<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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)
---------------
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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share........ 2,587,500 $14.00 $36,225,000 $10,978
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</TABLE>
(1) Includes 337,500 shares of Common Stock that the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee.
---------------
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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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 , 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 $700,000, 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.
<PAGE>
[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 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 certain hardware and software designs
and components of 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................................ 12,810,314 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>
PERIOD FROM YEAR ENDED
DECEMBER 5, 1994 DECEMBER 31, QUARTER ENDED
(INCEPTION) TO ----------------- ------------------------------------------------
DECEMBER 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1995 1996 1996 1996 1996 1996 1997
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.......... $ -- $ 7,593 $ 19,606 $ 146 $ 4,746 $ 5,924 $ 8,790 $ 9,096
Gross profit (deficit).. -- (544) 409 (109) (442) 211 749 787
Operating loss.......... (5,961) (8,734) (12,539) (2,459) (3,471) (3,003) (3,606) (3,134)
Net loss................ (5,942) (8,517) (12,761) (2,386) (3,489) (3,154) (3,732) (3,140)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------
ACTUAL AS ADJUSTED(2)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents, and short-term investments...... $16,366 $42,869
Working capital......................................... 19,353 45,856
Total assets............................................ 38,595 65,098
Total stockholders' equity.............................. 18,249 44,752
</TABLE>
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(1) Based on shares outstanding as of March 31, 1997. Does not include
1,067,520 shares of Common Stock issuable upon exercise of options and
warrants outstanding as of March 31, 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
<PAGE>
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.
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. Industry sources indicate
that fraud in the United States ("U.S.") alone cost wireless
telecommunications carriers in excess of $1 billion in 1996 and that cloning
fraud accounted for a majority of this fraud. 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. The second product 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
<PAGE>
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 $30.4 million as of March 31, 1997. There can be no
assurance that the Company's existing revenues 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
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 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
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
5
<PAGE>
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 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 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
6
<PAGE>
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 regulations 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."
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
7
<PAGE>
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.
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
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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 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,
9
<PAGE>
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 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 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 April 30, 1997, the Company had one
issued U.S. patent, six pending U.S. patent applications and eleven 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.
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.
10
<PAGE>
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 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
11
<PAGE>
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 122 on March 31, 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.
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<PAGE>
Recently enacted legislation 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. The Company seeks to pursue distribution
agreements with other companies. While the Company had not generated any
revenues from distributors through March 31, 1997, 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."
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
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<PAGE>
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 44.3% of the outstanding Common Stock (approximately 43.2% 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."
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, 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 10,560,000 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
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<PAGE>
in the public market immediately after this Offering pursuant to Rule 144(k)
under the Securities Act, and (ii) approximately 7,535,000 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 10,554,000 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 10,294,000 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 1,343,000 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 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
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<PAGE>
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 $9.51 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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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 $26.5 million
($30.6 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 working capital and
capital expenditures. The Company may use a portion of the net proceeds of
this Offering to repay approximately $4.8 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.
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. Pending application of the net proceeds as described above,
the Company intends to invest the net proceeds of this Offering in short-term
investment-grade securities.
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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CAPITALIZATION
The following table sets forth as of March 31, 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>
MARCH 31, 1997
--------------------------------
ACTUAL PRO FORMA AS ADJUSTED
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(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations, less current portion.... $ 3,892 $ 3,892 $ 3,892
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;
1,127,358 shares issued and outstanding
actual; 10,560,314 shares issued and
outstanding pro forma; 75,000,000 shares
authorized as adjusted; and 12,810,314
shares issued and outstanding as adjusted
(1)......................................... 2 11 13
Notes receivable from stockholder............ (136) (136) (136)
Additional paid-in capital................... 49,811 49,811 76,312
Deferred compensation........................ (1,077) (1,077) (1,077)
Accumulated deficit.......................... (30,360) (30,360) (30,360)
-------- -------- --------
Total stockholders' equity.................. 18,249 18,249 44,752
-------- -------- --------
Total capitalization........................... $ 22,141 $ 22,141 $ 48,644
======== ======== ========
</TABLE>
- --------
(1) Based on shares outstanding as of March 31, 1997. Does not include (i)
909,613 shares of Common Stock issuable upon exercise of options
outstanding as of March 31, 1997 at a weighted average exercise price of
approximately $2.14 per share and (ii) 157,907 shares of Common Stock
issuable upon the exercise of warrants outstanding at March 31, 1997 at a
weighted average exercise price of $6.52 per share.
18
<PAGE>
DILUTION
The net tangible book value of the Company at March 31, 1997 was
approximately $18.2 million or $1.73 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 March 31, 1997 would have been approximately $44.8
million or $3.49 per share of Common Stock. This represents an immediate
increase in net tangible book value per share of Common Stock of $1.76 to
existing stockholders and immediate dilution in net tangible book value of
$9.51 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 of Common Stock at March 31,
1997........................................................... $1.73
Increase per share attributable to new investors................ 1.76
-----
Net tangible book value per share of Common Stock after this Of-
fering........................................................... 3.49
------
Dilution per share to new investors (1)........................... $ 9.51
======
</TABLE>
- --------
(1) If the Underwriters' over-allotment option is exercised in full, dilution
per share to new investors would be $9.29.
The following table summarizes, on a pro forma basis as of March 31, 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.......... 10,560,314 82.4% $48,360,804 62.3% $ 4.58
New investors.................. 2,250,000 17.6 29,250,000 37.7 13.00
---------- ----- ----------- -----
Total........................ 12,810,314 100.0% $77,610,804 100.0%
========== ===== =========== =====
</TABLE>
All of the above computations assume no exercise of outstanding options or
warrants to purchase Common Stock. As of March 31, 1997, options to purchase
909,613 shares of Common Stock were outstanding at a weighted average exercise
price of approximately $2.14 per share under the Company's stock option plans.
As of March 31, 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 March 31, 1997, the Company also had an additional
296,363 shares of Common Stock available for grant pursuant to the Company's
stock option plans. 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 quarters ended March 31, 1996, June 30,
1996, September 30, 1996, December 31, 1996 and March 31, 1997, and as of
March 31, 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 YEAR ENDED
DECEMBER 5, 1994 DECEMBER 31, QUARTER ENDED
(INCEPTION) TO ----------------- ------------------------------------------------
DECEMBER 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1995 1996 1996 1996 1996 1996 1997
---------------- ------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues.......... $ -- $ 7,593 $ 19,606 $ 146 $ 4,746 $ 5,924 $ 8,790 $ 9,096
Total cost of revenues.. -- 8,137 19,197 255 5,188 5,713 8,041 8,309
------- ------- -------- ------- ------- ------- ------- -------
Gross profit (deficit).. -- (544) 409 (109) (442) 211 749 787
Operating costs and
expenses:
Research and
development........... 507 3,094 4,983 951 1,191 1,259 1,582 1,382
Sales and marketing.... 62 2,981 5,374 832 1,199 1,374 1,969 1,548
General and
administrative........ 498 2,115 2,591 567 639 581 804 991
Write-off of in-process
research and
development........... 4,894 -- -- -- -- -- -- --
------- ------- -------- ------- ------- ------- ------- -------
Total operating costs
and expenses.......... 5,961 8,190 12,948 2,350 3,029 3,214 4,355 3,921
------- ------- -------- ------- ------- ------- ------- -------
Operating loss.......... (5,961) (8,734) (12,539) (2,459) (3,471) (3,003) (3,606) (3,134)
Interest income
(expense), net......... 20 218 (220) 73 (18) (150) (125) (3)
------- ------- -------- ------- ------- ------- ------- -------
Loss before income
taxes.................. (5,941) (8,516) (12,759) (2,386) (3,489) (3,153) (3,731) (3,137)
Income taxes............ 1 1 2 -- -- 1 1 3
------- ------- -------- ------- ------- ------- ------- -------
Net loss................ $(5,942) $(8,517) $(12,761) $(2,386) $(3,489) $(3,154) $(3,732) $(3,140)
======= ======= ======== ======= ======= ======= ======= =======
Pro forma net loss per
share (1).............. $ (1.44) $(0.28) $(0.41) $(0.37) $(0.37) $ (0.29)
======== ======= ======= ======= ======= =======
Shares used in per share
computation(1)......... 8,870 8,497 8,502 8,510 9,970 10,799
======== ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
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 $16,366
Working capital............................. 9,560 9,767 19,682 19,353
Total assets................................ 11,305 14,156 34,911 38,595
Long-term obligations....................... 3,010 1,155 4,394 3,892
Total stockholders' equity.................. 7,273 10,592 18,011 18,249
</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 quarter ended March 31, 1997,
the Company generated revenues of $9.1 million based upon sales of PhonePrint
to 12 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, 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
21
<PAGE>
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.
RESULTS OF OPERATIONS--QUARTERS ENDED MARCH 31, 1997 AND 1996
Revenues. For the quarter ended March 31, 1997, total revenues were $9.1
million, compared with $146,000 for the comparable 1996 period. This increase
resulted primarily from an increase in sales of PhonePrint systems. System
revenue was $8.2 million for the quarter ended March 31, 1997, compared with
no system revenue for the comparable 1996 period. Service revenue was $929,000
for the quarter ended March 31, 1997, compared with $146,000 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
and initial revenue attributable to the Company's PhonePrint Roaming Network
service.
Gross Profit (Deficit). Gross profit increased to $787,000 in the quarter
ended March 31, 1997 from a gross deficit of $109,000 in the comparable 1996
period. The increase in gross profit was due primarily to system revenue which
contributed $687,000 in gross profit for the quarter ended March 31, 1997 as
compared to a gross deficit of $42,000 in the comparable 1996 period. In the
first quarter of 1997, total gross margin was 8.7% consisting of 8.4% system
gross margin and 10.8% service gross margin.
Research and Development. Research and development expenses were $1.4
million, or 15.2% of total revenues, for the quarter ended March 31, 1997,
compared with $951,000 for the comparable 1996 period. This increase in
expenditures was due primarily to the hiring of additional engineering
personnel and increased consulting expenses related to the continued
development of PhonePrint and incremental development work on new products.
The Company believes that continued 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 $1.5 million, or
17.0% of total revenues, during the quarter ended March 31, 1997, compared
with $832,000 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
$991,000, or 10.9% of total revenues, in the quarter ended March 31, 1997,
compared with $567,000 for the comparable 1996 period. This increase in
expenditures was due primarily to higher personnel expenses related to
increased staffing and information technology-related expenses.
22
<PAGE>
Interest Income (Expense), Net. Net interest expense was $3,000 in the
quarter ended March 31, 1997 as compared to net interest income of $73,000 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 quarters ended March 31, 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 covered by
service contracts and the increase in customers subscribing to the PhonePrint
Roaming Network service.
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 and increased consulting expenses
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 and the associated sales commissions.
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.
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 lower
average cash balances, larger 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.
23
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables present unaudited statement of operations data for each
of the five quarters in the period ended March 31, 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,
1996 1996 1996 1996 1997
-------- -------- --------- -------- --------
Revenues: (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
System revenue............. $ -- $ 4,437 $ 5,552 $ 8,189 $ 8,167
Service revenue............ 146 309 372 601 929
------- ------- ------- ------- -------
Total revenues........... 146 4,746 5,924 8,790 9,096
Cost of revenues:
Cost of system revenue..... 42 4,630 5,165 7,398 7,480
Cost of service revenue.... 213 558 548 643 829
------- ------- ------- ------- -------
Total cost of revenues... 255 5,188 5,713 8,041 8,309
------- ------- ------- ------- -------
Gross profit (deficit)....... (109) (442) 211 749 787
Operating expenses:
Research and development... 951 1,191 1,259 1,582 1,382
Sales and marketing........ 832 1,199 1,374 1,969 1,548
General and administra-
tive...................... 567 639 581 804 991
------- ------- ------- ------- -------
Total operating ex-
penses.................. 2,350 3,029 3,214 4,355 3,921
------- ------- ------- ------- -------
Operating loss............... (2,459) (3,471) (3,003) (3,606) (3,134)
Interest income (expense),
net......................... 73 (18) (150) (125) (3)
------- ------- ------- ------- -------
Loss before income taxes..... (2,386) (3,489) (3,153) (3,731) (3,137)
Income taxes................. -- -- 1 1 3
------- ------- ------- ------- -------
Net loss..................... $(2,386) $(3,489) $(3,154) $(3,732) $(3,140)
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
-------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1996 1996 1996 1996 1997
Revenues: -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
System revenue............ 0.0% 93.5% 93.7% 93.2% 89.8%
Service revenue........... 100.0 6.5 6.3 6.8 10.2
-------- ----- ----- ----- -----
Total revenues.......... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Cost of system revenue.... 28.8 97.6 87.2 84.2 82.2
Cost of service revenue... 145.9 11.8 9.2 7.3 9.1
-------- ----- ----- ----- -----
Total cost of revenues.. 175.0 109.3 96.4 91.5 91.4
-------- ----- ----- ----- -----
Gross profit (deficit)...... (74.7) (9.3) 3.6 8.5 8.6
Operating expenses:
Research and development.. 651.4 25.1 21.2 18.0 15.2
Sales and marketing....... 569.9 25.3 23.2 22.4 17.0
General and administra-
tive..................... 388.4 13.5 9.8 9.2 10.9
-------- ----- ----- ----- -----
Total operating ex-
penses................. (1,609.6) (63.8) (54.2) (49.5) (43.1)
-------- ----- ----- ----- -----
Loss from operations........ (1,684.2) (73.1) (50.7) (41.0) (34.4)
Interest income (expense),
net........................ 50.0 (0.4) (2.5) (1.4) (0.0)
Loss before income taxes.... (1,634.2) (73.5) (53.2) (42.4) (34.5)
Income taxes................ 0.0 0.0 0.0 0.0 0.0
-------- ----- ----- ----- -----
Net loss.................... (1,634.2)% (73.5)% (53.2)% (42.5)% (34.5)%
======== ===== ===== ===== =====
</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. 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 quarter
ended March 31, 1997 and the quarter ended December 31, 1996, respectively,
and recognized approximately $85,000 and $4,000 in amortization of deferred
compensation in the quarter ended March 31, 1997 and the quarter 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 March 31,
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 March 31,
1997, the Company had cash and cash equivalents of approximately $16.4 million
and working capital of approximately $19.4 million. The Company 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
one half of one percent. At March 31, 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 March 31, 1997.
25
<PAGE>
The Company's operating activities used cash of $6.0 million for the quarter
ended March 31, 1997, and $13.5 million and $5.7 million for the years ended
December 31, 1996 and 1995, respectively. In the first quarter of 1997, cash
used by operations increased by $2.5 million over the comparable 1996 period.
The increase in cash used by operations in 1996 as compared to 1995 was due
primarily to an increased net loss and a significant increase in accounts
receivable.
The Company's investing activities used cash of $4.6 million for the quarter
ended March 31, 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 $2.9 million for the
quarter ended March 31, 1997, and $24.6 million and $9.5 million for the years
ended December 31, 1996 and 1995, respectively. In the quarter ended March 31,
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. 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
certain hardware and software designs and components of 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. Industry
sources estimate 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. Industry experts forecast
that the number of digital subscribers will not exceed the number of analog
subscribers in the U.S. until 2003.
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.
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
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theft. According to industry sources, fraud in the U.S. cost wireless
telecommunications carriers in excess of $1 billion in 1996. 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 is expected to be used in a large
number of digital networks, 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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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 its products in
international markets. To date, the Company has deployed PhonePrint in Mexico
and the Philippines.
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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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The following chart illustrates the PhonePrint architecture.
DESCRIPTION OF CHART:
Center box with title: Corsair Service Center
Graphics inside center box: Two computer monitors with lines drawn to cloud
between the monitors.
Text inside center box next to computer monitors: System Control Center
Text inside center box inside cloud: PhonePrint Roaming Network
Upper left graphic: Next to text in box "Los Angeles," three
cellular telephone sites depicted by
antennas near small buildings next to text
"RF Units in Cell Sites." Two individuals
working at computer monitors next to text
"Cellular Carrier's Fraud Department" with
lines to one computer monitor next to text
"Application Server." Lines from cell sites
and application server to one computer
monitor next to text "System Control
Center." Line from System Control Center to
cloud inside center box.
Lower left graphic: Next to text in box "New York," three cellular
telephone sites depicted by antennas near
small buildings next to text "RF Units in Cell
Sites." Two individuals working at computer
monitors with lines to one computer monitor
next to text "Application Server." Lines from
cell sites and application server to System
Control Center inside center box.
Lower right graphic: Next to text in box "Mexico City," three
cellular telephone sites depicted by
antennas near small buildings next to
text "RF Units in Cell Sites." Two
individuals working at computer monitors
with lines to one computer monitor next
to text "Application Server." Lines from
cell sites and application server to
System Control Center inside center box.
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 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.
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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. 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 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 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
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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 March 31, 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:
AirTouch Communications, Inc. Houston Cellular Telephone Company
American Cellular Communications Los Angeles Cellular Telephone
Corporation Company
AT&T Wireless Services Pilipino Telephone Corporation
Bell Atlantic NYNEX Mobile (Piltel)
BellSouth Cellular Corp. Puerto Rico Cellular Telephone
Centennial Cellular Corporation Company
Comcast Cellular Communications, RadioMovil DIPSA, S.A. de C.V.
Inc. (Telcel)
CCPR Services, Inc. (Cellular One Southwestern Bell Mobile Systems,
Puerto Rico) Inc.
GTE Mobilnet Service Corp. 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 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
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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."
Revenue from international customers did not account for any of the
Company's total revenues in 1996 or for the three months ended March 31, 1997.
However, 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. 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 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.
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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 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
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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 and eleven 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.
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
37
<PAGE>
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 March 31, 1997, the Company had 122 employees, including 33 in sales
and marketing, 17 in manufacturing, 41 in research and development, 16 in
operations, field service and customer support and 15 in finance and
administration. None of the Company's employees are represented by a
collective bargaining agreement, nor has the Company experienced any work
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.
38
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company as of April 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............... 51 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).................. 41 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, Mr. McDowell served as General Manager
of the Voice Information Services Division at Octel
39
<PAGE>
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.
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
40
<PAGE>
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 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.
41
<PAGE>
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.
42
<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.
43
<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.
44
<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. 2,666,668 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 automatically be increased by an additional two percent of the
outstanding number of shares of capital stock of the Company per year.
45
<PAGE>
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
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.
46
<PAGE>
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 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
47
<PAGE>
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 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.
48
<PAGE>
CERTAIN TRANSACTIONS
Since its formation in December 1994, the Company has issued, in private
placement transactions, shares of its Preferred Stock 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 funds which are principal
stockholders of the Company and/or are affiliated with directors of the
49
<PAGE>
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. The entire principal amount and accrued
interest on the loan to Ms. Byrnes remains outstanding as of the date hereof.
50
<PAGE>
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.
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 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 16.1% 13.3%
Byers(3)..........................
2750 Sand Hill Road
Menlo Park, CA 94025
Sevin Rosen Funds(4)............... 1,431,564 13.6% 11.2%
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
Norwest Equity Partners(5)......... 1,439,580 13.6% 11.2%
245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
TRW Inc............................ 1,346,568 12.8% 10.5%
1 Federal System Park Drive
Fairfax, VA 22033
Accel Partners(6).................. 647,928 6.1% 5.0%
One Palmer Square
Princeton, NJ 08542
Kevin R. Compton(7)................ 1,710,354 16.2% 13.3%
Mary Ann Byrnes(8)................. 454,520 4.3% 3.5%
Stephen M. Dow(9).................. 1,439,064 13.6% 11.2%
Roland L. Robertson(10)............ 1,346,568 12.8% 10.5%
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 53.4% 44.3%
</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 March 31, 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.
52
<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 March 31, 1997.
(8) Includes 75,754 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 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 March 31, 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 March 31, 1997.
(13) Includes 26,627 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 1997.
(14) Includes 20,000 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 1997.
(15) Includes 18,000 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 1997.
(16) Includes 40,315 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 1997.
(17) Includes 380,677 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 1997.
53
<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 12,810,000 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 March 31, 1997, there were 10,560,314 shares of Common Stock outstanding
and held of record by approximately 76 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 the warrant without payment of cash by
surrendering the warrant and receiving shares of Common Stock equal to the
value of the warrant surrendered.
54
<PAGE>
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 (6) 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."
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
55
<PAGE>
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 Bank of Boston, N.A.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have approximately
12,810,000 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 10,560,000 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 7,535,000 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 10,554,000 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 10,294,000 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 128,000 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
57
<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 1,343,000 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.
58
<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.
59
<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.
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.
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.
60
<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.
61
<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 March 31, 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 Quarters Ended March 31, 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 Quarter Ended March 31, 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 Quarters Ended March 31, 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 May
27, 1997
F-2
<PAGE>
CORSAIR COMMUNICATIONS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, MARCH 31,
------------------ MARCH 31, 1997
1995 1996 1997 (NOTE 2)
-------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 7,072 $ 17,052 $ 9,413 $ 9,413
Short-term investments........... 1,957 2,452 6,953 6,953
Trade accounts receivable, less
allowance for doubtful accounts
of $404 for 1995, 1996 and
1997............................ 807 3,260 7,601 7,601
Other receivables................ 15 43 102 102
Evaluation inventory............. -- 5,328 7,402 7,402
Inventories, net................. 2,212 3,970 4,043 4,043
Prepaid expenses................. 113 83 293 293
-------- -------- -------- --------
Total current assets........... 12,176 32,188 35,807 35,807
Property and equipment, net........ 1,814 2,424 2,375 2,375
Other assets....................... 166 299 413 413
-------- -------- -------- --------
$ 14,156 $ 34,911 $ 38,595 $ 38,595
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................. $ 338 $ 3,428 $ 2,320 $ 2,320
Accrued expenses................. 722 2,502 2,167 2,167
Notes payable--current portion... 222 1,803 1,989 1,989
Current portion of obligations
under capital leases............ 44 286 365 365
Deferred revenue................. 1,083 4,487 9,613 9,613
-------- -------- -------- --------
Total current liabilities...... 2,409 12,506 16,454 16,454
Notes payable...................... 666 3,780 3,264 3,264
Obligations under capital leases,
net of current portion............ 109 614 628 628
Other long-term liabilities........ 380 -- -- --
-------- -------- -------- --------
Total liabilities.............. 3,564 16,900 20,346 20,346
-------- -------- -------- --------
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 March 31, 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 1,127,358
shares issued and outstanding,
respectively; 10,560,314 shares
issued and outstanding on a pro
forma basis..................... -- 1 2 11
Notes receivable from stockhold-
er.............................. -- (136) (136) (136)
Additional paid-in capital....... 25,044 45,426 49,811 49,811
Deferred compensation............ -- (69) (1,077) (1,077)
Accumulated deficit.............. (14,459) (27,220) (30,360) (30,360)
-------- -------- -------- --------
Total stockholders' equity..... 10,592 18,011 18,249 18,249
-------- -------- -------- --------
$ 14,156 $ 34,911 $ 38,595 $ 38,595
======== ======== ======== ========
</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 QUARTER ENDED
(INCEPTION) TO DECEMBER 31, MARCH 31,
DECEMBER 31, ----------------- ----------------
1994 1995 1996 1996 1997
---------------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
System revenue......... $ -- $ 7,351 $ 18,178 $ -- $ 8,167
Service revenue........ -- 242 1,428 146 929
------- ------- -------- ------- -------
Total revenues....... -- 7,593 19,606 146 9,096
------- ------- -------- ------- -------
Cost of revenues:
System revenue costs... -- 7,522 17,235 42 7,480
Service revenue costs.. -- 615 1,962 213 829
------- ------- -------- ------- -------
Total cost of reve-
nues................ -- 8,137 19,197 255 8,309
------- ------- -------- ------- -------
Gross profit (defi-
cit)................ -- (544) 409 (109) 787
------- ------- -------- ------- -------
Operating costs and ex-
penses:
Research and develop-
ment.................. 507 3,094 4,983 951 1,382
Sales and marketing.... 62 2,981 5,374 832 1,548
General and administra-
tive.................. 498 2,115 2,591 567 991
Write-off of in-process
research and
development........... 4,894 -- -- -- --
------- ------- -------- ------- -------
Total operating costs
and expenses........ 5,961 8,190 12,948 2,350 3,921
------- ------- -------- ------- -------
Operating loss....... (5,961) (8,734) (12,539) (2,459) (3,134)
Interest income (ex-
pense), net............. 20 218 (220) 73 (3)
------- ------- -------- ------- -------
Loss before income
taxes............... (5,941) (8,516) (12,759) (2,386) (3,137)
Income taxes............. 1 1 2 -- 3
------- ------- -------- ------- -------
Net loss............. $(5,942) $(8,517) $(12,761) $(2,386) $(3,140)
======= ======= ======== ======= =======
Pro forma net loss per
share data (Note 2):
Pro forma net loss per
share................. $ (1.44) $ (0.28) $ (0.29)
======== ======= =======
Shares used in per
share computation..... 8,870 8,497 10,799
======== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
CORSAIR COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM DECEMBER 5, 1994 (INCEPTION) TO MARCH 31, 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)........... -- -- -- -- -- 1,093 (1,093) -- --
Amortization of
deferred compensation
(unaudited)........... -- -- -- -- -- -- 85 -- 85
Exercise of common
stock options
(unaudited)........... -- -- 523,264 1 -- 295 -- -- 296
Issuance of Series D
convertible preferred
stock, net of issuance
costs of $3
(unaudited)........... 266,668 -- -- -- -- 2,997 -- -- 2,997
Net loss (unaudited)... -- -- -- -- -- -- -- (3,140) (3,140)
--------- ---- --------- ---- ------- ------- ------- -------- --------
Balances as of March
31, 1997 (unaudited).. 9,432,956 $ 9 1,127,358 $ 2 $ (136) $49,811 $(1,077) $(30,360) $ 18,249
========= ==== ========= ==== ======= ======= ======= ======== ========
</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 QUARTER ENDED
(INCEPTION) TO DECEMBER 31, MARCH 31,
DECEMBER 31, ----------------- ----------------
1994 1995 1996 1996 1997
---------------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss................ $(5,942) $(8,517) $(12,761) $(2,386) (3,140)
Adjustments to reconcile
net loss to net cash
used in operating ac-
tivities:
Depreciation and amor-
tization............... 8 472 1,013 207 316
Write-off of in process
research and develop-
ment................... 4,894 -- -- -- --
Amortization of de-
ferred compensation.... -- -- 4 -- 85
Loss on disposition of
fixed assets........... -- -- -- -- 100
Changes in operating
assets and liabili-
ties:
Trade accounts receiv-
able.................. -- (808) (2,453) 807 (4,341)
Other receivables...... -- -- (28) (31) (59)
Inventories............ -- 1,551 (7,086) (2,394) (2,147)
Prepaid expenses and
other assets.......... (18) (162) (78) (65) (453)
Accounts payable and
accrued expenses...... 905 302 4,870 938 (1,443)
Deferred revenue....... -- 1,423 3,024 (539) 5,126
------- ------- -------- ------- -------
Net cash used in oper-
ating activities..... (153) (5,739) (13,495) (3,463) (5,956)
------- ------- -------- ------- -------
Cash flows from investing
activities:
Purchase of short-term
investments............ -- (1,957) (2,452) -- (6,474)
Proceeds from
sales/maturity of
short-term invest-
ments.................. -- -- 1,957 10 1,973
Purchases of property
and equipment.......... (3) (1,528) (605) (3) (70)
------- ------- -------- ------- -------
Net cash (used in)
provided by investing
activities........... (3) (3,485) (1,100) 7 (4,571)
------- ------- -------- ------- -------
Cash flows from financing
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 -- 296
Proceeds from notes pay-
able................... -- 970 4,925 -- --
Proceeds from issuance
of warrants............ -- 30 131 -- --
Principal payments on
note payable........... -- (82) (230) (54) (330)
Principal payments on
capital lease.......... -- (12) (232) (20) (75)
Loan to stockholder..... -- -- (64) -- --
Repayment of notes pay-
able to ESL Incorporat-
ed..................... -- (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 (74) 2,888
------- ------- -------- ------- -------
Net increase (decrease)
in cash and cash equiva-
lents................... 6,819 253 9,980 (3,530) (7,639)
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 $ 3,542 $ 9,413
======= ======= ======== ======= =======
Supplemental disclosures
of cash flow informa-
tion:
Cash paid during the
year/period:
Interest................ $ 10 $ 112 $ 458 $ 27 $ 218
======= ======= ======== ======= =======
Income taxes............ $ -- $ 1 $ 2 $ -- $ 3
======= ======= ======== ======= =======
Noncash financing and
investing activities:
Issuance of note pay-
able to ESL Incorpo-
rated.................. $ 3,000 $ -- $ -- $ -- $ --
======= ======= ======== ======= =======
Receipt of note receiv-
able from stockhold-
ers.................... $ 3,000 $ -- $ -- $ -- $ --
======= ======= ======== ======= =======
Assets acquired through
capital lease.......... $ -- $ 165 $ 979 $ 128 $ 168
======= ======= ======== ======= =======
Common stock issued
upon exercise of stock
options in exchange
for stockholder note... $ -- $ -- $ 136 $ -- $ --
======= ======= ======== ======= =======
Deferred compensation
relating to stock op-
tion grants............ $ -- $ -- $ 73 $ -- $ 1,093
======= ======= ======== ======= =======
</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 MARCH 31, 1996 AND 1997 AND FOR THE
QUARTERS 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 March 31, 1997.
Revenue Recognition
System revenue is comprised of hardware sales and software licensing, net of
estimated bad debt 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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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 are 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.
Cash equivalents and short-term investments classified as available-for-sale
which were all due in one year or less as of December 31, 1996, 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.
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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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, when dilutive, 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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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 quarters
ended March 31, 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,
------------- MARCH 31,
1995 1996 1997
------ ------ ---------
<S> <C> <C> <C>
Raw materials........................................ $2,056 $2,492 $2,232
Work in process...................................... 62 1,026 901
Finished goods....................................... 94 452 910
------ ------ ------
$2,212 $3,970 $4,043
====== ====== ======
</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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS THEN ENDED IS UNAUDITED)
The cost of capitalized leased assets included in property and equipment is
approximately $125,000 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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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, which is being amortized over the term of the loan.
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, which is being
amortized over the term of the loan.
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 $1,828,000, $1,988,000, $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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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 $4,955,000 and $4,941,000,
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 2002.
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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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 March 31, 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 subsequently repaid.
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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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
$1,203,000 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
$85,000 in the three months ended March 31, 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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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).... 469,521 3.75 $3.20
=====
Options exercised (unaudited).. (523,264) 0.57
Options canceled (unaudited)... (10,571) 0.64
--------- -----
Outstanding as of March 31,
1997 (unaudited).............. 909,613 $2.14 152,120
========= ===== =======
</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 29,669 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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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 and are
secured by the leased equipment.
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 MARCH 31, 1996 AND 1997 AND FOR
THE QUARTERS 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 2,666,668
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.
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............................................................. 39
Certain Transactions................................................... 49
Principal Stockholders................................................. 52
Description of Capital Stock........................................... 54
Shares Eligible for Future Sale........................................ 57
Underwriting........................................................... 59
Legal Matters.......................................................... 61
Experts................................................................ 61
Additional Information................................................. 61
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.................................. 100,000
Legal fees and expenses.......................................... 350,000
Accounting fees and expenses..................................... 185,000
Transfer Agent and Registrar fees................................ 5,000
Miscellaneous expenses........................................... 16,961
--------
TOTAL.......................................................... $700,000
========
</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 March 1997, the Company issued options to purchase
an aggregate of 3,059,858 shares of Common Stock with exercise prices
ranging from $0.20 to $5.00 per share under the Prior Plans and an
aggregate of 1,691,008 shares of Common Stock were issued through the
exercise of options granted under the Prior Plans for an aggregate exercise
price of $546,393.00. 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.
<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.
</TABLE>
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>
- --------
+ To be filed by amendment.
* 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.
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 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 4TH DAY OF JUNE, 1997.
Corsair Communications, Inc.
/s/ Mary Ann Byrnes
By: _________________________________
MARY ANN BYRNES
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Mary Ann Byrnes and Kevin R. Compton, or either
of them, as his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement and any registration statement related to this Registration
Statement and filed pursuant to Rule 462 under the Securities Act of 1933, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes may lawfully do or cause to be done
by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Mary Ann Byrnes President, Chief June 4, 1997
_____________________________________ Executive Officer
(MARY ANN BYRNES) and Director
(Principal
Executive Officer)
/s/ Martin J. Silver Chief Financial June 4, 1997
_____________________________________ Officer and
(MARTIN J. SILVER) Secretary
(Principal
Financial and
Accounting Officer)
/s/ Kevin R. Compton Chairman of the June 4, 1997
_____________________________________ Board and Director
(KEVIN R. COMPTON)
/s/ Peter L.S. Currie Director June 4, 1997
_____________________________________
(PETER L.S. CURRIE)
/s/ David H. Ring Director June 4, 1997
_____________________________________
(DAVID H. RING)
/s/ Roland L. Robertson Director June 4, 1997
_____________________________________
(ROLAND L. ROBERTSON)
/s/ Steve Dow Director June 4, 1997
_____________________________________
(STEVE DOW)
II-7
<PAGE>
SCHEDULE II
CORSAIR COMMUNICATIONS, INC.
Valuation and Qualifying Accounts
(In thousands)
Reserve for bad debt and allowances
<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>
Period from inception
(December 5, 1994) to
December 31, 1994........ $-- $-- $-- $--
Year ended December 31,
1995..................... $-- $404 $-- $404
Year ended December 31,
1996..................... $404 $-- $-- $404
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
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>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
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>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
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>
- -------
+ To be filed by amendment.
* 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.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995. An amended and restated Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on October 26, 1995
and was amended pursuant to a Certificate of Amendment of Certificate of
Incorporation of the corporation filed with the Secretary of State of the State
of Delaware on December 18, 1995. An amended and restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
October 30, 1996.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of at least a
majority of the outstanding shares in accordance with Section 228 thereof, and
written notice having been given in accordance with the requirements of such
Section. The Amended and Restated Certificate of Incorporation restates,
integrates and amends the provisions of the Certificate of Incorporation of this
corporation.
3. The Certificate of Incorporation of the corporation is hereby amended
and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Corsair Communications, Inc.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
<PAGE>
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
Thirty-Four Million Five Hundred Forty-Eight Thousand Nine Hundred Sixty Three
(34,548,963) shares. Twenty Million (20,000,000) shares shall be Common Stock,
$.001 par value per share, and Fourteen Million Five Hundred Forty-Eight
Thousand Nine Hundred Sixty Three (14,548,963) shares shall be Preferred Stock,
$.001 par value per share, of which Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock, Two Million Two Hundred
Twenty-Eight Thousand Nine Hundred Sixty Three (2,228,963) shares shall be
Series B Preferred Stock, Three Million Eight Hundred Thousand (3,800,000)
shares shall be Series C Preferred Stock, and Four Hundred Thousand (400,000)
shares shall be Series D Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this corporation) on the Common Stock of this
corporation, at the rate of $0.10 per share of Series A Preferred Stock per
annum, $0.22 per share of Series B Preferred Stock per annum, $0.275 per share
of Series C Preferred Stock per annum, and $0.375 per share of Series D
Preferred Stock per annum (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations) payable when, as and
if declared by the Board of Directors. Such dividends shall not be cumulative.
No cash dividend shall be declared or paid with respect to the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock unless at the same time a like proportionate cash dividend for
the same dividend period, ratably in proportion to the respective annual
dividend rates set forth above, is declared and paid with respect to the Series
A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock.
-2-
<PAGE>
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock were the holders of the number of shares of Common Stock of
this corporation into which their respective shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of this corporation entitled to receive such distribution.
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series C
Preferred Stock and Series D Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Series A Preferred Stock, Series B Preferred Stock or Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $5.50 for each outstanding share of Series C Preferred Stock and $7.50
for each outstanding share of Series D Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series C Issue
Price" and "Original Series D Issue Price," respectively), and (ii) an amount
equal to declared but unpaid dividends on such shares of Series C Preferred
Stock and Series D Preferred Stock as applicable. If upon the occurrence of
such event, the assets and funds thus distributed among the holders of Series C
Preferred Stock and Series D Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then, the
entire assets and funds of the corporation legally available for distribution
shall be distributed ratably among the holders of Series C Preferred Stock and
Series D Preferred Stock in proportion to the aggregate liquidation preferences
of the respective series, and ratably among the holders of the Series C
Preferred Stock and Series D Preferred Stock in proportion to the amount of such
stock owned by each such holder.
b. After the distribution described in subsection (a) above has
been paid, the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets of this corporation to the holders of Common Stock by reason of
their ownership thereof, an amount per share equal to the sum of (i) $2.00 for
each outstanding share of Series A Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series A Issue
Price"), (ii) $4.43 for each outstanding share of Series B Preferred Stock
(subject to appropriate adjustments for stock splits, stock dividends,
combinations or other
-3-
<PAGE>
recapitalizations and hereafter referred to as the "Original Series B Issue
Price"), and (iii) an amount equal to declared but unpaid dividends on such
shares of Series A Preferred Stock or Series B Preferred Stock as applicable.
If upon the occurrence of such event, and after the distribution described in
subsection (a) above has been paid, the assets and funds thus distributed among
the holders of Series A Preferred Stock and the Series B Preferred Stock shall
be insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, the entire assets and funds of the corporation
legally available for distribution shall be distributed ratably among the
holders of Series A Preferred Stock and Series B Preferred Stock in proportion
to the aggregate liquidation preferences of the respective series, and ratably
among the holders of each series in proportion to the amount of such stock owned
by each such holder.
c. After the distributions described in subsections (a) and (b)
above have been paid, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock).
d. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement, the issuance of Series B Preferred Stock
pursuant to the Series B Preferred Stock Purchase Agreement, the issuance of
Series C Preferred Stock pursuant to the Series C Preferred Stock Purchase
Agreement and the issuance of Series D Preferred Stock pursuant to the Series D
Preferred Stock Purchase Agreement), shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2.
3. Conversion. The holders of the Series A Preferred Stock, Series
----------
B Preferred Stock and Series C Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
a. Right to Convert.
----------------
(i) Subject to subsection (c), each share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of this
corporation or any transfer agent for the particular series of Preferred Stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing (A) the Original Series A Issue Price for each share of
Series A Preferred Stock, (B) the Original Series B Issue Price for each share
of Series B Preferred Stock, (C) the Original Series C Issue
-4-
<PAGE>
Price for each share of Series C Preferred Stock and (D) the Original Series D
Issue Price for each share of Series D Preferred Stock, plus all declared but
unpaid dividends thereon for each share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, by the
Conversion Price at the time in effect for such share. The initial Conversion
Price per share for shares of Series A Preferred Stock shall be the Original
Series A Issue Price, the initial Conversion Price per share for shares of
Series B Preferred Stock shall be the Original Series B Issue Price, the initial
Conversion Price per share for shares of Series C Preferred Stock shall be the
Original Series C Issue Price and the initial Conversion Price per share for
shares of Series D Preferred Stock shall be the Original Series D Issue Price;
provided, however, that the Conversion Price for the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
shall be subject to adjustment as set forth in subsection 3(c).
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $15,000,000 in the aggregate or (B) the date upon which
the corporation obtains the written consent of the holders of a majority of the
then outstanding shares of Series A Preferred Stock and Series B Preferred Stock
voting together as a single class on an as converted basis.
(iii) Each share of Series C Preferred Stock and Series D
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $15,000,000 in the aggregate or (B) the date upon which
the corporation obtains the written consent of the holders of a majority of the
then outstanding shares of Series C Preferred Stock and Series D Preferred Stock
voting together as a single class on an as converted basis.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
particular series of Preferred Stock, and shall give written notice by mail,
postage prepaid, to this corporation at its principal corporate office, of the
election to convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued.
This
-5-
<PAGE>
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and/or Series D Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and/or Series D
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act, the conversion may, at the
option of any holder tendering Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and/or Series D Preferred Stock for conversion,
be conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred
Stock shall not be deemed to have converted such Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred
Stock until immediately prior to the closing of such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Prices of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be subject to
adjustment from time to time as follows:
(i) A. If the corporation shall issue any Additional Stock
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for the Series A Preferred Stock, the Conversion Price
for the Series B Preferred Stock, the Conversion Price for the Series C
Preferred Stock or the Conversion Price for the Series D Preferred Stock in
effect immediately prior to the issuance of such Additional Stock, the
Conversion Price for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock, as the case may be, in
effect immediately prior to each such issuance shall forthwith (except as
otherwise provided in this clause (i)) be adjusted to a price equal to the
quotient obtained by dividing the total computed under clause (x) below by the
total computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the shares
of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock sold pursuant to the
applicable agreements pursuant to which such shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D
-6-
<PAGE>
Preferred Stock, as the case may be, are first issued (the "Stock
Purchase Agreements"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the dates of the applicable Stock Purchase Agreements (the
"Purchase Date") other than shares of Common Stock issued or issuable
with respect to the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock sold pursuant to
the applicable Stock Purchase Agreements divided by the applicable
Conversion Price for such shares in effect at the applicable Purchase
Date (or such higher or lower Conversion Price for such series as
results from the application of subsections 3(c)(iii) and (iv) and
assuming that this Certificate was in effect as of the applicable
Purchase Date) plus
(2) the number of shares of Additional
Stock issued since the applicable Purchase Date (increased or
decreased to the extent that the number of such shares of Additional
Stock shall have been increased or decreased as the result of the
application of subsections 3(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections
(E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this
subsection 3(c)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
-7-
<PAGE>
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on
or after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subsections 3(c)(i)(C) and (c)(i)(D)), if any, received by
the corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 3(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the applicable Conversion Price of
the Series A Preferred Stock, Series B Preferred Stock Series C
Preferred
-8-
<PAGE>
Stock and Series D Preferred Stock, as applicable, and to the extent
in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such
options or rights or the conversion or exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock, as applicable, to the extent in any way
affected by or computed using such options, rights or securities or
options or rights related to such securities, shall be recomputed to
reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities which remain in effect)
actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 3(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 3(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by this corporation before, on or after the applicable Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 3(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly or
pursuant to a stock option plan or agreement or restricted stock plan
or agreement approved by the Board of Directors of this corporation,
D. shares of Common Stock issued or issuable (I) in
a public offering before or in connection with which all outstanding
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
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<PAGE>
Preferred Stock and Series D Preferred Stock will be converted to
Common Stock or (II) upon exercise of warrants or rights granted to
underwriters in connection with such a public offering,
E. shares of Series B Preferred Stock issued or
issuable to Comdisco, Inc. pursuant to Warrants dated August 31, 1995,
July 31, 1996, and August 5, 1996, or
F. shares of Series B Preferred Stock issued or
issuable to MMC/GATX PARTNERSHIP NO. 1 pursuant to a Warrant dated
July 31, 1996.
(iii) In the event the corporation should at any time or
from time to time after the applicable Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock then in
effect shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding
at any time after the applicable Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
then in effect shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the
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<PAGE>
number of shares of Common Stock of the corporation into which their shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the corporation entitled to
receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision
or a combination provided for elsewhere in this Section 3) provision shall be
made so that the holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock,
respectively, the number of shares of stock or other securities or property of
the Company or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 3 with respect to the rights of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect and
the number of shares issuable upon conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock)
shall be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock against
impairment.
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon conversion
of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock, and the number of shares of Common Stock to
be issued shall be rounded up to the nearest whole share. The number of shares
of Common Stock issuable upon such conversion shall be determined on the basis
of the total number of shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock the holder is at
the time converting into Common Stock.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock pursuant to this Section
3,
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<PAGE>
this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock at least
20 days prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock, this corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
shall be deemed
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<PAGE>
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of this corporation.
4. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the Bylaws of
this corporation, and shall be entitled to vote, together as a single class with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be seven (7). Notwithstanding 4(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Common Stock, voting together as a single class on an as
converted basis, shall be entitled to elect three (3) directors of the
corporation. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of the Series A
Preferred Stock then outstanding shall constitute a quorum of the Series A
Preferred Stock for the election of directors to be elected solely by the
holders of Series A Preferred Stock. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Common Stock then outstanding, on
an as converted basis, shall constitute a quorum of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Common Stock for the election of directors to be elected solely by the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Common Stock, voting together as a
single class on an as converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock; and a vacancy in any directorship elected
by the holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Common Stock voting together shall
be filled only by the vote of the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common
Stock voting together as provided above.
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<PAGE>
5. Protective Provisions.
---------------------
a. Preferred Stock. So long as shares of Series A Preferred
---------------
Stock, Series B Preferred Stock, Series C Preferred Stock and/or Series D
Preferred Stock are outstanding, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, voting together as a single class on an as converted basis:
i) sell, convey, or otherwise dispose of or encumber all
or substantially all of its property or business or merge into or consolidate
with any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
ii) alter or change the rights, preferences or privileges
of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock;
iii) increase the authorized number of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Common Stock;
iv) create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock with
respect to voting, dividends, conversion rights or upon liquidation, or (ii)
having rights similar to any of the rights of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
under this Section 5;
v) pay any dividend to the holders of Common Stock; or
vi) change the authorized number of directors from seven
(7).
b. Series C Preferred Stock. So long as shares of Series C
------------------------
Preferred Stock are outstanding, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of a majority of the then outstanding shares of Series C Preferred Stock
alter or change the rights, preferences or privileges of the shares of Series C
Preferred Stock so as to adversely affect the shares or the holders thereof.
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<PAGE>
c. Series D Preferred Stock. So long as shares of Series D Preferred
------------------------
Stock are outstanding, this corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of a
majority of the then outstanding shares of Series D Preferred Stock alter or
change the rights, preferences or privileges of the shares of Series D Preferred
Stock so as to adversely affect the shares or the holders thereof.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such
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<PAGE>
agents or other persons, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 145 of the Delaware General Corporation Law, subject only to limits
created by applicable Delaware law (statutory or non-statutory), with respect to
actions for breach of duty to the Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The corporation shall have a perpetual existence.
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the Bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been signed under the seal of this corporation as of this 3rd day of March,
1997.
CORSAIR COMMUNICATIONS, INC.
By: /s/ Mary Ann Byrnes
-------------------------------
Mary Ann Byrnes, President
ATTEST:
/s/ Martin Silver
- -------------------------------
Martin Silver, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
CORSAIR COMMUNICATIONS, INC.
Corsair Communications, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of Directors of the
Corporation setting forth proposed amendments to the Amended and Restated
Certificate of Incorporation of the Corporation, and declaring said amendments
to be advisable and recommended for approval by the stockholders of the
Corporation. The resolutions setting forth the proposed amendments are as
follows:
NOW, THEREFORE, BE IT RESOLVED, that Section A of Article IV of the Amended
and Restated Certificate of Incorporation of the Corporation be amended in
its entirety to read as follows:
"A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares which the corporation is
authorized to issue is Thirty-Four Million Five Hundred Forty-Eight
Thousand Nine Hundred Sixty Three (34,548,963) shares. Twenty Million
(20,000,000) shares shall be Common Stock, $.001 par value per share, and
Fourteen Million Five Hundred Forty-Eight Thousand Nine Hundred Sixty Three
(14,548,963) shares shall be Preferred Stock, $.001 par value per share, of
which Eight Million One Hundred Twenty Thousand (8,120,000) shares shall be
Series A Preferred Stock, Two Million Two Hundred Twenty-Eight Thousand
Nine Hundred Sixty Three (2,228,963) shares shall be
<PAGE>
Series B Preferred Stock, Three Million Eight Hundred Thousand (3,800,000)
shares shall be Series C Preferred Stock, and Four Hundred Thousand
(400,000) shares shall be Series D Preferred Stock.
Upon the amendment of this Article IV as set forth herein, each three
shares of Common Stock, $.001 par value per share, issued and outstanding
at such time shall be combined, reclassified and converted into two shares
of Common Stock, $.001 par value per share ("new shares"). No fractional
share shall be issued upon the combination, reclassification and conversion
of any share or shares of Common Stock. If the combination,
reclassification and conversion of the shares of Common Stock represented
by each certificate (including, for this purpose, a holder of a certificate
of shares of Common Stock issuable upon the conversion of Preferred Stock)
would result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, issue the
holder one additional share. An amount shall be transferred from capital
to surplus so that the amount of capital represented by the new shares in
the aggregate at the time of filing of this Certificate of Amendment shall
equal the aggregate number of new shares multiplied by $.001. Unless
otherwise requested by the holders thereof, the share certificates
representing the shares outstanding prior to the filing of this Certificate
of Amendment shall represent such number of new shares as combined,
reclassified and converted following the filing of this Certificate of
Amendment. Upon surrender by a holder of Common Stock of a certificate or
certificates for Common Stock, $.001 par value, duly endorsed, at the
office of this Corporation, this Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Common
Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of new shares to which such holder shall be
entitled as aforesaid."
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law. The total
number of outstanding shares of the Corporation is 1,986,597 shares of Common
Stock, 8,120,000 shares of Series A Preferred Stock, 1,992,104 shares of Series
B Preferred Stock, 3,637,272 shares of Series C Preferred Stock and 400,000
shares of Series D Preferred Stock. The number of shares voting in favor of the
amendment equaled or exceeded the
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<PAGE>
vote required, such required vote being (a) a majority of the outstanding shares
of Common Stock and (b) a majority of the outstanding shares of Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock (voting together on an as-converted basis).
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, said Corsair Communications, Inc. has caused this
certificate to be signed by Mary Ann Byrnes, its Chief Executive Officer and
President, and Martin J. Silver, its Secretary, this 6 day of June, 1997.
By: /s/ MARY ANN BYRNES
----------------------------------
Mary Ann Byrnes, Chief Executive
Officer and President
By: /s/ MARTIN J. SILVER
-----------------------------------
Martin J. Silver, Secretary
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995. An amended and restated Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on October 26, 1995 and was
amended pursuant to a Certificate of Amendment of Certificate of Incorporation
of the corporation filed with the Secretary of State of the State of Delaware on
December 18, 1995. An amended and restated Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on October 30, 1996.
An amended and restated Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on March 6, 1997.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of at least a
majority of the outstanding shares in accordance with Section 228 thereof, and
written notice having been given in accordance with the requirements of such
Section. The Amended and Restated Certificate of Incorporation restates,
integrates and amends the provisions of the Certificate of Incorporation of this
corporation.
3. The text of the Certificate of Incorporation as heretofore amended or
supplemented is hereby restated and further amended to read in its entirety as
follows:
ARTICLE I
The name of this corporation is Corsair Communications, Inc.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
<PAGE>
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
(A) Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock, denominated Common Stock and Preferred Stock. The Common Stock shall
have a par value of $0.001 per share and the Preferred Stock shall have a par
value of $0.001 per share. The total number of shares of Common Stock which the
Corporation is authorized to issue is Seventy-Five million (75,000,000), and the
total number of shares of Preferred Stock which the Corporation is authorized to
issue is Ten million (10,000,000), which shares of Preferred Stock shall be
undesignated as to series.
(B) Issuance of Preferred Stock. The Preferred Stock may be issued from
---------------------------
time to time in one or more series. The Board of Directors is hereby authorized,
by filing one or more certificates pursuant to the Delaware General Corporation
Law (each, a "Preferred Stock Designation"), to fix or alter from time to time
the designations, powers, preferences and rights of each such series of
Preferred Stock and the qualifications, limitations or restrictions thereof,
including without limitation the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), redemption price or prices, and the liquidation preferences of any
wholly-unissued series of Preferred Stock, and to establish from time to time
the number of shares constituting any such series and the designation thereof,
or any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
(C) Rights, Preferences, Privileges and Restrictions of Common Stock.
----------------------------------------------------------------
1. Dividend Rights. Subject to the prior or equal rights of holders
---------------
of all classes of stock at the time outstanding having prior or equal rights as
to dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Redemption. The Common Stock is not redeemable upon demand of
----------
any holder thereof or upon demand of this corporation.
3. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in
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<PAGE>
accordance with the Bylaws of this corporation, and shall be entitled to vote
upon such matters and in such manner as may be provided by law.
ARTICLE V
(A) Exculpation. A director of the corporation shall not be personally
-----------
liable to the corporation or its stockholders 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 corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
corporation's stockholders, further reductions in the liability of the
corporation's directors for breach of fiduciary duty, then a director of the
corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
(B) Indemnification. To the extent permitted by applicable law, this
---------------
corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
corporation, its stockholders, and others.
(C) Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall be prospective and shall not
adversely affect any right or protection of a director, officer, agent or other
person existing at the time of, or increase the liability of any director of the
corporation with respect to any acts or omissions of such director occurring
prior to, such repeal or modification.
ARTICLE VI
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation. At the 1998 Annual Meeting of
Stockholders, the Directors shall be classified into three classes, as nearly
equal in number as possible as determined by the Board of Directors, with the
term of office of the first class to expire at the 1999 Annual Meeting of
Stockholders, the term of office of the second class to expire at the 2000
Annual Meeting of Stockholders and the term of office of the third class to
expire at the 2001 Annual Meeting of Stockholders. At each Annual Meeting of
Stockholders following such initial classification and election, Directors
elected to succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding Annual Meeting of Stockholders
after their election. Additional
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directorships resulting from an increase in the number of Directors shall be
apportioned among the classes as equally as possible as determined by the Board
of Directors.
ARTICLE VII
No holder of shares of stock of the corporation shall have any preemptive
or other right, except as such rights are expressly provided by contract, to
purchase or subscribe for or receive any shares of any class, or series thereof,
of stock of the corporation, whether now or hereafter authorized, or any
warrants, options, bonds, debentures or other securities convertible into,
exchangeable for or carrying any right to purchase any share of any class, or
series thereof, of stock; but such additional shares of stock and such warrants,
options, bonds, debentures or other securities convertible into, exchangeable
for or carrying any right to purchase any shares of any class, or series
thereof, of stock may be issued or disposed of by the Board of Directors to such
persons, and on such terms and for such lawful consideration as in its
discretion it shall deem advisable or as the corporation shall have by contract
agreed.
ARTICLE VIII
The corporation is to have a perpetual existence.
ARTICLE IX
The corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Amended and Restated Certificate of Incorporation
and/or any provision contained in any amendment to or restatement of this
Amended and Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE X
The Board of Directors may from time to time make, amend, supplement or
repeal the Bylaws by the requisite affirmative vote of Directors as set forth in
the Bylaws; provided, however, that the stockholders may change or repeal any
bylaw adopted by the Board of Directors by the requisite affirmative vote of
stockholders as set forth in the Bylaws; and, provided further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of stockholders called in accordance with the
Bylaws, and no action shall be taken by the stockholders by written consent.
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ARTICLE XII
Advance notice of stockholder nominations for the election of directors and
of business to be brought by stockholders before any meeting of the stockholders
of the corporation shall be given in the manner provided in the Bylaws of the
corporation.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been signed under the seal of the corporation as of this _____ day of
_________, 1997.
CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
By:___________________________
Mary Ann Byrnes
President and Chief Executive Officer
ATTEST:
____________________________________
Martin J. Silver, Secretary
[SIGNATURE PAGE TO AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF CORSAIR COMMUNICATIONS, INC.]
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EXHIBIT 3.3
BYLAWS
OF
PHONEPRINT, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover, County of
Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of Palo Alto, State of California, at such place as
may be fixed from time to time by the Board of Directors, or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1994,
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
<PAGE>
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
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Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
certificate of incorporation, a different vote
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is required, in which case such express provision shall govern and control the
decision of such question.
Section 10. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be five (5). The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
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Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these bylaws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the
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annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected Board of Directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the President on
four (4) days' notice to each director by mail or 48 hours' notice to each
director either personally or by telegram; special meetings shall be called by
the President or Secretary in like manner and on like notice on the written
request of two directors unless the board consists of only one director, in
which case special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of the sole director.
Section 8. At all meetings of the board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the
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Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these bylaws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board
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of Directors to act at the meeting in the place of any such absent or
disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each
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meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of incorporation
or bylaw, any director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of shares entitled to vote at an
election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be elected by the Board of
Directors and shall include a President and a Secretary. The Board of Directors
may elect from among its members a Chairman of the Board and a Vice Chairman of
the Board. The Board of Directors may also elect a Treasurer and/or one or more
Vice Presidents, Assistant Secretaries and Assistant Treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall elect a President and a Secretary and may also
elect Vice Presidents and a Treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation shall
be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
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THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all meetings
of the Board of Directors and of the stockholders at which he shall be present.
He shall have and may exercise such powers as are, from time to time, assigned
to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and of the stockholders at which he shall be present. He shall have and may
exercise such powers as are, from time to time, assigned to him by the Board and
as may be provided by law.
THE PRESIDENT AND VICE PRESIDENT
Section 8. The President shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
he shall preside at all meetings of the stockholders and the Board of Directors.
He shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
Section 10. In the absence of the President or in the event of his
inability or refusal to act, the Vice President, if any, (or in the event there
be more than one Vice President, the Vice Presidents in the order designated by
the directors, or in the absence
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of any designation, then in the order of their election) shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Vice Presidents shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The Assistant Secretary, or, if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
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THE TREASURER AND ASSISTANT TREASURERS
Section 13. The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The Assistant Treasurer, or if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the Treasurer or in the event of his inability or refusal to
act, perform the duties and
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exercise the powers of the Treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a Vice
President and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the corporation, certifying the number of shares owned by
him in the corporation.
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special
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rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation
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to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
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SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized under
the laws of the State of Delaware, as those laws may be amended and supplemented
from time to time, indemnify any director made, or threatened to be made, a
party to an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of being a director of the corporation or a predecessor
corporation or, at the corporation's request, a director or officer of another
corporation, provided, however, that the corporation shall indemnify any such
agent in connection with a proceeding initiated by such agent only if such
proceeding was authorized by the Board of Directors of the corporation. The
indemnification provided for in this Section 6 shall: (i) not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement or vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) continue as to a person who has
ceased to be a director, and (iii) inure to the benefit of the heirs, executors
and administrators of such a person. The corporation's obligation to provide
indemnification under this Section 6 shall be offset to the extent of any other
source of indemnification or any otherwise applicable insurance coverage under a
policy maintained by the corporation or any other person.
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Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware. Notwithstanding the foregoing, the
corporation shall not be required to advance such expenses to an agent who is a
party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such agent, disclosure of confidential
information in violation of such agent's fiduciary or contractual obligations to
the corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action,
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<PAGE>
suit or proceeding by reason of the fact that he, his testator or intestate, is
or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENT
Section 1. These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors by the certificate of incorporation at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting. If the
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<PAGE>
power to adopt, amend or repeal bylaws is conferred upon the Board of Directors
by the certificate of incorporation it shall not divest or limit the power of
the stockholders to adopt, amend or repeal bylaws.
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<PAGE>
CERTIFICATE OF SECRETARY
The undersigned, being the Secretary of PhonePrint, Inc., a Delaware
corporation, does hereby certify the foregoing to be the Bylaws of said
Corporation, as adopted by the directors of the Corporation and which remain in
full force and effect as of the date hereof.
Executed at Palo Alto, California effective as of December 8, 1994.
/s/ Kevin Compton
-----------------------------
Kevin Compton, Secretary
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<PAGE>
AMENDMENT TO BYLAWS
OF
CORSAIR COMMUNICATIONS, INC., a Delaware corporation
Certificate of Secretary
The undersigned does hereby certify that:
I am the duly qualified and acting Secretary of Corsair Communications,
Inc., a duly organized and existing Delaware corporation (the "Corporation").
The following is a true copy of a resolution duly adopted by unanimous
written consent of the directors of the Corporation effective November 10, 1995
and approved by the stockholders of the Corporation effective November 10, 1995,
which appears in the minute book of the Corporation:
NOW, THEREFORE, BE RESOLVED, that Article III, Section 1 of the
Corporation's Bylaws be amended to read as follows:
"Section 2. The number of directors which shall constitute
the whole board shall be seven (7). The directors shall be
elected at the annual meeting of the stockholders, except as
provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders."
The foregoing amendment to the Bylaws is in conformity with the Amended and
Restated Certificate of Incorporation and Bylaws of the Corporation, has never
been modified or repealed, and will be in full force and effect upon execution
of this Amendment.
IN WITNESS WHEREOF, I have executed this Amendment to Bylaws and affixed
the seal of the Corporation on the 10th day of November, 1995.
/s/ Kevin Compton
-------------------------------------
Kevin Compton, Secretary
<PAGE>
EXHIBIT 3.4
RESTATED BYLAWS
OF
CORSAIR COMMUNICATIONS, INC.
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office shall be in the City
-----------------
of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
-------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. All meetings of the stockholders for the
-----------------
election of Directors shall be held in the City of Palo Alto, State of
California, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of
California as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
California, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual Meeting.
--------------
(a) The annual meeting of the stockholders of the
corporation, for the purpose of election of Directors and for such other
business as may lawfully come before it, shall be held on such date and at such
time as may be designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (C) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the
<PAGE>
Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation no later than the date specified in the corporation's proxy
statement released to stockholders in connection with the previous year's annual
meeting of stockholders, which date shall be not less than one hundred twenty
(120) calendar days in advance of the date of such proxy statement; provided,
however, that in the event that no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than thirty (30) days
from the date contemplated at the time of the previous year's proxy statement,
notice by the stockholder to be timely must be so received a reasonable time
before the solicitation is made. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business and (v) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934
Act"), in his capacity as a proponent to a stockholder proposal. In addition to
the foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations promulgated
under the 1934 Act to the extent such regulations require notice that is
different from the notice required above. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b) of this
Section 2. The chairman of the annual meeting shall, if the facts warrant,
determine and declare at the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this paragraph (b),
and, if he should so determine, he shall so declare at the meeting that any such
business not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of Directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 2. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a Director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation that are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person
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<PAGE>
or persons) pursuant to which the nominations are to be made by the stockholder,
and (E) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of Directors, or is otherwise
required, in each case pursuant to Regulation 14A under the 1934 Act (including
without limitation such person's written consent to being named in the proxy
statement, if any, as a nominee and to serving as a Director if elected); and
(ii) as to such stockholder giving notice, the information required to be
provided pursuant to subitems (ii), (iii) and (iv) of paragraph (b) of this
Section 2. At the request of the Board of Directors, any person nominated by a
stockholder for election as a Director shall furnish to the Secretary of the
corporation that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a Director of the corporation unless nominated in accordance
with the procedures set forth in this paragraph (c). The chairman of the
meeting shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
Section 3. Notice of Annual Meeting. Written notice of the annual meeting
------------------------
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 4. Voting List. The officer who has charge of the stock ledger of
-----------
the corporation shall prepare and make, or have prepared and made, at least ten
(10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special Meetings. Special meetings of the stockholders, for
----------------
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, as amended from time to time, may only be called
as provided in this Section 5 by the President, Chief Executive Officer or
Chairman of the Board and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors. Such request shall
state the purpose or purposes of the proposed meeting. The place, date and time
of any special meeting shall be determined by the Board of Directors. Such
determination shall include the record date for determining the stockholders
having the right of and to vote at such meeting.
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<PAGE>
Section 6. Notice of Special Meeting. Written notice of a special meeting
-------------------------
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, to each stockholder entitled to
vote at such meeting.
Section 7. Action at Special Meeting. Business transacted at any special
-------------------------
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. Quorum and Adjournments.
-----------------------
(a) The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation, as amended from time to time. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
(b) When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of statutes or of the
Certificate of Incorporation, as amended from time to time, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Unless otherwise provided in the Certificate of
-------------
Incorporation, as amended from time to time, each stockholder shall at every
meeting of the stockholders be entitled to one (1) vote in person or by proxy
for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three (3) years from its date,
unless the proxy provides for a longer period.
Section 10. Action Without Meeting. No action shall be taken by the
----------------------
stockholders of the corporation except at an annual or special meeting of
stockholders called in accordance with these Bylaws, and no action shall be
taken by the stockholders by written consent.
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<PAGE>
ARTICLE III
Directors
---------
Section 1. Classes, Number, Term of Office and Qualification. At the
-------------------------------------------------
1998 Annual Meeting of Stockholders, the Directors shall be classified into
three classes, as nearly equal in number as possible as determined by the Board
of Directors, with the term of office of the first class to expire at the 1999
Annual Meeting of Stockholders, the term of office of the second class to expire
at the 2000 Annual Meeting of Stockholders and the term of office of the third
class to expire at the 2001 Annual Meeting of Stockholders. At each Annual
Meeting of Stockholders following such initial classification and election,
Directors elected to succeed those Directors whose terms expire shall be elected
for a term of office to expire at the third succeeding Annual Meeting of
Stockholders after their election. Additional directorships resulting from an
increase in the number of Directors shall be apportioned among the classes as
equally as possible as determined by the Board of Directors. The number of
Directors which shall constitute the whole Board shall be between five (5) and
seven (7) Directors, and the exact number shall be fixed by resolution of the
majority of the Board of Directors (notwithstanding the provisions of Article X,
Section 1, paragraph (c)), with the number initially fixed at six (6). The
number of Directors shall be determined by resolution of sixty-six and two-
thirds percent (66-2/3%) of the Directors then in office or by sixty-six and
two-thirds percent (66-2/3%) of the stockholders at the annual meeting of the
stockholders, and each Director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. Vacancies. Vacancies may be filled only by a majority of
---------
the Directors then in office, though less than a quorum, or by a sole remaining
Director. Each Director so chosen shall hold office until a successor is duly
elected and shall qualify or until his earlier death, resignation or removal.
If there are no Directors in office, then an election of Directors may be held
in the manner provided by statute. If, at the time of filling any vacancy, the
Directors then in office shall constitute less than a majority of the whole
Board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent of the total number of the shares at the time outstanding
having the right to vote for such Directors, summarily order an election to be
held to fill any such vacancies, or to replace the Directors chosen by the
Directors then in office.
Section 3. Powers. The business of the corporation shall be managed
------
by or under the direction of its Board of Directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation, as amended from time to time, or
by these Bylaws directed or required to be exercised or done by the
stockholders.
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<PAGE>
Section 4. Regular and Special Meetings. The Board of Directors of
----------------------------
the corporation may hold meetings, both regular and special, either within or
without the State of California.
Section 5. Annual Meeting. The annual meeting of each newly elected
--------------
Board of Directors shall be held without notice other than this Bylaw
immediately after, and at the same place as, the annual meeting of
stockholders. In the event the annual meeting of any newly elected Board of
Directors shall not be held immediately after, and at the same place as, the
annual meeting of stockholders, the meeting may be held at such time and place
as shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors.
Section 6. Notice of Regular Meetings. Regular meetings of the Board
--------------------------
of Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 7. Notice of Special Meetings. Special meetings of the Board
--------------------------
may be called by the Chief Executive Officer or President on no less than forty-
eight (48) hours notice to each Director either personally, or by telephone,
mail, telegram or facsimile; special meetings shall be called by the Chief
Executive Officer, President or Secretary in like manner and on like notice on
the written request of two Directors unless the Board consists of only one
Director, in which case special meetings shall be called by the Chief Executive
Officer, President or Secretary in like manner and on like notice on the written
request of the sole Director. A written waiver of notice, signed by the person
entitled thereto, whether before or after the time of the meeting stated
therein, shall be deemed equivalent to notice.
Section 8. Quorum. At all meetings of the Board a majority of the
------
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation, as
amended from time to time. If a quorum shall not be present at any meeting of
the Board of Directors, the Directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 9. Action Without Meeting. Unless otherwise restricted by
----------------------
the Certificate of Incorporation, as amended from time to time, or these Bylaws,
any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
Section 10. Meetings by Telephone Conference Calls. Unless otherwise
--------------------------------------
restricted by the Certificate of Incorporation, as amended from time to time, or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board
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<PAGE>
of Directors, may participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
Section 11. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee.
In the absence of disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, as amended
from time to time, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the Bylaws of the corporation; and, unless the resolution or the
Certificate of Incorporation, as amended from time to time, expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
Section 12. Fees and Compensation. Unless otherwise restricted by
---------------------
the Certificate of Incorporation, as amended from time to time, or these Bylaws,
the Board of Directors shall have the authority to fix the compensation of
Directors. The Directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
Director. No such payment shall preclude any Director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
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<PAGE>
Section 13. Removal. Subject to any limitations imposed by law or
-------
the Certificate of Incorporation, as amended from time to time, the Board of
Directors, or any individual Director, may be removed from office at any time
only with cause by the affirmative vote of the holders of at least a majority of
shares entitled to vote at an election of Directors.
ARTICLE IV
NOTICES
-------
Section 1. Notice. Whenever, under the provisions of the statutes or
------
of the Certificate of Incorporation, as amended from time to time, or of these
Bylaws, notice is required to be given to any Director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such Director or stockholder, at his address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to Directors may also be given by
telephone, telegram and facsimile.
Section 2. Waiver of Notice. Whenever any notice is required to be
----------------
given under the provisions of the statutes or of the Certificate of
Incorporation, as amended from time to time, or of these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE V
OFFICERS
--------
Section 1. Enumeration. The officers of the corporation shall be
-----------
chosen by the Board of Directors and shall be a Chief Executive Officer, a Chief
Financial Officer and a Secretary. The Board of Directors may elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
of Directors may also choose a President, one or more Vice Presidents and one or
more Assistant Secretaries. Any number of offices may be held by the same
person, unless the Certificate of Incorporation, as amended from time to time,
or these Bylaws otherwise provide.
The compensation of all officers and agents of the corporation
shall be fixed by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of his also being a Director of the
corporation.
Section 2. Election or Appointment. The Board of Directors at its
-----------------------
first meeting after each annual meeting of stockholders shall choose a Chief
Executive Officer, Chief Financial Officer and a Secretary and may choose a
President, one or more Vice Presidents and one or more Assistant Secretaries.
-8-
<PAGE>
The Board of Directors may appoint such other officers and agents as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
Section 3. Tenure, Removal and Vacancies. The officers of the
-----------------------------
corporation shall hold office until their successors are chosen and qualified.
Any officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the corporation shall be filled by the Board
of Directors.
Section 4. Chairman of the Board. The Chairman of the Board, if any,
---------------------
shall preside at all meetings of the Board of Directors and of the stockholders
at which he shall be present. The Chairman of the Board shall have and may
exercise such powers as are, from time to time, assigned by the Board and as may
be provided by law.
Section 5. Vice Chairman of the Board. In the absence of the
--------------------------
Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at
all meetings of the Board of Directors and of the stockholders at which he shall
be present. The Vice Chairman of the Board shall have and may exercise such
powers as are, from time to time, assigned by the Board and as may be provided
by law.
Section 6. Chief Executive Officer. The Chief Executive Officer of
-----------------------
the corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the corporation. The Chief Executive Officer shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a Chairman or Vice
Chairman of the Board at all meetings of the Board of Directors. The Chief
Executive Officer shall have the general powers and duties of management usually
vested in the Chief Executive Officer of a corporation, including general
supervision, direction and control of the business and supervision of other
officers of the corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws.
The Chief Executive Officer shall, without limitation, have the
authority to execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the corporation.
Section 7. President. Subject to such supervisory powers as may be
---------
given by these Bylaws or the Board of Directors to the Chairman of the Board or
the Chief Executive Officer, if there be such officers, the President shall have
general supervision, direction and control of the business and supervision of
other officers of the corporation, and shall have such other powers and duties
as may be prescribed by the Board of Directors or these Bylaws. In the event a
Chief Executive Officer shall not be appointed, the President shall have the
duties of such office.
-9-
<PAGE>
Section 8. Vice Presidents. The Vice President, or if there shall be
---------------
more than one, the Vice Presidents in the order determined by the Board of
Directors, shall, in the absence or disability of the President, act with all of
the powers and be subject to all the restrictions of the President. The Vice
Presidents shall also perform such other duties and have such other powers as
the Board of Directors, the President or these Bylaws may, from time to time,
prescribe.
Section 9. Secretary. The Secretary shall attend all meetings of the
---------
Board of Directors, all meetings of the committees thereof and all meetings of
the stockholders and record all the proceedings of the meetings in a book or
books to be kept for that purpose. Under the Chief Executive Officer's or
President's supervision, the Secretary shall give, or cause to be given, all
notices required to be given by these Bylaws or by law; shall have such powers
and perform such duties as the Board of Directors, the Chief Executive Officer,
the President or these Bylaws may, from time to time, prescribe; and shall have
custody of the seal of the corporation. The Secretary, or an Assistant
Secretary, shall have authority to affix the seal of the corporation to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his or her signature.
Section 10. Assistant Secretary. The Assistant Secretary, if any, or
-------------------
if there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors, shall, in the absence, disability or refusal to act of
the Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as the Board of
Directors, the Chief Executive Officer, the President, the Secretary or these
Bylaws may, from time to time, prescribe.
Section 11. Chief Financial Officer. The Chief Financial Officer
-----------------------
shall act as Treasurer and shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
The Chief Financial Officer shall disburse the funds of the
corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the President and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his or her transactions as Treasurer and of the financial
condition of the corporation.
If required by the Board of Directors, the Chief Financial
Officer shall give the corporation a bond (which shall be renewed every six
years) in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers,
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<PAGE>
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by the Board of Directors, the Chief
Executive Officer or the President.
Section 13. Absence or Disability of Officers. In the case of the absence
---------------------------------
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may delegate the powers and duties of such
officer to any officer or to any Director, or to any other person who it may
select.
ARTICLE VI
CERTIFICATES OF STOCK
---------------------
Section 1. Certificates of Stock. Every holder of stock in the
---------------------
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the Chairman or Vice Chairman of the Board of Directors,
or the President or a Vice President and the Chief Financial Officer or an
Assistant Chief Financial Officer, or the Secretary or an Assistant Secretary of
the corporation, certifying the number of shares owned by him in the
corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, 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 shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that 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.
Section 2. Execution of Certificates. Any or all of the signatures on the
-------------------------
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased
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<PAGE>
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfer of Stock. Upon surrender to the corporation or the
-----------------
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 5. Fixing Record Date. In order that the corporation may
------------------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholder or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 6. Registered Stockholders. The corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
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<PAGE>
ARTICLE VII
INDEMNIFICATION
---------------
Section 1. Indemnification of Directors and Executive Officers. The
---------------------------------------------------
corporation shall indemnify its Directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law; provided,
however, that the corporation may limit the extent of such indemnification by
individual contracts with its Directors and executive officers; and, provided,
further, that the corporation shall not be required to indemnify any Director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person or any proceeding by such person against the corporation or its
Directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the corporation, and (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the Delaware General Corporation Law.
Section 2. Indemnification of Other Officers, Employees and Other Agents.
-------------------------------------------------------------
The corporation shall have power to indemnify its other officers, employees and
other agents as set forth in the Delaware General Corporation Law.
Section 3. Good Faith.
----------
(a) For purposes of any determination under this Bylaw, a Director or
officer shall be deemed to have acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, to have had no reasonable
cause to believe that any conduct was unlawful, if such Director's or officer's
action is based on information, opinions, reports and statements, including
financial statements and other financial data, in each case prepared or
presented by:
(1) one or more officers or employees of the corporation whom the
Director or executive officer believed to be reliable and competent in
the matters presented;
(2) counsel, independent accountants or other persons as to
matters which the Director or executive officer believed to be within
such person's professional competence; and
(3) with respect to a Director, a committee of the Board upon
which such Director does not serve, as to matters within such
Committee's designated authority, which committee the Director
believes to merit confidence; so long as, in each case, the Director
or executive officer acts without knowledge that would cause such
reliance to be unwarranted.
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<PAGE>
(b) The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which was reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, that
the person had reasonable cause to believe that his or her consent was unlawful.
(c) The provisions of this Section 3 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the Delaware
General Corporation Law.
Section 4. Expenses. The corporation shall advance, prior to the final
--------
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or officer in connection with such proceeding upon
receipt of an undertaking by or on behalf of such person to repay said amounts
if it should be determined ultimately that such person is not entitled to be
indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 4 of this Bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made (i) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested Directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
Section 5. Enforcement. Without the necessity of entering into an express
-----------
contract, all rights to indemnification and advances to Directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the Director or officer. Any right to indemnification or advances granted by
this Bylaw to a Director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his or her claim.
The corporation shall be entitled to raise as a defense to any such action that
the claimant has not met the standards of conduct that make it permissible under
the Delaware General Corporation Law for the corporation to indemnify the
claimant for the amount claimed. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the
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<PAGE>
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 6. Non-Exclusivity of Rights. The rights conferred on any person
-------------------------
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, as amended from time to time, Bylaws, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding office.
The corporation is specifically authorized to enter into individual contracts
with any or all of its Directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the
Delaware General Corporation Law.
Section 7. Survival of Rights. The rights conferred on any person by this
------------------
Bylaw shall continue as to a person who has ceased to be a Director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 8. Insurance. To the fullest extent permitted by the Delaware
---------
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
Section 9. Amendments. Any repeal or modification of this Bylaw shall
----------
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
Section 10. Saving Clause. If this Bylaw or any portion hereof shall be
-------------
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and officer to the full
extent not prohibited by any applicable portion of this Bylaw that shall not
have been invalidated, or by any other applicable law.
Section 11. Certain Definitions. For the purposes of this Bylaw, the
-------------------
following definitions shall apply:
(a) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of the testimony
in, any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative.
(b) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines, amounts
paid in
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<PAGE>
settlement or judgment and any other costs and expenses of any nature or kind
incurred in connection with any proceeding.
(c) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
Directors, officers, and employees or agents, so that any person who is or was a
Director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(d) References to a "Director," "officer," "employee," or "agent" of
the corporation shall include, without limitation, situations where such person
is serving at the request of the corporation as a Director, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(e) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a Director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such Director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE VIII
LOANS TO OFFICERS
-----------------
Section 1. Loans to Officers. The corporation may lend money to, or
-----------------
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the Corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation. Nothing in this Bylaw shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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<PAGE>
ARTICLE IX
GENERAL PROVISIONS
------------------
Section 1. Declaration of Dividends. Dividends upon the capital stock of
------------------------
the corporation, subject to the provisions of the Certificate of Incorporation,
as amended from time to time, if any, may be declared by the Board of Directors
at any regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock, subject to the provisions
of the Certificate of Incorporation, as amended from time to time.
Section 2. Dividend Reserve. Before payment of any dividend, there may be
----------------
set aside out of any funds of the corporation available for dividends such sum
or sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purposes as the Directors shall think conducive to the interest
of the corporation, and the Directors may modify or abolish any such reserve in
the manner in which it was created.
Section 3. Execution of Corporate Instruments. All checks or demands for
----------------------------------
money and notes of the corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
Section 4. Fiscal Year. The fiscal year of the corporation shall be fixed
-----------
by resolution of the Board of Directors.
Section 5. Corporate Seal. The Board of Directors may adopt a corporate
--------------
seal having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE X
AMENDMENTS
----------
Section 1. Amendments.
----------
(a) Except as otherwise set forth in Section 9 of Article VII of
these Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of a majority of the voting power of all of the
then-outstanding shares of capital stock of the corporation entitled to vote
generally in the election of Directors (the "Voting Stock"). The Board of
Directors shall also have the power, if such power is conferred upon the Board
of Directors by the Certificate of Incorporation, as amended from time to time,
to adopt, amend or repeal Bylaws by a vote of the majority of the Board of
Directors unless a greater or different vote is required pursuant to the
provisions of the Bylaws, the Certificate of Incorporation or any applicable
provision of law.
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<PAGE>
(b) Notwithstanding any other provisions of these Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation, as
amended from time to time, or any Preferred Stock Designation (as the term is
defined in the Certificate of Incorporation, as amended), the affirmative vote
of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock, voting
together as a single class, shall be required to alter, amend or repeal this
paragraph (b) or Section 2, Section 5 or Section 10 of Article II or Section 1,
Section 2 or Section 13 of Article III of these Bylaws.
(c) Notwithstanding any other provisions of these Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation, as
amended from time to time, or any Preferred Stock Designation (as the term is
defined in the Certificate of Incorporation, as amended from time to time), the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
Continuing Directors (as defined below), shall be required to alter, amend or
repeal this paragraph (c) or Section 2, Section 5 or Section 10 of Article II or
Section 1, Section 2 or Section 13 of Article III of these Bylaws. For purposes
of this paragraph, "Continuing Director" shall mean either (i) those Directors
(the "Original Directors") who are members of the Board of Directors on the date
these Restated Bylaws are adopted; or (ii) Directors who are nominated for
election or are elected by (A) a majority of the six (6) Original Directors or
(B) Directors, constituting a then majority of the Board of Directors, who were
all either Original Directors or were nominated for election or elected by a
then majority of the Board of Directors whose nomination or election can be
traced directly through other Directors to the Original Directors.
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<PAGE>
CERTIFICATE OF SECRETARY
The undersigned, being the Secretary of Corsair Communications, Inc., a
Delaware corporation, does hereby certify the foregoing to be the Bylaws of said
Corporation, as adopted by the requisite vote or votes of the stockholders and
Directors of the Corporation and which remain in full force and effect as of the
date hereof.
Executed at Palo Alto, California effective as of ___________________,1997.
__________________________________________
Martin J. Silver, Secretary
<PAGE>
EXHIBIT 10.1
PHONEPRINT, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
---------------------
December 10, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Purchase and Sale of Stock............................................ 1
1.1 Sale and Issuance of Series A Preferred Stock................... 1
1.2 Closing......................................................... 1
2. Representations and Warranties of the Company......................... 1
2.1 Organization, Good Standing and Qualification................... 2
2.2 Capitalization and Voting Rights................................ 2
2.3 Subsidiaries.................................................... 2
2.4 Authorization................................................... 2
2.5 Valid Issuance of Preferred and Common Stock.................... 3
2.6 Governmental Consents........................................... 3
2.7 Litigation...................................................... 3
2.8 Compliance with Other Instruments............................... 3
2.9 Agreements; Action.............................................. 4
2.10 Related-Party Transactions...................................... 5
2.11 Permits......................................................... 5
2.12 Disclosure...................................................... 5
2.13 Minute Books.................................................... 5
2.14 Labor Agreements and Actions.................................... 5
3. Representations and Warranties of the Investor........................ 6
3.1 Authorization................................................... 6
3.2 Purchase Entirely for Own Account............................... 6
3.3 Disclosure of Information....................................... 6
3.4 Investment Experience........................................... 6
3.5 Accredited Investor............................................. 7
3.6 Restricted Securities........................................... 7
3.7 Further Limitations on Disposition.............................. 7
3.8 Legends......................................................... 7
4. California Commissioner of Corporations............................... 8
4.1 Corporate Securities Law....................................... 8
5. Conditions of Investor's Obligations at Closing....................... 8
5.1 Representations and Warranties................................... 8
5.2 Performance...................................................... 8
5.3 Compliance Certificate........................................... 8
5.4 Qualifications................................................... 9
5.5 Proceedings and Documents........................................ 9
5.6 Bylaws........................................................... 9
5.7 Board of Directors............................................... 9
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
5.8 Investors' Rights Agreement...................................... 9
6. Conditions of the Company's Obligations at Closing.................... 9
6.1 Representations and Warranties................................... 9
6.2 Payment of Purchase Price........................................ 9
6.3 California Qualification......................................... 9
7. Miscellaneous......................................................... 9
7.1 Survival of Warranties........................................... 9
7.2 Successors and Assigns........................................... 10
7.3 Governing Law.................................................... 10
7.4 Counterparts..................................................... 10
7.5 Titles and Subtitles............................................. 10
7.6 Notices.......................................................... 10
7.7 Finder's Fee..................................................... 10
7.8 Expenses......................................................... 10
7.9 Amendments and Waivers........................................... 11
7.10 Severability.................................................... 11
7.11 Aggregation of Stock............................................ 11
7.12 Entire Agreement................................................ 11
</TABLE>
SCHEDULE A - Schedule of Investors
EXHIBIT A - Certificate of Incorporation
EXHIBIT B - Form of Promissory Note
EXHIBIT C - Investors' Rights Agreement
(ii)
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT is made as of the 10th day of
December, 1994, by and between PhonePrint, Inc., a Delaware corporation (the
"Company") and the investors listed on Schedule A hereto, each of which is
herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Issuance of Series A Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State of
Delaware on or before the Closing (as defined below) the Certificate of
Incorporation in the form attached hereto as Exhibit A.
---------
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally, to purchase at the Closing and the Company agrees to
sell and issue to each Investor at the Closing, that number of shares of the
Company's Series A Preferred Stock set forth opposite each Investor's name on
Schedule A hereto for the purchase price set forth thereon. Such purchase shall
be payable by Investor by delivery to Company by Investor of (i) a check in the
amount of the purchase price set forth opposite such Investor's name under the
heading "Cash Purchase Price" on Schedule A payable to the Company's order or by
wire transfer of funds in such amount to the Company's designated bank account
and (ii) a promissory note in the form attached hereto as Exhibit B in the
---------
amount set forth opposite such Investor's name under the heading "Promissory
Note" on Schedule A.
1.2 Closing. The purchase and sale of the Series A Preferred Stock
-------
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1200, San Diego, California at 11:00 o'clock A.M., on December 8,
1994, or at such other time and place as the Company and Investors acquiring in
the aggregate more than half the shares of Series A Preferred Stock sold
pursuant hereto mutually agree upon orally or in writing (which time and place
are designated as the "Closing"). At the Closing the Company shall deliver to
each Investor a certificate representing the Series A Preferred Stock which such
Investor is purchasing against delivery to the Company by such Investor of the
purchase price in the form as set forth above in Section 1.1(b).
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions furnished each Investor, and special counsel for the Investors,
specifically identifying the relevant subparagraph hereof, which exceptions
shall be deemed to be representations and warranties as if made hereunder:
<PAGE>
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
--------------------------------
Company consists, or will consist prior to the Closing, of:
(i) Preferred Stock. 8,120,000 shares of Preferred Stock (the
---------------
"Preferred Stock"), of which 8,120,000 shares have been designated Series A
Preferred Stock and up to 6,100,150 will be sold pursuant to this Agreement.
The rights, privileges and preferences of the Series A Preferred Stock will be
as stated in the Company's Certificate of Incorporation attached hereto as
Exhibit A.
- ---------
(ii) Common Stock. 18,270,000 shares of common stock ("Common
------------
Stock"), none of which are currently issued and outstanding.
(iii) Except for the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement, and the rights provided in
paragraph 2.4 of the Investors' Rights Agreement, there are not outstanding any
options, warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock. The Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company.
2.3 Subsidiaries. The Company does not presently own or control, directly
------------
or indirectly, any interest in any other corporation, association, or other
business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company, its
-------------
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the Investors' Rights Agreement and any other
agreement to which the Company is a party, the execution and delivery of which
is contemplated hereby (the "Ancillary Agreements"), the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance (or reservation for issuance) and delivery of the Series A Preferred
Stock being sold hereunder and the Common Stock issuable upon conversion of the
Series A Preferred Stock has been taken or will be taken prior to the Closing,
and this Agreement, the Investors' Rights Agreement and any Ancillary Agreements
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application
<PAGE>
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series A Preferred
--------------------------------------------
Stock which is being purchased by the Investors hereunder, when issued, sold and
delivered in accordance with the terms hereof for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable and, based
in part upon the representations of the Investors in this Agreement, will be
issued in compliance with all applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Series A Preferred Stock purchased
under this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Certificate of Incorporation, shall
be duly and validly issued, fully paid and nonassessable, and issued in
compliance with all applicable securities laws, as presently in effect, of the
United States and each of the states whose securities laws govern the issuance
of any of the Series A Preferred Stock hereunder.
2.6 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing pursuant to Section
25102(f) of the California Corporate Securities Law of 1968, as amended, and the
rules thereunder, which filing will be effected within 15 days of the sale of
the Series A Preferred Stock hereunder.
2.7 Litigation. There is no action, suit, proceeding or investigation
----------
pending or currently threatened against the Company which questions the validity
of this Agreement, the Investors' Rights Agreement or any Ancillary Agreements,
or the right of the Company to enter into any of them, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for the foregoing. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any provisions of
its Certificate of Incorporation or Bylaws or of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound
or, to its knowledge, of any provision of federal or state statute, rule or
regulation applicable to the Company. The execution, delivery and performance
of this Agreement, the Investors' Rights
<PAGE>
Agreement or any Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement.
2.9 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement and any Ancillary Agreements, there are no
agreements, understandings or proposed transactions between the Company and any
of its officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i) obligations
(contingent or otherwise) of, or payments to the Company in excess of, $5,000,
or (ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services
or (iv) indemnification by the Company with respect to infringements of
proprietary rights.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $5,000 or, in the case of
indebtedness and/or liabilities individually less than $5,000, in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Certificate of
<PAGE>
Incorporation or Bylaws, which adversely affects its business as now conducted
or as proposed to be conducted in the Business Plan, its properties or its
financial condition.
(f) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company of a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
2.10 Related-Party Transactions. No employee, officer, or director
--------------------------
of the Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the best of the Company's knowledge, none
of such persons has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company, except that employees, officers, or directors of the Company and
members of their immediate families may own stock in publicly traded companies
that may compete with the Company. No member of the immediate family of any
officer or director of the Company is directly or indirectly interested in any
material contract with the Company.
2.11 Permits. The Company has all franchises, permits, licenses,
-------
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.12 Disclosure. The Company has fully provided each Investor with
----------
all the information which such Investor has requested for deciding whether to
purchase the Series A Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement and any Ancillary
Agreements, nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.13 Minute Books. The minute books of the Company provided to the
------------
Investors contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
<PAGE>
2.14 Labor Agreements and Actions. The Company is not bound by or
----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
3. Representations and Warranties of the Investor. Each Investor hereby
----------------------------------------------
represents and warrants that:
3.1 Authorization. This Agreement constitutes its valid and legally
-------------
binding obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series A Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has full
power and authority to enter into this Agreement.
3.3 Disclosure of Information. It believes it has received all the
-------------------------
information it considers necessary or appropriate for deciding whether to
purchase the Series A Preferred Stock. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.4 Investment Experience. Each Investor is an investor in
---------------------
securities of companies in the development stage and acknowledges that it is
able to fend for itself,
<PAGE>
can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series A Preferred Stock. If other
than an individual, Investor also represents it has not been organized for the
purpose of acquiring the Series A Preferred Stock.
3.5 Accredited Investor. Each Investor is an "accredited investor"
-------------------
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 Restricted Securities. It understands that the shares of
---------------------
Series A Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Act, only in certain limited circumstances. In
this connection, each Investor represents that it is familiar with SEC Rule 144,
as presently in effect, and understands the resale limitations imposed thereby
and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series A Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3.7, provided and to the extent such section is then applicable and
Investors' Rights Agreement and any applicable Ancillary Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such
<PAGE>
partner or his spouse, if the transferee agrees in writing to be subject to the
terms hereof to the same extent as if he were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
-------
Series A Preferred Stock (and the Common Stock issuable upon conversion thereof)
may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the Code.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. Conditions of Investor's Obligations at Closing. The obligations of
-----------------------------------------------
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 Performance. The Company shall have performed and complied
-----------
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
<PAGE>
5.3 Compliance Certificate. The Chairman of the Board of the Company
----------------------
shall deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since the
date of the Business Plan.
5.4 Qualifications. The Commissioner of Corporations of the State of
--------------
California shall have issued a permit qualifying the offer and sale of the
Series A Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification.
5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 Bylaws. The Bylaws of the Company shall provide that the Board
------
of Directors of the Company shall consist of five (5) persons which number shall
not be changed by an Amendment to the Certificate of Incorporation or the Bylaws
without consent of a majority of the Series A Preferred Stock.
5.7 Board of Directors. The directors of the Company shall be Kevin
------------------
Compton and there shall be four (4) vacancies on the Board of Directors.
5.8 Investors' Rights Agreement. The Company and each Investor shall
---------------------------
have entered into the Investors' Rights Agreement in the form attached as
Exhibit C .
- ---------
6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
purchase price specified in Section 1.2.
6.3 California Qualification. The Commissioner of Corporations of
------------------------
the State of California shall have issued a permit qualifying the offer and sale
to the Investor of the Series A Preferred Stock and the Common Stock issuable
upon the conversion thereof or such offer and sale shall be exempt from such
qualification.
<PAGE>
7. Miscellaneous.
-------------
7.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Series A Preferred Stock sold hereunder or any
Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 Finder's Fee. Each party represents that it neither is nor
------------
will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses
<PAGE>
of defending against such liability or asserted liability) for which the Company
or any of its officers, employees or representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected, the
--------
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of special counsel for the Investors and shall, upon receipt of a bill
therefor, reimburse the out of pocket expenses of such counsel. If any action
at law or in equity is necessary to enforce or interpret the terms of this
Agreement or the Certificate of Incorporation, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the Series
A Preferred Stock. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and the
Company; provided, however, that no condition set forth in Section 5 hereof may
be waived with respect to any Investor who does not consent thereto.
7.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
7.12 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PHONEPRINT, INC., a Delaware corporation
By: /s/ Kevin Compton
----------------------------------------
Kevin Compton,
Chairman of the Board
Address: 495 Java Drive
Sunnyvale, California 94088
INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII
By: /s/ Kevin Compton
----------------------------------------
Address: 2750 Sand Hill Road
Menlo Park, California 94025
KPCB VII FOUNDERS FUND
By:/s/ Kevin Compton
-----------------------------------------
Address: 2750 Sand Hill Road
Menlo Park, California 94025
SEVIN-ROSEN IV
By: /s/ Steve Dow
----------------------------------------
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
[SIGNATURES TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT
CONTINUED ON NEXT PAGE]
<PAGE>
SEVIN-ROSEN-BAYLESS MANAGEMENT COMPANY
By: /s/ Steve Dow
----------------------------------------
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
NORWEST EQUITY PARTNERS IV, a
Minnesota Limited Partnership
By: Itasca Partners
Its: General Partner
By: /s/ Promod Haque, Partner
----------------------------------------
Address: 2800 Piper Jaffray Tower
Minneapolis, Minnesota 55402
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management
Partners, L.P.
By: /s/ John Michaelson
----------------------------------------
Address: 400 Park Avenue
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By: /s/ Raj Rajaratnam
----------------------------------------
Address: 400 Park Avenue
New York, NY 10022
[SIGNATURE PAGE TO SERIES A
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Total
Cash Purchase Promissory Purchase No. of
Name and Address Price Note Price Shares
- -------------------------------------- ------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Kleiner Perkins Caufield & Byers VII $2,714,776 $ 885,224 $ 3,600,000 1,800,000
2750 Sand Hill Road
Menlo, CA 94025
KPCB VII Founders Fund $ 301,642 $ 98,358 $ 400,000 200,000
2750 Sand Hill Road
Menlo, CA 94025
Sevin-Rosen IV $3,006,418 $ 983,582 $ 3,990,000 1,995,000
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
Sevin-Rosen-Bayless Management $ 10,000 ------ $ 10,000 5,000
Company
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
Norwest Equity Partners IV $2,413,360 $ 786,940 $ 3,200,300 1,600,150
2800 Piper Jaffray Tower
Minneapolis, MN 55402
Needham Capital SBIC, L.P. $ 377,052 $ 122,948 $ 500,000 250,000
400 Park Avenue
New York, NY 10022
Needham Emerging Growth Partners $ 377,052 $ 122,948 $ 500,000 250,000
400 Park Avenue
New York, NY 10022
---------- ---------- ----------- ---------
CLOSING TOTALS $9,200,300 $3,000,000 $12,200,300 6,100,150
</TABLE>
<PAGE>
EXHIBIT A
CERTIFICATE OF INCORPORATION
----------------------------
A-1
<PAGE>
CERTIFICATE OF INCORPORATION
OF PHONEPRINT, INC.,
a Delaware corporation
ARTICLE I
The name of this corporation is PhonePrint, Inc..
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Series A
Preferred Stock." The total number of shares which the corporation is authorized
to issue is Eighteen Million Two Hundred Seventy Thousand (18,270,000) shares.
Ten Million One Hundred Fifty Thousand (10,150,000) shares shall be Common
Stock, $.001 par value per share, and Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock, $.001 par value per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Series A Preferred
Stock are as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this
<PAGE>
corporation) on the Common Stock of this corporation, at the rate of $0.10 per
share (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) per annum payable when, as and if
declared by the Board of Directors. Such dividends shall not be cumulative.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
A Preferred Stock were the holders of the number of shares of Common Stock of
this corporation into which their respective shares of Series A Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of this corporation entitled to receive such distribution.
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $2.00 for each outstanding share of Series A Preferred Stock (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series A Issue
Price") and (ii) an amount equal to declared but unpaid dividends on such share.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Series A Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then, the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to shareholders shall be distributed among the holders of Series A
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A Preferred
Stock).
c. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement), shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2.
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<PAGE>
3. Redemption.
----------
a. On or at any time after November 30, 2001, this corporation
may at any time it may lawfully do so, at the option of the Board of Directors,
redeem in whole or in part the Series A Preferred Stock by paying in cash
therefor a sum per share equal to the Original Series A Issue Price together
with all dividends declared, but unpaid, with respect to such share to the
Redemption Date (such total amount is hereinafter referred to as the "Series A
Redemption Price").
b. Within thirty (30) days after the receipt by this
corporation of the written request of the holders of not less than sixty-six and
two-thirds percent (66%) of the then outstanding Series A Preferred Stock, this
corporation shall redeem the percentage of the Series A Preferred Stock
specified in such request (or, if less, the maximum amount it may lawfully
redeem) by paying in cash therefor a sum per share equal to the Series A
Redemption Price.
c. i) In the event of any redemption of only a part of the
then outstanding Series A Preferred Stock, this corporation shall effect such
redemption pro rata according to the number of shares held by each holder
thereof.
ii) At least 30 (or, in the case of a redemption pursuant
to subsection 3(b), 20) but no more than 60 days prior to the date fixed for any
redemption of Series A Preferred Stock (the "Redemption Date"), written notice
shall be mailed, first class postage prepaid, to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of the Series A Preferred Stock to be redeemed, at the address last shown
on the records of this corporation for such holder or given by the holder to
this corporation for the purpose of notice or, if no such address appears or is
given, at the place where the principal executive office of this corporation is
located, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and the date on
which such holder's Conversion Rights (as hereinafter defined) as to such shares
terminate and calling upon such holder to surrender to this corporation, in the
manner and at the place designated, his certificate or certificates representing
the shares to be redeemed (the "Redemption Notice"). Except as provided in
subsection 3(c)(iii), on or after the Redemption Date, each holder of Series A
Preferred Stock to be redeemed shall surrender to this corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
iii) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of such
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<PAGE>
shares as holders of Series A Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the corporation legally
available for redemption of shares of Series A Preferred Stock on any Redemption
Date are insufficient to redeem the total number of shares of Series A Preferred
Stock to be redeemed on such date, those funds which are legally available will
be used to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed. The shares of Series A Preferred Stock
not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of
the Company are legally available for the redemption of shares of Series A
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Company has become obligated to redeem on any Redemption
Date but which it has not redeemed.
4. Conversion. The holders of the Series A Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
a. Right to Convert.
----------------
i) Subject to subsection (c), each share of Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share and prior to the close of
business on any Redemption Date as may have been fixed in any Redemption Notice
with respect to such share, at the office of this corporation or any transfer
agent for the Series A Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Series A Issue Price plus all declared but unpaid dividends thereon for each
share of Series A Preferred Stock, by the Conversion Price at the time in effect
for such share. The initial Conversion Price per share for shares of Series A
Preferred Stock shall be the Original Series A Issue Price; provided, however,
that the Conversion Price for the Series A Preferred Stock shall be subject to
adjustment as set forth in subsection 4(c).
ii) In the event of a call for redemption of any shares of
Series A Preferred Stock pursuant to Section 3 hereof, the Conversion Rights
shall terminate as to the shares designated for redemption at the close of
business on the Redemption Date, unless default is made in payment of the
Redemption Price in which case the Conversion Rights shall terminate on the date
such Redemption Price is paid.
iii) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such Series A Preferred Stock immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than
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<PAGE>
$10.00 per share (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations) and $7,500,000 in the
aggregate or (B) the date upon which the corporation obtains the consent of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice by mail, postage
prepaid, to this corporation at its principal corporate office, of the election
to convert the same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. This
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offer of securities registered
pursuant to the Securities Act, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock, shall not be
deemed to have converted such Series A Preferred Stock until immediately prior
to the closing of such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Price of the Series A Preferred Stock shall be subject to adjustment
from time to time as follows:
i) A. If the corporation shall issue any Additional
Stock (as defined below) without consideration or for a consideration per share
less than the Conversion Price for the Series A Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
for the Series A Preferred Stock in effect immediately prior to each such
issuance shall forthwith (except as otherwise provided in this clause (i)) be
adjusted to a price equal to the quotient obtained by dividing the total
computed under clause (x) below by the total computed under clause (y) below as
follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock sold pursuant to the
agreements
-5-
<PAGE>
pursuant to which shares of Series A Preferred Stock are first issued
(the "Stock Purchase Agreement"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the date of the Stock Purchase Agreement (the "Purchase Date")
other than shares of Common Stock issued or issuable with respect to
the Series A Preferred Stock issued pursuant to the Stock Purchase
Agreement;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock sold pursuant to the Stock Purchase
Agreement divided by the Conversion Price for such shares in effect at
the Purchase Date (or such higher or lower Conversion Price for such
series as results from the application of subsections 4(c)(iii) and
(iv) and assuming that this Certificate was in effect as of the
Purchase Date) plus
(2) the number of shares of Additional Stock
issued since the Purchase Date (increased or decreased to the extent
that the number of such shares of Additional Stock shall have been
increased or decreased as the result of the application of subsections
4(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the
Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections (E)(3)
and (E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(c)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
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<PAGE>
E. In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(c)(i) and subsection 4(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 4(c)(i)(C) and
(c)(i)(D)), if any, received by the corporation upon the issuance
of such options or rights plus the minimum exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for
any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion
or exchange thereof shall be deemed to have been issued at the
time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if
any, received by the corporation for any such securities and
related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities
or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in subsections 4(c)(i)(C) and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration
payable to this corporation upon exercise of such options or
rights or upon conversion of or in exchange for such convertible
or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof, the
Conversion Price of the Series A Preferred Stock, to the extent
in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of
Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or
exchange of such securities.
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<PAGE>
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange
or the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price of
the Series A Preferred Stock, to the extent in any way affected
by or computed using such options, rights or securities or
options or rights related to such securities, shall be recomputed
to reflect the issuance of only the number of shares of Common
Stock (and convertible or exchangeable securities which remain in
effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or
upon the exercise of the options or rights related to such
securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 4(c)(i)(E)(1) and (2) shall be appropriately adjusted
to reflect any change, termination or expiration of the type
described in either subsection 4(c)(i)(E)(3) or (4).
ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(c)(i)(E))
by this corporation before, on or after the Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 4(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
the Series A Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly
or pursuant to a stock option plan or agreement or restricted
stock plan or agreement approved by the Board of Directors of
this corporation at any time when the total number of shares of
Common Stock so issuable or issued (and not repurchased at cost
by the corporation in connection with the termination of
employment or service) does not exceed 2,030,000 (subject to
appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) since the date of
incorporation, or
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all
outstanding shares of Series A Preferred Stock will be converted
to Common Stock or (II) upon exercise of warrants or rights
granted to underwriters in connection with such a public
offering.
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<PAGE>
iii) In the event the corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock then in effect shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents.
iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock then in
effect shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(c)(iii), then,
in each such case for the purpose of this subsection 4(d), the holders of the
Series A Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4) provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series A Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A Preferred Stock after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Conversion Price then
in effect and the
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<PAGE>
number of shares purchasable upon conversion of the Series A Preferred Stock)
shall be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
i) No fractional shares shall be issued upon conversion of
the Series A Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock pursuant to this Section 4,
this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but
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<PAGE>
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, this corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
5. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Series A Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the by-laws of
this corporation, and shall be entitled to vote, together as a single class with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be Five (5). Notwithstanding 5(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock and Common Stock, voting together on an as converted basis,
shall be entitled to elect one (1) director of the corporation. At any meeting
held for the purpose of electing directors, the presence in person or by proxy
of the holders of a majority of the Series A Preferred Stock then outstanding
shall constitute a quorum of the Series A Preferred Stock for the election of
directors to be elected solely by the holders of Series A Preferred Stock. At
any meeting held for the purpose of electing directors, the presence in person
or by proxy of the holders of a majority of the Series A Preferred Stock and
Common Stock then outstanding, on an as converted basis, shall constitute a
quorum of the Series A Preferred Stock and Common Stock for the election of
directors to be elected solely by the holders of the Series A Preferred Stock
and Common Stock, voting together on an as converted basis. A vacancy in any
directorship elected by the holders of Series A Preferred Stock shall be filled
only by vote of the holders of Series A Preferred Stock; and a vacancy in any
directorship elected by the holders of Series A Preferred Stock and
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<PAGE>
Common Stock voting together shall be filled only by the vote of the holders of
Series A Preferred Stock and Common Stock voting together as provided above.
6. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock are outstanding, this corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of a
majority of the then outstanding shares of Series A Preferred Stock:
a. Sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares;
c. increase the authorized number of shares of Series A
Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock with
respect to voting, dividends or upon liquidation, or (ii) having rights similar
to any of the rights of the Series A Preferred Stock under this Section 6; or
e. change authorized number of directors from five (5).
7. Status of Converted or Redeemed Stock. In the event any shares
-------------------------------------
of Series A Preferred Stock shall be redeemed or converted pursuant to Section 3
or Section 4 hereof, the shares so converted or redeemed shall be cancelled and
shall not be issuable by the corporation. The Certificate of Incorporation of
this corporation shall be appropriately amended to effect the corresponding
reduction in the corporation's authorized capital stock.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders
---------------
of all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
------------------
winding up of the corporation, the assets of the corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV hereof.
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<PAGE>
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock
-------------
shall have the right to one vote, and shall be entitled to notice of any
shareholders' meeting in accordance with the By-laws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The name and mailing address of the incorporator is Kevin Compton, 2750
Sand Hill Road, Menlo Park, CA 94025.
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<PAGE>
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the corporation.
ARTICLE IX
The corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-14-
<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation as of this 22nd day of November, 1994.
____________________________________________
Kevin Compton, Incorporator
[SIGNATURE PAGE TO CERTIFICATE OF INCORPORATION]
<PAGE>
EXHIBIT B
FORM OF PROMISSORY NOTE
-----------------------
B-1
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND THEREFORE THEY MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED
UNLESS REGISTERED UNDER THE APPLICABLE PROVISIONS OF
THE SECURITIES ACT OF 1933, OR UNLESS PURSUANT TO
RULE 144 UNDER SUCH ACT OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION FROM LEGAL COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
NON-NEGOTIABLE PROMISSORY NOTE
------------------------------
$885,224 December 10, 1994
Palo Alto, California
Kleiner Perkins Caufield & Byers VII ("Obligor"), for value received,
hereby promises to pay to the order of PhonePrint, Inc., a Delaware corporation
("Payee"), in lawful money of the United States at 495 Java Drive, Sunnyvale, CA
94088 the principal sum of EIGHT HUNDRED EIGHTY FIVE THOUSAND TWO HUNDRED TWENTY
FOUR DOLLARS ($885,224), on December 10, 1997.
Unpaid principal of this Note shall bear interest, from the date hereof
(the "Closing Date") until such principal is due and payable, at a rate per
annum equal at all times to the greater of 6.34% per annum or the minimum rate
required under the Internal Revenue Code on the date of execution of this Note
to avoid imputed interest (the "Rate"), compounded annually. In the event that
any amount of principal or inter est, or any other amount payable hereunder, is
not paid in full when due (whether at stated maturity, by acceleration or
otherwise), Obligor shall pay interest on such unpaid principal amount, from the
date such amount becomes due until the date such amount is paid in full, payable
on demand, at a rate per annum equal at all times to the Rate plus 1%. All
computations of interest shall be made on the basis of a year of 365 or 366
days, as the case may be, for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
payable. All payments with respect to this Note shall be credited first to the
payment of accrued but unpaid interest and then to the repayment of principal.
Any payment shall be deemed made upon receipt by Payee.
Anything herein to the contrary notwithstanding, if during any period for
which interest is computed hereunder, the amount of interest computed on the
basis provided for in this Note, together with all fees, charges and other
payments which are treated as
<PAGE>
interest under applicable law, as provided for herein or in any other document
executed in connection herewith, would exceed the amount of such interest
computed on the basis of the Highest Lawful Rate, Obligor shall not be obligated
to pay, and Payee shall not be entitled to charge, collect, receive, reserve or
take, interest in excess of the Highest Lawful Rate, and during any such period
the interest payable hereunder shall be computed on the basis of the Highest
Lawful Rate. As used herein, "Highest Lawful Rate" means the maximum non-
usurious rate of interest, as in effect from time to time, which may be charged,
contracted for, reserved, received or collected by Payee in connection with this
Note under applicable law.
Obligor may, at any time, prepay the outstanding amount hereof in whole or
in part, without premium or penalty. In addition, Obligor shall be required to
prepay, without premium or penalty, the principal amount of this Note at the
same time and in the same proration as Payee's payments prior to maturity
(whether by prepayment, acceleration or otherwise) under that certain promissory
note in the principal amount of Three Million Dollars ($3,000,000) in favor of
ESL Incorporated ("ESL Note") become due. Payee shall deliver written notice to
Obligor at least fifteen (15) days prior to any date that some or all of the ESL
Note becomes due, which notice shall specify the amount of the ESL Note that is
payable and the due date and the portion of this Note then due and payable. If
Payee fails to deliver such written notice to Obligor at least fifteen (15) days
prior to any ESL Note due date, then the due date for Obligor's payment as
required by this paragraph shall be extended to the fifteenth (15th) day after
Obligor's receipt of such written notice. Together with any prepayment
hereunder, Obligor shall pay accrued interest to the date of such prepayment on
the principal amount prepaid. Notwithstanding the terms of the ESL Note or the
Investor Notes (described below), in no event shall Obligor's obligations exceed
or go beyond Obligor's obligation to pay the principal and interest described in
this Note.
This Note is one of a series of promissory notes in favor of Payee dated
the date hereof in the aggregate principal amount of Three Million Dollars
($3,000,000) (such promissory notes to be collectively referred to as the
"Investor Notes").
This Note may be modified, amended or terminated either: (i) by a writing
signed by Obligor and Payee; or (ii) in connection with a modification,
amendment or termination of all the Investor Notes, by a writing signed by Payee
and the obligors of Investor Notes representing a majority of the aggregate
principal amount then outstanding under the Investor Notes ("Majority in
Interest"). Any action relating to the Investor Notes approved by a Majority in
Interest will be binding upon all of the obligors of the Investor Notes
irrespective of whether any obligor individually acted to approve or disapprove
such action; provided, however, that neither the principal hereof nor any
interest rate hereunder may be increased or the due dates hereunder changed to
any earlier dates without the written consent of Obligor.
The execution, delivery and performance by Obligor of this Note have been
duly authorized by all necessary corporate or partnership action of Obligor, no
consent or approval of any person or entity is required in connection herewith,
and this Note is the
-2-
<PAGE>
legal, valid and binding obligation of Obligor, enforceable against Obligor in
accordance with its terms.
So long as any amount of principal or interest hereon remains unpaid,
Obligor will not merge with or into any entity or sell, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets, unless the entity that survives any
merger or acquires such assets assumes in writing the obligations of Obligor
hereunder.
Any of the following events which shall occur shall constitute an "Event of
Default":
1. Obligor shall fail to pay when due any amount of principal or
interest hereunder or other amount payable hereunder, and such failure shall
continue for 5 business days.
2. Any representation or warranty by Obligor under or in connection
with this Note shall prove to have been incorrect in any material respect when
made or deemed made.
3. Obligor shall fail to perform or observe any term, covenant or
agreement contained in the immediately preceding paragraph above, and such
failure shall continue for 15 business days.
4. Obligor shall admit in writing its inability to, or shall fail
generally or be generally unable to, pay its debts (including its payrolls) as
such debts become due, or shall make a general assignment for the benefit of
creditors; or Obligor shall file a voluntary petition in bankruptcy or a
petition or answer seeking reorganization, to effect a plan or other arrangement
with creditors or any other relief under the Bankruptcy Reform Act of 1978, as
amended or recodified from time to time (the "Bankruptcy Code") or under any
other state or federal law relating to bankruptcy or reorganization granting
relief to debtors, whether now or hereafter in effect, or shall file an answer
admitting the jurisdiction of the court and the material allegations of any
involuntary petition filed against Obligor pursuant to the Bankruptcy Code or
any such other state or federal law; or Obligor shall be adjudicated a bankrupt,
or shall make an assignment for the benefit of creditors, or shall apply for or
consent to the appointment of any custodian, receiver or trustee for all or any
substantial part of Obligor's property, or shall take any action to authorize
any of the actions or events set forth above in this paragraph; or an
involuntary petition seeking any of the relief specified in this paragraph shall
be filed against Obligor and shall not be dismissed within 30 days; or any order
for relief shall be entered against Obligor in any involuntary proceeding under
the Bankruptcy Code or any such other state or federal law referred to in this
paragraph 4.
5. Obligor shall liquidate, wind up or dissolve (or suffer any
liquidation, wind-up or dissolution), except in connection with a transaction
expressly permitted by this Note.
-3-
<PAGE>
If any Event of Default shall occur and be continuing, Payee may, by notice
to Obligor, declare the entire unpaid principal amount of this Note, all
interest accrued and unpaid hereon and all other amounts payable hereunder to be
forthwith due and payable, whereupon all unpaid principal under this Note, all
such accrued interest and all such other amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by Obligor.
Upon payment in full of all principal and interest payable hereunder, this
Note shall be surrendered to Obligor for cancellation.
This Note shall be binding upon, inure to the benefit of and be enforceable
by Obligor, Payee and their respective successors and assigns; provided that
without the written consent of a Majority in Interest of the obligors of the
Investor Notes, this Note may not be transferred or assigned by the Payee,
except for an assignment for security purposes to ESL Incorporated.
No delay on the part of Payee in exercising any right hereunder shall
operate as a waiver of such right under this Note.
This Note is being delivered in and shall be construed in accordance with
the laws of the State of California.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including by facsimile) and mailed, sent
or delivered to the respective parties hereto at or to the following addresses
(or at or to such other address or facsimile number as shall be designated by
any party in a written notice to the other party hereto):
If to Payee: PhonePrint, Inc.
495 Java Drive
Sunnyvale, CA 94088
Attn: Kevin Compton
If to Obligor: Kleiner Perkins Caufield & Byers VII
2750 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin Compton
All such notices and communications shall be effective (i) if delivered by hand,
upon delivery; (ii) if sent by mail, upon the earlier of the date of receipt or
five business days after deposit in the mail, first class, postage prepaid; and
(iii) if sent by facsimile, when sent.
Obligor agrees to pay on demand all costs and expenses of Payee in
connection with the enforcement and collection of this Note, including
reasonable attorneys' fees.
-4-
<PAGE>
IN WITNESS WHEREOF, Obligor has duly executed this Note, as of the date
first above written.
KLEINER PERKINS CAUFIELD & BYERS VII
By: _______________________________________________________
Kevin Compton
-5-
<PAGE>
EXHIBIT C
INVESTORS' RIGHTS AGREEMENT
---------------------------
C-1
<PAGE>
PHONEPRINT, INC.
INVESTORS' RIGHTS AGREEMENT
_____________________
December 10, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Registration Rights.................................................... 1
1.1 Definitions...................................................... 1
1.2 Request for Registration......................................... 2
1.3 Company Registration............................................. 3
1.4 Obligations of the Company....................................... 3
1.5 Furnish Information.............................................. 5
1.6 Expenses of Demand Registration.................................. 5
1.7 Expenses of Company Registration................................. 5
1.8 Underwriting Requirements........................................ 6
1.9 Delay of Registration............................................ 6
1.10 Indemnification.................................................. 6
1.11 Reports Under Securities Exchange Act of 1934.................... 8
1.12 Form S-3 Registration............................................ 9
1.13 Assignment of Registration Rights................................ 10
1.14 Limitations on Subsequent Registration Rights.................... 11
1.15 "Market Stand-Off" Agreement..................................... 11
1.16 Termination of Registration Rights............................... 11
2. Covenants of the Company............................................... 12
2.1 Delivery of Financial Statements.................................. 12
2.2 Inspection........................................................ 13
2.3 Termination of Information and Inspection Covenants............... 13
2.4 Right of First Offer.............................................. 13
2.5 Management Stock.................................................. 14
3. Miscellaneous.......................................................... 15
3.1 Successors and Assigns........................................... 15
3.2 Governing Law.................................................... 15
3.3 Counterparts..................................................... 15
3.4 Titles and Subtitles............................................. 15
3.5 Notices.......................................................... 15
3.6 Expenses......................................................... 15
3.7 Amendments and Waivers........................................... 16
3.8 Severability..................................................... 16
3.9 Aggregation of Stock............................................. 16
3.10 Entire Agreement; Amendment; Waiver.............................. 16
</TABLE>
(i)
<PAGE>
INVESTORS' RIGHTS AGREEMENT
---------------------------
THIS INVESTORS' RIGHTS AGREEMENT is made as of the 10th day of December,
1994, by and among PhonePrint, Inc. a Delaware corporation (the "Company") and
the investors listed on the signature page, each of which is herein referred to
as an "Investor."
RECITALS
--------
WHEREAS, the Company and the Investors are parties to the Series A
Preferred Stock Purchase Agreement of even date herewith (the "Series A
Agreement");
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Investors to invest funds in the Company pursuant to
the Series A Agreement, the Investors and the Company hereby agree that this
Agreement shall govern the rights of the Investor to cause the Company to
register shares of Common Stock issuable to the Investors and certain other
matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "register", "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(c) The term "Registrable Securities" means (1) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, and (2) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Series A Preferred Stock or Common Stock, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned;
(d) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
<PAGE>
The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof; and
(e) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the Securities and Exchange Commission ("SEC") which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier of (i)
the fourth anniversary date of this Agreement, or (ii) three (3) months after
the effective date of the first registration statement for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction), a written
request from the Holders of at least thirty-three percent (33%) of the
Registrable Securities then outstanding that the Company file a registration
statement under the Act covering the registration of at least twenty percent
(20%) of the Registrable Securities then outstanding (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $1,000,000), then the Company shall, within ten (10)
days of the receipt thereof, give written notice of such request to all Holders
and shall, subject to the limitations of subsection 1.2(b), effect as soon as
practicable, and in any event within 60 days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered within twenty (20) days of the mailing of such notice
by the Company in accordance with paragraph 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
-2-
<PAGE>
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting.
(c) The Company is obligated to effect only two (2) such registrations
pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 60 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve month period.
1.3 Company Registration. If (but without any obligation to do so) the
--------------------
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, or a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or a registration on Form S-4), the Company shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing
of such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered.
1.4 Obligations of the Company. Whenever required under this Section 1
--------------------------
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
-3-
<PAGE>
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
-4-
<PAGE>
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b)(2), whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all Participating Holders shall bear such expenses on
a pro rata basis), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 1.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
-5-
<PAGE>
1.8 Underwriting Requirements. In connection with any offering involving
-------------------------
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 1.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling Shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders)
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below thirty percent (30%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's securities in which case the selling
shareholders may be excluded if the underwriters make the determination
described above and no other shareholder's securities are included or (ii)
notwithstanding (i) above, any shares being sold by a shareholder exercising a
demand registration right similar to that granted in Section 1.2 be excluded
from such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling shareholder", and
any pro-rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder", as defined in
this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject
-6-
<PAGE>
under the Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, or any rule or regulation promulgated under
the Act, or the 1934 Act; and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, or the 1934 Act insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 1.10(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 1.10(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the
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<PAGE>
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
-8-
<PAGE>
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from the
---------------------
Holder or Holders of at least twenty percent (20%) of the Registrable Securities
then outstanding a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such
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<PAGE>
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public (net of any underwriters' discounts
or commissions) of less than $250,000; (3) if the Company shall furnish to the
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than 60 days after receipt of the request of the Holder or
Holders under this Section 1.12; provided, however, that the Company shall not
utilize this right more than once in any twelve month period; or (4) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration. Registrations effected pursuant to
this Section 1.12 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the Company
---------------------------------
to register Registrable Securities pursuant to this Section 1 may be assigned
(but only with all related obligations) by a Holder to a transferee or assignee
of such securities who, after such assignment or transfer, holds at least
375,000 shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations),
provided the Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee, the holdings of transferees and assignees of a partnership who are
partners or retired partners of such partnership (including spouses and
ancestors, lineal descendants and siblings of such partners or spouses who
acquire Registrable Securities by gift, will or intestate succession) shall be
aggregated together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Section 1.
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<PAGE>
1.14 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.2 or 1.3 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which are included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
----------------------------
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements; and
(c) such market stand-off time period shall not exceed 180 days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 Termination of Registration Rights. No Holder shall be entitled to
----------------------------------
exercise any right provided for in this Section 1 after five (5) years following
the consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public.
-11-
<PAGE>
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of shareholder's
equity as of the end of such year, and a schedule as to the sources and
applications of funds for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("gaap"), and audited and certified by independent public accountants
of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited profit or loss statement, schedule as to the
sources and application of funds for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter.
(c) within thirty (30) days of the end of each month, an
unaudited income statement and schedule as to the sources and application of
funds and balance sheet for and as of the end of such month, in reasonable
detail;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including balance sheets and sources
and applications of funds statements for such months and, as soon as prepared,
any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with gaap consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by gaap) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment;
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated under this subsection (f) or any other
subsection of Section 2.1 to provide information which it deems in good faith to
be a trade secret or similar confidential information.
-12-
<PAGE>
2.2 Inspection. The Company shall permit each Investor, at such
----------
Investor's expense, as the case may be, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Investor; provided, however, that
the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
2.3 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in subsections 2.1(c), (d) and (f) and Section 2.2 shall
terminate as to Investors and be of no further force or effect when the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the firm commitment underwritten offering of its
securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the 1934 Act, whichever event shall first occur.
2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean (i) any Investor who holds at
least 10% of the original investment such Investor makes in the Company pursuant
to the Series A Agreement and (ii) any person who acquires at least 10% of the
Series A Preferred Stock (or the common stock issued upon conversion thereof)
issued pursuant to the Series A Agreement. For purposes of this Section 2.4,
Investor includes any general partners and affiliates of an Investor. An
Investor shall be entitled to apportion the right of first offer hereby granted
it among itself and its partners and affiliates in such proportions as it deems
appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the
Major Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of common stock issued and held, or
issuable upon conversion of the Series A Preferred Stock then held, by such
Major Investor bears to the total number of shares of common stock of the
Company then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities). The Company shall promptly, in writing,
inform each Major Investor which purchases all the shares available to it
-13-
<PAGE>
("Fully-Exercising Investor") of any other Major Investor's failure to do
likewise. During the ten-day period commencing after receipt of such
information is given, each Fully-Exercising Investor shall be entitled to obtain
that portion of the Shares not subscribed for by the Major Investors which is
equal to the proportion that the number of shares of common stock issued and
held, or issuable upon conversion of Series A Preferred Stock then held, by such
Fully-Exercising Investor bears to the total number of shares of common stock
issued and held, or issuable upon conversion of the Series A Preferred Stock
then held, by all Fully-Exercising Investors who wish to purchase some of the
unsubscribed shares.
(c) If all Shares which Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 30 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable (i) to the issuance or sale of not to exceed 2,030,000 shares of
common stock (or options therefor) to employees for the primary purpose of
soliciting or retaining their employment, provided each employee executes an
agreement containing the provisions set forth in Section 2.5(b) hereof, (ii) to
or after consummation of a bona fide, firmly underwritten public offering of
shares of common stock, registered under the Act pursuant to a registration
statement on Form S-1, at an offering price of at least $10.00 per share
(appropriately adjusted for any stock split, dividend, combination or other
recapitalization) and $7,500,000 in the aggregate, (iii) the issuance of
securities pursuant to the conversion or exercise of convertible or exercisable
securities, (iv) the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise or (v) the issuance of
stock, warrants or other securities or rights to persons or entities with which
the Company has business relationships, provided such issuances are for other
than primarily equity financing purposes.
2.5 Management Stock.
----------------
(a) Employee Reserve. An initial pool of 2,030,000 shares of the
----------------
Company's Common Stock shall be reserved for purchase or incentive grants to
employees, consultants, directors or officers under those incentive and non-
qualified stock purchase or stock option plans or agreements ("Employee
Reserve").
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<PAGE>
(b) Vesting and Restrictions on Transfer. The shares or options
------------------------------------
issued from the Employee Reserve provided for in Section 2.5 shall vest
following the grant or issuance of such shares or options, as follows: 25% shall
vest after an initial 12-month cliff period and the remainder shall vest in
equal monthly installments over the next thirty-six (36) months following the
cliff period, as approved by the Company's Board of Directors. The Company
shall have a repurchase option at cost with respect to unvested shares.
Unvested shares may not be transferred. The Company shall have a right of first
refusal on vested shares until such time that the Company consummates an initial
public offering. The shares shall be subject to a market stand-off agreement
for a period of up to 180 days in connection with stock offerings by the
Company.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
-15-
<PAGE>
3.7 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.10 Entire Agreement; Amendment; Waiver. This Agreement (including
-----------------------------------
the Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PHONEPRINT, INC., a Delaware corporation
By:_______________________________________________
Kevin Compton, Chairman of the Board,
Address: 495 Java Drive
Sunnyvale, California 94088
INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII
By:_______________________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
KPCB VII FOUNDERS FUND
By:_______________________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
SEVIN-ROSEN IV
By:_______________________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
[SIGNATURES TO INVESTORS' RIGHTS AGREEMENT
CONTINUED ON NEXT PAGE]
<PAGE>
SEVIN-ROSEN-BAYLESS MANAGEMENT COMPANY
By:_______________________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
NORWEST EQUITY PARTNERS IV, a
Minnesota Limited Partnership
By: Itasca Partners
Its: General Partner
By:_______________________________________________
Address: 2800 Piper Jaffray Tower
Minneapolis, Minnesota 55402
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management
Partners, L.P.
By:_______________________________________________
Address: 400 Park Avenue
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By:_______________________________________________
Address: 400 Park Avenue
New York, NY 10022
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT ("Agreement") is entered into as of December
14, 1994 (the "Execution Date"), by and between PHONEPRINT, INC., a Delaware
corporation ("Buyer"), ESL INCORPORATED, a California corporation ("Seller") and
TRW INC., an Ohio corporation ("TRW"), with reference to the following facts:
WHEREAS, Seller has established a business unit known as "PhonePrint" (the
"Business Unit") that has engaged in research, development and other activities
relating to wireless communications fraud detection ("Business").
WHEREAS, Buyer desires to purchase from Seller and Seller desires to sell
to Buyer, on the terms and subject to the conditions of this Agreement, all of
such rights, interests and property relating to the Business.
WHEREAS, in connection with the sale of the Business, Seller desires to
license to Buyer certain technology within a defined field described in the
License and Technical Assistance Agreement attached hereto as Exhibit B.
---------
WHEREAS, TRW is the parent company of Seller, and is interested in and
benefits from the transactions described in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained below, the
parties agree as follows:
ARTICLE 1
---------
PURCHASE AND SALE OF ASSETS
PURCHASE AND SALE. On the Closing Date (as defined in Article 7
-----------------
below), Seller agrees to sell, transfer, assign and deliver to Buyer and Buyer
agrees to purchase, accept and acquire from Seller, all of Seller's right, title
and interest in and to the assets (the "Assets") of Seller described in Exhibit
-------
A attached hereto and incorporated herein by this reference. On the Closing
- -
Date, in addition to any other documents required hereunder, Seller shall
execute and deliver to Buyer: (i) the License and Technical Assistance
Agreement in the form attached hereto as Exhibit B ("License Agreement"); (ii)
---------
the Assignment and Assumption Agreement in the form attached hereto as Exhibit C
---------
("Assignment of Lease"); (iii) the Assignment of Development and License
Agreement in
<PAGE>
the form attached hereto as Exhibit D ("AirTouch Assignment"); (iv) the Patent
---------
Application Assignment in the form attached hereto as Exhibit E ("Patent
---------
Assignment") (which shall also be properly notarized); (v) the Assignment of
U.S. Intent-To-Use Trademark Application in the form attached hereto as Exhibit
-------
F ("Trademark Assignment") (which shall also be properly notarized); (vi) the
- -
Purchase Order and Supply Contract Assignment in the form attached as Exhibit G
---------
("Order and Contract Assignment"); (vii) the General Conveyance, Bill Of Sale
And Assignment in the form attached hereto as Exhibit H ("General Conveyance");
---------
(vii) the Non-Competition Agreement in the form attached hereto as Exhibit I
---------
("Non-Competition Agreement"); (viii) the Pledge Agreement in the form attached
hereto as Exhibit J ("Pledge Agreement"); and (ix) the Cooperation Agreement in
---------
the form attached hereto as Exhibit K ("Cooperation Agreement"). In addition,
---------
on the Closing Date, Seller shall simultaneously take all additional steps and
execute all additional documents and instruments as may be reasonably necessary
to put Buyer in possession and complete operating control of the Assets and to
transfer all of Seller's right, title and interest in and to the Assets to
Buyer. Seller agrees that for a period of thirty (30) days following the Closing
Date Buyer shall also have the right (but no obligation) to contact and hire any
employees of Seller who work in or whose duties relate to the Business Unit. The
documents and instruments that Seller is required to deliver to Buyer under this
Section 1.1 shall be the "Conveyance Documents."
1.1 PURCHASE PRICE. The purchase price to be paid by Buyer to Seller for
--------------
the sale, transfer, assignment and delivery of the Assets shall be Nine Million
Two Hundred Forty Thousand Dollars ($9,240,000), payable as follows:
(a) $6,240,000 at the Closing (the "Cash Payment") by certified or
cashier's check or by wire transfer; and
(b) $3,000,000 in the form of a promissory note ("Buyer Note") in the
form attached hereto as Exhibit L.
---------
1.2 ALLOCATION OF PURCHASE PRICE AMONG CERTAIN ASSETS. Buyer, Seller and
-------------------------------------------------
TRW agree: (i) the value of the inventory being sold to Buyer is $6,391,848;
(ii) the value of the equipment being sold to Buyer, as set forth in Schedule 8
of the disclosure schedule attached hereto as Exhibit M (the "Disclosure
---------
Schedule"), is $712,465; (iii) the value of the trade secrets, licenses,
patents, copyrights, trademarks and other agreements being sold to Buyer is
$2,135,000; and (iv) the value of all paper and storage media (including, but
not limited to computer storage and computer disks) being sold to Buyer is two
hundred percent (200%) of the fair market value of the paper and storage media.
1.3 NO LIABILITIES ASSUMED. Except for the "Assumed Obligations" (defined
----------------------
below), Buyer shall not assume and shall under no circumstances be responsible
for, and Seller and TRW shall retain and be responsible for, any liabilities or
obligations of Seller
-2-
<PAGE>
related to the Assets or the employees of Seller or TRW whatsoever, regardless
of amount, character or description, or whether accrued, contingent, determined,
undetermined or otherwise, including (without limitation) any obligation or
liability whatsoever arising from the conduct of Seller's or TRW's business at
any time. The "Assumed Obligations" shall consist solely of the obligations
expressly assumed by Buyer pursuant to the AirTouch Assignment, the Lease
Assignment and the Order and Contract Assignment.
ARTICLE 2
---------
REPRESENTATIONS AND WARRANTIES
OF SELLER AND TRW
For purposes of this Article 2, "Knowledge," "Known" or similar terms mean
the knowledge of the officers and directors of TRW and ESL, and any employees of
TRW or ESL who have knowledge of or responsibility for the subject matter of the
applicable representation and warranty. Except as set forth in the Disclosure
Schedule referencing the specific section of this Article 2 (the "Disclosure
Schedule"), the Seller and TRW hereby represent and warrant to Buyer as follows:
2.1 CORPORATE ORGANIZATION AND CAPITALIZATION. Seller is a corporation
-----------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of California.
2.2 AUTHORIZATION. The execution, delivery and performance by Seller and
-------------
TRW of this Agreement, and all documents and instruments contemplated hereby,
referenced herein or executed in connection herewith (collectively, the "Related
Documents"), and the consummation by Seller of the transactions contemplated
hereby and therein, have been duly authorized and approved by all necessary
corporate proceedings of Seller and TRW. This Agreement and each of the Related
Documents have been duly executed and delivered by Seller (and TRW, where
applicable), and each constitutes a legal, valid and binding agreement of Seller
(and TRW, where applicable), enforceable against Seller (and TRW, where
applicable) in accordance with their respective terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors' rights.
2.3 TITLE; CONDITION OF ASSETS. Except as otherwise provided for in
--------------------------
Paragraph 2.12, Seller has good and marketable title to all of the Assets, free
and clear of all mortgages, liens (tax or otherwise), pledges, charges, leases,
encumbrances, claims or restrictions of any kind or character. The Assets
conform and comply with all applicable laws, regulations and ordinances and
other than those Assets constituting inventory, and to Seller's and TRW's
knowledge without having conducted an independent review, the Assets are in good
condition with no material defects, excepting normal wear and tear.
-3-
<PAGE>
With respect to the inventory, at the time of the Closing the components parts
of such inventory are in good condition with no material defects, excepting
normal wear and tear.
2.4 NO VIOLATION. The execution, delivery and performance of this
------------
Agreement and the Related Documents by Seller (and TRW, where applicable) will
not (with notice and/or the lapse of time) result in a breach or violation of,
or constitute a material default under, Seller's or TRW's Articles of
Incorporation, Bylaws or any material agreement to which Seller or TRW is a
party or by which Seller or TRW is bound, and will not, to the best of Seller's
and TRW's Knowledge, be in violation of any statute, judgment, order, rule or
regulation in effect at the Closing Date of any court or federal, state or other
regulatory authority or governmental body having jurisdiction over Seller, TRW
or the Assets. Neither Seller nor TRW is a party to, subject to or bound by any
agreement or judgment, order, writ, injunction or decree of any court or
federal, state or other regulatory or governmental body that prevents or impairs
the consummation of the transactions contemplated by this Agreement or the
Related Documents or the rights of the Buyer hereunder and thereunder.
2.5 GOVERNMENTAL AUTHORITIES. Neither Seller nor TRW is required to
------------------------
submit any notice, report or other filing to any governmental or regulatory
authority, nor is any consent, approval or authorization of any governmental or
regulatory authority required to be obtained in connection with the consummation
of the transactions contemplated hereby or in the Related Documents.
2.6 LIABILITIES. The Assets are not subject to any liability or
-----------
obligation of whatever nature (other than the Assumed Obligations as defined in
Section 1.4), whether absolute, accrued, contingent or otherwise. Seller, TRW
and their respective officers, employees or agents have not employed any broker
or finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby or the
Related Documents, except for a fee owing to Needham & Company pursuant to a
separate agreement between TRW and Needham & Company.
2.7 ASSETS; ACCOUNTS RECEIVABLE; PURCHASE ORDERS. The Assets include all
--------------------------------------------
intellectual property, inventory and all other property in which Seller or TRW
has any right, title or interest with respect to the Business Unit except for
the shared pool equipment described in Paragraph 2.7 of the Disclosure Schedule
and the software subject to an ESL site license that is not transferrable as
described in Schedule 2 of the Disclosure Schedule. The Assets include all the
assets necessary to operate the Business Unit in the same manner as the Business
Unit was operated by Seller or TRW prior to the Closing. There are no notes or
accounts receivable relating to the Business Unit as of the Closing. All
purchase orders relating to orders received by the Seller and all supply
contracts relating to purchase obligations created by the Business Unit are
listed in Paragraph 2.7 of the Disclosure Schedule, and have arisen only from
bona fide
-4-
<PAGE>
transactions in the ordinary course of Seller's business, are valid contracts,
and are being assigned to Buyer pursuant to the Order and Contract Assignment.
All inventory and equipment, relating to the Business Unit as of the Execution
Date are Seller's property and have been acquired or arisen in the ordinary
course of business, have not been pledged as collateral, are not held by Seller
on consignment from others and are being conveyed to Buyer pursuant to the
General Assignment. All inventory and equipment relating to the Business Unit
are listed in Schedule 2.7 of the Disclosure Schedule. Except as set forth in
the Disclosure Schedule, Seller has provided no warranties or guarantees
relating to any of the products of the Business Unit, and Buyer is not assuming
and will not have any liabilities pursuant to such warranties.
2.8 LITIGATION. To the Knowledge of Seller and TRW, there are no claims,
----------
actions, litigation, suits, proceedings or investigations pending or threatened
against or affecting any of the Assets, the business and activities conducted by
the Business Unit or the consummation of the transactions contemplated hereby or
the Related Documents, at law or in equity or before or by any governmental or
regulatory authority, agency or instrumentality or before any arbitrator of any
kind, and there is no valid basis for any such claim, action, litigation, suit,
proceeding or investigation. To the Knowledge of Seller and TRW, no
governmental or regulatory authority, agency or instrumentality has at any time
challenged or questioned the legal right of Seller or TRW to sell any products
and services of the Business Unit or relating to the Assets. The Disclosure
Schedule contains a list and brief description of all claims, actions,
litigation, suits, proceedings or investigations relating to the Assets or the
Business Unit which resulted in a judgment, settlement, compromise, release,
payment or award of any nature. No governmental or regulatory authority, agency
or instrumentality has at any time challenged or questioned the legal right of
Seller or TRW to sell any products or services of the Business Unit or relating
to the Assets.
2.9 CONTRACTS. A true copy of each agreement, instrument, commitment,
---------
contract or other obligation of any type to which Seller or TRW is a party or is
bound relating in any way to the Assets or the Business or activities conducted
by the Business Unit, or to which the Assets are subject (collectively, the
"Relevant Contracts") has been provided to Buyer's counsel prior to Closing and
an accurate listing of same has been set forth in the Disclosure Schedule. All
Relevant Contracts are in full force and effect and are valid, binding and
enforceable in accordance with their respective terms; all parties to such
Relevant Contracts have complied with the provisions thereof; no such party is
in default under any of the terms thereof and no event has occurred that (with
the passage of time and/or the giving of notice) would constitute a default by
any party under any provision thereof. The Assets are not subject to any
agreement, contract, commitment or instrument maintained by Seller or TRW, or
other obligation, whether written or oral and of whatever nature that will be
enforceable against the Assets. From and after the Closing, other than the
Assumed Obligations, no agreement, contract, commitment, instrument or other
obligation made by Seller or TRW prior to the Closing, whether
-5-
<PAGE>
written or oral and of whatever nature, will be enforceable against Buyer. No
consent, approval or authorization of any third party on the part of Seller or
TRW is required in connection with the consummation of the transactions
contemplated hereunder. Buyer will be entitled to the full benefits after the
Closing under the agreement ("AirTouch Agreement") being assigned under the
Airtouch Assignment without the consent of or notice to any third party and the
transactions contemplated hereby and in the Related Documents will not create
any termination rights in favor of any party to the AirTouch Agreement or
otherwise change the material rights and obligations of the parties thereunder.
2.10 COMPLIANCE WITH LAW. Seller and TRW are, in connection with the
-------------------
Business and activities conducted by the Business Unit and the ownership and use
of the Assets, in compliance with all applicable foreign, federal, state or
local laws, statutes, rules, regulations, ordinances, codes, orders, licenses,
franchises, permits, authorizations and concessions (collectively,
"Regulations").
2.11 LICENSES, PERMITS AND AUTHORIZATIONS. The Disclosure Schedule
------------------------------------
contains a list of all approvals, authorizations, consents, licenses,
franchises, orders and other permits of, and filings with, any governmental
authority, whether foreign, federal, state or local ("Permits"), which are
required in connection with the ownership, handling, use , sale or possession of
the Assets, the noncompliance with which would have a material adverse effect on
Buyer or the Assets.
2.12 INTANGIBLE PROPERTY RIGHTS. Seller owns and possesses all the
--------------------------
patents, patent applications, inventions, Trade Secrets (as defined in the
License Agreement), licenses, trade names, trademarks, service marks,
brandmarks, copyrights or registrations or applications therefor, franchises and
other assets of like kind (such assets and rights herein called "Rights"),
necessary for the ownership and development of the Assets that consist of Rights
and the conduct of the Business Unit as presently conducted, and such Rights
will not be adversely affected by the transactions contemplated hereby and in
the Related Documents; and, to the Knowledge of Seller and TRW, such Rights are
not being infringed or violated by any other person or entity. All Assets that
consist of Rights, are, and upon the consummation of the transactions
contemplated by this Agreement and the Related Documents will be, vested in
Buyer, pursuant to the terms of this Agreement and the License Agreement, free
of any equities, claims, liens, encumbrances or restrictions of whatever nature
and Seller and TRW have not granted any license or right thereto to others.
Neither the Assets that consist of Rights employed by Seller or TRW in
connection with the Business Unit infringes upon: (i) other than patents, any
Rights, proprietary rights or intellectual property of any other person, firm,
corporation or other entity; or (ii) any patent of any other person, firm,
corporation or other entity issued on or prior to July 11, 1994. The documents
reflecting the Assets that consist of Rights are current and accurate and
sufficient in detail and content to identify the Rights and permit the full and
proper use by Buyer, and have been provided to
-6-
<PAGE>
Buyer. Any employee or other person who, either alone or in concert with others,
developed, invented, discovered, derived, programmed or designed any of the
Assets that consist of Rights, or who has Knowledge of or access to information
relating to it, has been put on notice that such Rights are proprietary to
Seller and are not to be divulged or misused and has executed a form of
proprietary information and inventions agreement provided to and approved by
Buyer. The Assets that consist of Rights are presently valid and protectable,
and not part of the public Knowledge or literature, nor have they been used,
divulged, or appropriated for the benefit of any past or present employees or
other persons.
2.13 TAX MATTERS. All taxes, including without limitation income,
-----------
property, sales, use, franchise, added value, imposed by the United States or by
any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country, or by any other
taxing authority, which are due or payable by Seller or TRW in connection with
the Assets, and all interest and penalties thereon, whether disputed or not,
have been or will be paid in full; all tax returns required to be filed in
connection therewith have been or will be accurately prepared and duly and
timely filed or will be so filed after the Closing Date if due thereafter; and
all deposits required by law to be made by Seller or TRW have been or will be
duly made. Nothing in this Section 2.13 shall be construed as limiting Seller's
or TRW's right to dispute taxes levied upon it.
2.14 ENVIRONMENTAL AND SAFETY MATTERS. Seller's and TRW's operation of the
--------------------------------
Business Unit have been in material compliance with, and Seller and TRW have
complied in all material respect with all, and are not in violation of any,
applicable United States federal, state and local laws, ordinances, regulations
and orders relating to environmental matters (collectively, "Environmental
Laws"), including, but not limited to, matters related to air pollution, water
pollution, on-site or off-site hazardous substance handling, discharge, disposal
or recovery, toxic or hazardous substances or materials, asbestos, PCBs,
employee safety, and transportation or shipping safety, and, no notice of
violation of any such statutes, laws, ordinances, regulations and orders with
respect thereto have been received by Seller or TRW, nor, to the Knowledge of
Seller or TRW, is any such notice threatened. Seller and TRW have obtained all
material environmental permits, temporary and otherwise, required for the lawful
operation of the Business Unit, and all such permits are in full force and
effect and Seller and TRW have not received notice that any such permits will be
revoked, lapsed or otherwise subject to modification, nor to the Knowledge of
Seller or TRW is any such notice of violation, lapse or modification threatened.
2.15 CUSTOMERS AND SUPPLIERS. There are no current customers or clients of
-----------------------
Seller and TRW in connection with the Business Unit. Section 2.15 of the
Disclosure Schedule sets forth a list of all suppliers of Seller with respect to
the Business conducted by the Business Unit.
-7-
<PAGE>
2.16 DISCLOSURE; NO MISSTATEMENTS. Neither this Agreement nor the Related
----------------------------
Documents, nor any other document, certificate or written statement referenced
in this Agreement or the Related Agreements or prepared or furnished by Seller
or TRW or their respective representatives and furnished to Buyer or Buyer's
representatives on or after November 1, 1994, in connection herewith or
therewith, contain any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading as of the date hereof or thereof. Seller and TRW, have
disclosed to Buyer all Known material facts relating to the Assets or the
Business or activities conducted by the Business Unit using the trade Secrets
licensed under the License Agreement. There is no fact Known to Seller or TRW
that materially and adversely affects the value of the Assets or the Business
Unit which has not been set forth in this Agreement.
2.17 BUSINESS UNIT. Within Seller, the Business Unit is the exclusive unit
-------------
that conducts activities relating to the Business, and no material activities
within Seller are conducted with respect to the Business outside of the Business
Unit except for continued research and development activities provided that such
research and development activities do not violate the terms of this Agreement
or the Related Documents. Within TRW or any direct or indirect wholly-owned
subsidiary of TRW, no material activities are conducted with respect to radio
fingerprinting using the Trade Secrets licensed under the License Agreement.
2.18 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the terms of
------------------------------------------
Article 6.4, all of Seller's and TRW's warranties and representations herein
shall survive the Closing.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Seller as follows:
3.1 ORGANIZATION; AUTHORITY. Buyer is a corporation duly organized,
-----------------------
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority to enter into this Agreement and
perform its obligations hereunder.
3.2 AUTHORITY RELATIVE TO AGREEMENT. The execution, delivery and
-------------------------------
performance of this Agreement and the Related Agreements by Buyer and the
consummation of the transactions contemplated hereby and therein, have been duly
and validly authorized by all necessary corporate action of Buyer. This
Agreement and the Related Agreements have been duly executed and delivered and
constitute the legal, valid and binding
-8-
<PAGE>
obligations of Buyer, each enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency, or other laws of general
application relating to the enforcement of creditor's rights.
3.3 NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. The execution,
------------------------------------------------
delivery and performance of this Agreement or the Related Agreements by Buyer
will not result in a material breach or violation of, or constitute a material
default under, Buyer's Articles of Incorporation, Bylaws or any agreement to
which Buyer is a party or by which Buyer is bound or to which any of Buyer's
property is subject and, to the best of Buyer's Knowledge, will not be in
violation of any statute, judgment, order, rule or regulation in effect at the
date hereof of any court or federal, state or other regulatory authority or
governmental body having jurisdiction over Buyer.
3.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to Article 6.4,
------------------------------------------
all Buyer's warranties and representations herein shall survive the Closing.
3.5 BUYER'S DUE DILIGENCE. Buyer has conducted a due diligence review of
---------------------
the Business Unit. On the basis thereof and to the best of Buyer's Knowledge,
no condition exists that would make Seller's representations materially untrue.
ARTICLE 4
---------
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer under this Agreement to be performed on
or before the Closing Date shall be subject to the satisfaction, on or before
the Closing Date, of the following conditions precedent, except to the extent
that Buyer shall have waived such satisfaction in writing:
4.1 PERFORMANCE. Seller shall have performed and complied with all
-----------
agreements, covenants and conditions required by this Agreement to be performed
and complied with by Seller on or before the Closing Date.
4.2 CONVEYANCE DOCUMENTS. Seller (and TRW, where appropriate) shall have
--------------------
executed and delivered to Buyer all of the Conveyance Documents, in the form
attached hereto (or, if there is no attached form, then in form and substance
acceptable to Buyer).
4.3 INVESTOR SERIES A PREFERRED STOCK PURCHASE AGREEMENT. Buyer and
----------------------------------------------------
certain investors shall have entered into and closed either prior to or
contemporaneously with the Closing hereunder, the Series A Preferred Stock
Purchase Agreement in form and substance acceptable to Buyer.
-9-
<PAGE>
4.4 SELLER SERIES A PREFERRED STOCK PURCHASE AGREEMENT. Buyer and Seller
--------------------------------------------------
shall have entered into a Series A Preferred Stock Purchase Agreement in form
and substance acceptable to Buyer, pursuant to which Seller is obligated to
purchase 2,019,850 shares of Buyer's Series A Preferred Stock for a purchase
price of $4,039,700.
4.5 AMENDMENT TO LEASE AGREEMENT. Seller and the landlord ("Landlord") of
----------------------------
the facility currently occupied by the Business Unit shall have entered into
Amendment 3 of the existing lease ("Lease") that establishes a February 15, 1995
expiration date for the lease agreement.
4.6 CONSENT AND ESTOPPEL CERTIFICATES. Buyer shall have received consent
---------------------------------
and estoppel certificates, in form and substance acceptable to Buyer, from
AirTouch Communications (with respect to the agreement being assigned to Buyer
pursuant to the AirTouch Assignment) and from the Landlord (with respect to the
Lease).
4.7 OPINION OF SELLER'S COUNSEL. Buyer shall receive an opinion of the
---------------------------
Seller's counsel, dated the Closing Date, in form and substance satisfactory to
Buyer and its counsel.
4.8 GOVERNMENTAL APPROVALS. As of the Closing, all authorizations,
----------------------
approvals or permits of or filings with any governmental authority that are
required by law prior to and in connection with the transfer of the Assets or
the transactions contemplated by this Agreement or the Related Documents shall
have been duly obtained or made and shall be effective as of the Closing.
4.9 CLOSING CERTIFICATE. Buyer shall have received a certificate of the
-------------------
President or the Secretary of the Seller dated as of the Closing Date and
certifying to the fulfillment of the foregoing conditions and the absence of any
material adverse change, in form and substance acceptable to Buyer and its
counsel ("Closing Certificate").
ARTICLE 5
---------
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER
Each and every obligation of Seller under this Agreement to be performed on
or before the Closing Date shall be subject to the satisfaction, on or before
the Closing Date, of each of the following conditions precedent, except to the
extent that the Seller shall have waived in writing such satisfaction.
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<PAGE>
5.1 PERFORMANCE. Buyer shall have performed and complied with all
-----------
agreements, covenants and conditions required by this Agreement to be performed
and complied with by Buyer on or before the Closing Date.
5.2 CASH PAYMENT AND BUYER NOTE. Buyer shall at the Closing pay to Seller
---------------------------
the Cash Payment and deliver to Seller the Buyer Note.
5.4 PLEDGE AGREEMENT. Seller and Buyer shall have entered into the Pledge
----------------
Agreement in the form attached hereto as Exhibit J.
---------
5.5 CONVEYANCE DOCUMENTS. Buyer shall have executed and delivered to
--------------------
Seller all Conveyance Documents required by their terms to be executed by Buyer,
in the form attached hereto.
ARTICLE 6
---------
INDEMNIFICATION
6.1 GRANT OF INDEMNITY.
------------------
(a) INDEMNIFICATION BY SELLER. As an inducement to Buyer to enter
-------------------------
into this Agreement and the Related Documents, and acknowledging that Buyer is
relying on the indemnification provided in this Section 6 in entering into this
Agreement and the Related Documents, Seller and TRW agree to indemnify, defend
and hold harmless Buyer and its employees, officers, directors, representatives,
agents, successors and assigns (collectively, "Buyer Affiliates"), from and
against any claims, losses, liability, obligations, lawsuits, judgments,
settlements, governmental investigations, deficiencies, damages, costs or
expenses of whatever nature, whether Known or unknown, accrued, absolute,
contingent or otherwise including, without limitation, interest, penalties,
attorneys' fees, costs of investigation and all amounts paid in defense or
settlement of the foregoing, (collectively "Claims and Losses"), suffered or
incurred by Buyer or Buyer Affiliates as a result of or in connection with the
following: (i) any and all debts, liabilities and obligations of Seller or TRW
or related to the Assets, whether Known or unknown, accrued, absolute,
contingent or otherwise, arising out of or relating to the business and
operations of the Business Unit or related to the Assets prior to or on the
Closing Date or which arise after the Closing Date, to the extent such debts,
liabilities and obligations are based upon or arise out of any act, transaction,
circumstance, state of facts or other condition which occurred or existed on or
before the Closing Date, whether or not then Known, accrued, due or payable;
(ii) a breach of any obligation, representation, warranty, covenant or agreement
of Seller or TRW in this Agreement or any Related Document, or because any
representation or warranty by Seller or TRW contained in this Agreement or any
Related Document, in any document furnished or
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<PAGE>
required to be furnished pursuant to this Agreement by Seller to Buyer or any of
its representatives, or any documents furnished to Buyer in connection with the
Closing hereunder, shall be false; (iii) except for matters covered under
Buyer's indemnification in Section 6.1(b), any litigation, to the extent such
litigation arises out of or is based upon events or operative facts occurring
prior to or on the Closing Date, in connection with the Seller, TRW or the
Assets, whether or not disclosed on the Disclosure Schedule, including, but not
limited to, claims made by employees or former employees of Seller or TRW; (iv)
any and all claims, including legal, administrative or creditor claims or
actions, in connection with the Seller, TRW or the Assets or the transfer of
Assets hereunder, to the extent any fact material to any such claim or cause of
action pleaded or stated there occurred prior to or on the Closing Date; (v) any
fee or payment due from Seller or TRW to Needham & Company, Inc. or any of its
affiliates; (vi) as required by Section 8.3(a) of the License Agreement; and
(vii) costs and expenses (including reasonable attorneys' fees) incurred by
Buyer in connection with any demand, action, suit, proceeding, demand,
assessment or judgment incident to any of the foregoing (collectively, "Buyer's
Damages").
(b) INDEMNIFICATION BY BUYER. As an inducement to Seller and TRW to
------------------------
enter into this Agreement and the Related Documents, and acknowledging that
Seller and TRW are relying on the indemnification provided in this Section 6 in
entering into this Agreement and the Related Documents, Buyer agrees to
indemnify, defend and hold harmless Seller, and its respective affiliates,
agents, successors and assigns (collectively, "Seller Affiliates"), from and
against any Claims and Losses suffered or incurred by Seller or TRW as a result
of or in connection with the following: (i) a breach of any obligation,
representation, warranty, covenant or agreement of Buyer in this Agreement or
any Related Document, or because any representation or warranty by Buyer
contained in this Agreement or any Related Document, in any document furnished
or required to be furnished pursuant to this Agreement by Buyer to Seller, or
any of their representatives, or any documents furnished to Seller in connection
with the Closing hereunder, shall be false; (ii) any and all liabilities of the
Seller, to the extent such liabilities arise out of the conduct of business by
Buyer after the Closing, including, but not limited to, liabilities arising from
the sale of any product by Seller following the Closing Date, except for matters
which are the subject of indemnification pursuant to Section 6.1(a); (iii) as
required by Section 8.3(b) of the License Agreement; and (iv) costs and expenses
(including reasonable attorneys' fees) incurred by Seller in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any of the
foregoing (collectively, "Seller's Damages").
6.2 REPRESENTATION, COOPERATION AND SETTLEMENT.
------------------------------------------
(a) Each party agrees to give prompt notice to the other of any claim
against the other which might give rise to a claim based on the indemnity
contained in Sections 6.1 and 6.2, stating the nature and basis of the claim and
the amount thereof.
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<PAGE>
(b) In the event any claims, action, suit or proceeding is brought
against a party (the "Indemnified Party") with respect to which the other party
(the "Indemnifying Party") may have liability under the indemnity contained in
Sections 6.1 and 6.2 hereof, the Indemnified Party shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting from
such claim, provided that Buyer shall not be required to permit Seller to assume
the defense of any third party claim which if not first paid, discharged, or
otherwise complied with would result in a material interruption or cessation of
the conduct of Buyer's business or any material part thereof or materially
impair the value of the Assets. Failure by the Indemnifying Party to notify the
Indemnified Party of its election to defend any such claim or action by a third
party within thirty (30) days after notice thereof shall have been given by the
Indemnified Party, shall be deemed a waiver of any such election. If the
Indemnifying Party assumes the defense of such claim or litigation resulting
therefrom, the obligations of the Indemnifying Party hereunder as to such claim
shall include taking all steps reasonably necessary in the defense or settlement
of such claim or litigation resulting therefrom, including the retention of
competent counsel satisfactory to the Indemnified Party, and holding the
Indemnified Party harmless from and against any and all damage resulting from,
arising out of, or incurred with respect to any settlement approved by the
Indemnifying Party or any judgment in connection with such claim or litigation
resulting therefrom. The Indemnifying Party shall not, in the defense of such
claim or litigation, consent to the entry of any judgment (other than a judgment
of dismissal on the merits without costs) except with the written consent of the
Indemnified Party nor enter into any settlement (except with the written consent
of the Indemnified Party) which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified Party a
release from all liability in respect to such claim or litigation in form and
substance acceptable to the Indemnified Party.
(c) If the Indemnifying Party shall not assume the defense of any such
claim by a third party or litigation resulting therefrom, the Indemnified Party
may defend against such claim or litigation in such manner as it deems
appropriate. The Indemnifying Party shall, in accordance with the provisions
hereof, promptly reimburse the Indemnified Party for the amount of any
settlement reasonably entered into by the Indemnified Party and for all damage
incurred by the Indemnified Party in connection with the defense against or
settlement of such claim or litigation.
6.3 INTEREST. In the case of payments to third parties (including
--------
federal, state, local or other tax authorities) which are indemnifiable
hereunder, the amount of the indemnifying party's liability under this Article 6
with respect thereto shall include interest on the amount of such payment from
the effective date of the indemnified party's notice of such payment to the
indemnifying party or the date on which such payment is made (whichever is
later) through the date on which the indemnified party shall have been
indemnified therefor, at a simple rate of interest equal to eight percent
-13-
<PAGE>
(8%) per annum; provided, in no event shall such rate exceed the maximum rate
permitted by law.
6.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; LIMITATION OF LIABILITY.
-------------------------------------------------------------------
(a) The representations and warranties of Seller and TRW contained in
Article 2 above (excluding the representations and warranties contained in
Section 2.12 and 2.16 which shall survive for the respective periods described
below), and the covenants of Seller and TRW contained in Article 6 (excluding
the indemnification obligation referenced in subitem (vi) of Section 6.1(a) and
Sections 6.2 and 6.3 as they relate to subitem (vi) of Section 6.1(a)) of this
Agreement, shall survive the Closing hereunder and shall continue in full force
and effect for a period of 18 months after the Closing. The representation and
warranty contained in Section 2.12 and the indemnification obligation referenced
in subitem (vi) of Section 6.1(a) shall survive the Closing indefinitely. The
representation and warranty contained in Section 2.16 shall survive the Closing
for a period of two (2) years. A claim shall be deemed made under this Section
6.4(a) and shall not be deemed to be invalid by the terms of this Section 6.4(a)
if Buyer sends written notice of such claim to TRW prior to the applicable
expiration date of the survival period.
(b) The representations and warranties of Buyer contained in Article
3 above and the covenants of Buyer contained in Article 6 (excluding the
indemnification obligation referenced in subitem (iii) of Section 6.1(b) and
Sections 6.2 and 6.3 as they relates to subitem (iii) of Section 6.1(b)) of this
Agreement, shall survive the Closing hereunder and shall continue in full force
and effect for a period of eighteen (18) months after the Closing. The
indemnification obligation referenced in subitem (iii) of Section 6.1(b) shall
survive the Closing indefinitely. A claim shall be deemed made under this
Section 6.4(b) and shall not be deemed to be invalid by the terms of this
Section 6.4(b) if TRW sends written notice of such claim to Buyer prior to the
expiration of the applicable expiration date of the survival period.
(c) Except for any liability arising in connection with the
representations and warranties contained in Section 6.12 of this Agreement and
the indemnification obligation referenced in subitem (vi) of Sections 6.1(a) and
2.12 of this Agreement, the liability of Seller and TRW under this Agreement
shall not exceed the sum of (i) Six Million Two Hundred Thousand Dollars
($6,200,00); plus (ii) any principal payments made to Seller or TRW pursuant to
the Buyer Note. Seller and TRW shall not have liability for the first Fifty
Thousand Dollars ($50,000.00) of claims, in the aggregate, made by Buyer. Seller
and TRW shall be liable, subject to the limits imposed by the first sentence of
this Section 6.4(c), for the entire amount of claims above such $50,000
aggregate threshold.
-14-
<PAGE>
(d) Except for any liability arising in connection with the
indemnification obligation referenced in subitem (iii) of Section 6.1(b),
Buyer's liability under this Agreement shall not exceed Nine Million Two Hundred
Thousand Dollars ($9,200,000). Buyer shall not have liability for the first
Fifty Thousand Dollars ($50,000.00) of claims, in the aggregate, made by Seller
and TRW. Buyer shall be liable, subject to the limits imposed by the first
sentence of this Section 6.4(d), for the entire amount of Claims above such
$50,000 aggregate threshold.
(e) The limitations on survival and liability in this Section 6.4
shall not apply with respect to the License Agreement, the Non-Competition
Agreement, the Cooperation Agreement, the Patent Assignment and the Trademark
Assignment.
ARTICLE 7
---------
CLOSING
7.1 CLOSING. The closing (the "Closing") shall be consummated at the
-------
offices of Brobeck, Phleger & Harrison, 2200 Geng Road, Palo Alto California, at
10:00 a.m. (Pacific Standard Time) on December __, 1994. The date of such
Closing is herein referred to as the "Closing Date." At the Closing, the
parties to this Agreement will exchange funds, documents, agreements,
certificates, opinions and other instruments and documents so as to cause the
terms and conditions of this Agreement to be satisfied. All documents and
instruments delivered at Closing pursuant to this Article 7 shall be dated and
shall be effective for all purposes as of the Closing Date.
7.2 DELIVERIES BY SELLER. At the Closing, Seller (and TRW, where
--------------------
required by the document) shall execute and deliver to Buyer: (i) the License
Agreement; (ii) the Assignment of Lease; (iii) the AirTouch Assignment; (iv) the
Patent Assignment; (v) the Trademark Assignment; (vi) the Purchase Order
Assignment; (vii) the Non-Competition Agreement; (viii) the General Conveyance;
and (ix) the Closing Certificate.
7.3 DELIVERIES BY BUYER. At the Closing Buyer shall pay the Cash Payment
-------------------
to Seller, and shall execute and deliver to Seller: (i) the License Agreement;
(ii) the Assignment of Lease; (iii) the AirTouch Assignment; (iv) the Non-
Competition Agreement; (v) the Buyer Note; and (vi) the Pledge Agreement.
7.4 FILING OF PATENT ASSIGNMENT AND TRADEMARK ASSIGNMENT. At the closing,
----------------------------------------------------
the Patent Assignment and Trademark Assignment shall be filed with the United
States Patent Office, in a manner necessary to complete and perfect the
assignments to Buyer, as determined by Buyer.
-15-
<PAGE>
ARTICLE 8
---------
TRANSACTIONS SUBSEQUENT TO THE CLOSING DATE
8.1 FURTHER ASSURANCES. From time to time after the Closing Date, the
------------------
parties shall execute, deliver and acknowledge all such further instruments of
transfer and conveyance and shall perform all such other acts as any other party
may reasonably request to more effectively transfer the Assets and to otherwise
carry out the transactions contemplated by this Agreement and the Related
Documents.
8.2 SALES AND USE TAXES. Any sales, use or other transfer tax which is
-------------------
payable as the result of the transactions contemplated by this Agreement shall
be paid by Buyer in full compliance with applicable law. Buyer will provide
Seller with an appropriate resale certificate relating to the purchase of
Seller's inventory.
8.3 TRW TRADEMARK. Licensee may use printed material bearing the name
-------------
and mark"TRW PhonePrint" for a period from the Effective Date through February
2, 1995 specifically in support of the CTIA trade show; provided it disclaims
its affiliation with TRW, Inc. when and as appropriate. Thereafter, Licensee
will cease use of the TRW name, mark or logo either by itself or in connection
with the PhonePrint name and mark. Notwithstanding anything in this Agreement
to the contrary, TRW reserves all right, title and interest to the TRW name,
mark and logo and Licensee may not use the TRW name, mark or logo in any way
except as provided in this Section 8.3. Licensor shall abandon and shall not
use the "TRW PhonePrint" name and mark, and will execute all documents and take
all action reasonably required by Licensee to permit Licensee to use the
"PhonePrint" name and mark.
ARTICLE 9
---------
MISCELLANEOUS PROVISIONS
9.1 INVESTIGATIONS AND SURVIVAL. The respective representations,
---------------------------
warranties, covenants and agreements of Seller and Buyer herein and in the
Related Documents, or in any certificates or other documents delivered prior to
or at the Closing, shall not be deemed modified, waived or otherwise affected by
any investigation made by any party or its representatives hereto nor shall the
same be affected by the Closing.
9.2 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by a
----------------------
party without the prior written consent of the parties hereto which consent
shall not be unreasonably withheld or delayed; provided, however, this Agreement
may be assigned and the obligations hereunder delegated by the Buyer to a
purchaser or acquiror of all or substantially all of the business, stock or
assets of Buyer in whatever form of
-16-
<PAGE>
corporate transaction or to any other corporation or entity that, directly or
indirectly, through one or more intermediaries, controls, is controlled by or
under common control with Buyer without the consent of the Seller. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors, assigns,
heirs, legatees, executors and administrators of the parties.
9.3 GOVERNING LAW; JURISDICTION AND VENUE; SEVERABILITY. This Agreement
---------------------------------------------------
shall be governed by and construed in accordance with the laws of the State of
California, without regard to principles of conflicts of law. If any term,
covenant or condition of this Agreement is held to be to any extent invalid,
void, or otherwise unenforceable by any court or arbitrator, the remainder of
this Agreement shall not be affected thereby and each term, covenant and
condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
9.4 ENTIRE AGREEMENT; MODIFICATION AND WAIVER. This Agreement, together
-----------------------------------------
the agreements and documents referred to herein, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior and contemporaneous agreements and understandings. All
Exhibits and Schedules attached hereto are incorporated herein by this
reference. This Agreement may be modified, amended or supplemented only by a
written instrument duly executed by all parties hereto. No covenant, term or
condition or the breach thereof shall be deemed waived, unless it is waived in
writing and signed by the party against whom the waiver is claimed. Any waiver
of breach of any covenant, term or condition shall not be deemed to be a waiver
of any preceding or succeeding breach of the same or any other covenant, term or
condition. The failure of any party to insist upon strict performance of any
covenant, term or condition hereunder shall not constitute a waiver of such
party's right to demand strict compliance therewith in the future. Time is of
the essence for purposes of each and every provision of this agreement.
9.5 NOTICES. All payments, notices, requests, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
delivered personally (which shall include delivery by courier or overnight
delivery service) or sent by certified or registered mail postage prepaid,
certified or return receipt requested, or sent by telecopier or similar
facsimile transmission, to the parties at their respective address set forth
below or at such other address as shall be given in writing by a party to the
other party. Items delivered personally or by telecopier or facsimile shall be
deemed delivered on the date of actual delivery; items sent by certified or
regular mail shall be deemed delivered three (3) days after mailing.
-17-
<PAGE>
If to Seller: ESL Incorporated
495 Java Drive
Sunnyvale, CA 94088-3510
Attn: TRW Legal Department
If to TRW: TRW, Inc.
One Rancho Carmel
San Diego, CA 92128
Attn: TRW Legal Department
If to Buyer: PhonePrint, Inc.
207 E. Java Drive
Sunnyvale, CA 94088
Attn: Kevin Compton
9.6 PAYMENT OF FEES AND EXPENSES. Each party to this Agreement shall be
----------------------------
responsible for, and shall pay, all of its own legal, accounting and other
transactional fees and expenses incurred in the negotiation and preparation of
this Agreement and the Related Documents and the transactions contemplated
herein and therein.
9.7 DRAFTING PARTY. The provisions of this Agreement, and the documents
--------------
and instruments referred to herein, have been examined, negotiated, drafted and
revised by counsel for each party hereto.
9.8 COUNTERPARTS. This Agreement may be executed in multiple copies,
------------
each of which shall be deemed an original and all of which shall constitute a
single agreement binding on all parties.
[Remainder of This Page Intentionally Left Blank]
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"BUYER" "SELLER"
PHONEPRINT, INC., a Delaware ESL INCORPORATED, a California
corporation corporation
By:/s/ Kevin Compton By:/s/ James Sandstrom
------------------------- ----------------------------------
Title: Chairman Title: Senior Vice President
---------------------- -------------------------------
TRW INC, an Ohio corporation
By: /s/ illegible
----------------------------------
Title: Vice President Finance
-------------------------------
[COUNTERPART SIGNATURE PAGE TO AGREEMENT TO PURCHASE
SELECTED ASSETS]
-19-
<PAGE>
EXHIBIT A
---------
Assets
------
1. All property that is the subject of the General Conveyance,
including, without limitation, the items set forth on Schedule 1 to
----------
the General Conveyance.
2. The Trade Secrets, Copyrights, Licensed Products, Licensed Services
and Patent Right (as defined in the License Agreement), including
without limitation, the items set forth on Schedules 1, 2, 3 and 4 to
-----------------------
the License Agreement.
3. The interest in real property that is the subject of the Assignment
of Lease.
4. The contract and other rights that are the subject of the AirTouch
Assignment and the Order and Contract Assignment.
5. The rights and property that are the subject of the Patent Assignment
and the Trademark Assignment.
6. All other assets and property used by the Business Unit in connection
with the Business, except for the pooled and excluded assets
described in Paragraph 2.7 of the Disclosure Schedule.
7. All goodwill of Seller and TRW associated with the foregoing.
A-1
<PAGE>
EXHIBIT B
---------
License Agreement
-----------------
B-1
<PAGE>
LICENSE AND TECHNICAL ASSISTANCE AGREEMENT
This LICENSE AND TECHNICAL ASSISTANCE AGREEMENT, ("Agreement") is made
and entered into as of the 14th day of December, 1994, ("Effective Date")
between TRW INC., an Ohio corporation ("TRW"), ESL INCORPORATED, a California
corporation and wholly owned subsidiary of TRW INC. ("ESL") (TRW and ESL are
together referred to as "Licensor"), and PHONEPRINT, INC., a Delaware
corporation ("Licensee").
WHEREAS, Licensor has * * * a * * * that * * *
and * * * a * * * based on * * * or * * *
and is able to * * * activities in the "Wireless
Communications Field," as defined below; and
WHEREAS, Licensee desires to avail itself of this * * * ,
and Licensor desires to license the technology to Licensee;
NOW THEREFORE, in consideration of the mutual promises contained
herein and the mutual benefits to be derived therefrom, Licensor and Licensee
agree as follows:
ARTICLE 1
DEFINITIONS
-----------
The following words and phrases will have the meanings set forth
below:
1.1 AGREEMENT. This Agreement and the following Schedules attached
---------
hereto:
Schedule 1 Trade Secrets
----------
Schedule 2 Licensed Products
----------
Schedule 3 Licensed Services
----------
Schedule 4 Patent Rights
----------
1.2 *** . Those particular Trade Secrets identified as ***
----------
in Schedule 1 and which consist of mechanical, technological or
----------
computational procedures for solving a problem or achieving a particular result.
1.3 ASSET PURCHASE AGREEMENT. The Asset Purchase Agreement of even
------------------------
date herewith between the parties.
1.4 BUSINESS SUCCESSOR. For purposes of Section 1 of this
------------------
Agreement, "Business Successor" is defined as the Tactical and National Lines of
Business of TRW's Avionics and Surveillance Group and any successor unit or
subunit (whether or not
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
separately incorporated), of TRW conducting some or all of those businesses
currently carried on by ESL.
1.5 * * * . Any * * * technology
-------------------------------
* * * Business Successor that consists of * * *
intended for or that have application with respect to * * *
and that * * * major system * * *. * * * shall
not include any * * * ; the parties intend that * * *
will consist only of * * * described in Schedule 1.
----------
1.6 COOPERATION AGREEMENT. The Cooperation Agreement of even date
---------------------
herewith between Licensee and TRW.
1.7 COPYRIGHTS. All existing copyrights that have been used in or
----------
for manufacture of the Licensed Products, the provision of Licensed Services or
in connection with Trade Secrets (and all * * *
related thereto) in connection with which Licensor owns and has the right to
grant licenses to Licensee, and future copyrights used or created by Business
Successor that have use in, for or with respect to products, services or trade
secrets (including, without limitation, the Licensed Products, Licensed
Services, Trade Secrets, and * * * ) relating to fraud
detection or mitigation in the Wireless Communications Field.
1.8 GOVERNMENTAL ENTITY. Any department, agency, organization,
-------------------
activity, office or the like ("agency") of the United States Government or in
which the United States is a participant; and any agency of the government of
another sovereign state or country throughout the world or in which such
government participates; any contractor or vendor to any such agency or
government proposing to purchase with funds derived from or reimbursable by any
such agency or state, or any other customer under circumstances such that
Licensee knows or has reason to know or believe that the customer intends to use
the product or service in any activity funded by any such agency or state.
1.9 INVESTORS. Kleiner Perkins Caufield & Byers VII, KPCB VII
---------
Founders Fund, Sevin-Rosen IV, Sevin-Rosen-Bayless Management Company, Norwest
Equity Partners IV, Needham Capital SBIC, L.P., and Needham Emerging Growth
Partners.
1.10 LICENSED PRODUCT(S). Each of * * * products that
-------------------
recognizes and identifies a transmitter based on * * * or * * *
for the purpose of detecting fraudulent activities, listed on Schedule 2 or
----------
* * * by Business Successor, whether or not Licensee hereafter
makes any changes, including, without limitation, * * * or other
modifications thereto.
1.11 LICENSED SERVICES. Each of * * * that relates to
-----------------
the * * * of a transmitter based on * * * or
* * * for the purpose of detecting fraudulent activities, listed on
Schedule 3 or * * * by Business Successor, whether or not
- ----------
Licensee hereafter makes any changes or
2
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
modifications thereof. * * * (a) will include, by way of example
but not of limitation, services for * * * , such as * * *
for * * * and * * * and the development of * * * for
* * * or * * * and (b) will not include
work in the * * * that involves a Licensed Product in the
* * * .
1.12 LICENSEE IMPROVEMENTS. Any new technology used or developed by
---------------------
Licensee that consists of improvements to the * * * intended for or that
have application with respect to * * *
and that do not require major system redesign. Licensee Improvements shall not
include any * * * ; the parties intend that Licensee Improvements will
consist only of modification to the * * * described in Schedule 1.
----------
1.13 LICENSEE NOTE. The certain promissory note of even date
-------------
herewith made by Licensee in favor of TRW, in the principal amount of $ * * * .
1.14 LICENSOR. TRW and ESL.
--------
1.15 MILITARY/INTELLIGENCE FIELD. Uses or applications of Trade
---------------------------
Secrets and Copyrights under contract or in collaboration with a Governmental
Entity for the purpose of * * * and other similar applications.
1.16 NEW INVENTIONS. Any technology, trade secrets, copyrights,
--------------
patents, patent applications, products or services in the * * *
developed by * * * other than * * * .
1.17 PATENT RIGHTS. All rights, benefits and privileges under: (i)
-------------
United States Letters Patent and pending United States patent applications owned
by Licensor that are identified in Schedule 4, Part A; (ii) any future United
--------
States patent applications or patents that relate to the inventions listed on
Schedule 4, Part B; and (iii) all patents now or subsequently issuing throughout
- ----------
the world based on the subject matter described in such patents and
applications, including, without limitation, any continuation, division, reissue
or foreign country counterpart thereof.
1.18 TRADE SECRETS. All of Licensor's existing technical expertise,
-------------
and all proprietary information, data or confidential know-how pertaining to the
design, manufacture, installation, use, repair, maintenance, and operation of
Licensed Products or Licensed Services (and all * * *
) which were developed or acquired by Licensor and are owned by Licensor and
which have been applied to or used or tested for the purpose of fraud detection
or mitigation in the * * * , including, but not limited
to, the methods, processes, * * * , computer programs, databases, formulae,
devices, specifications, drawings and items listed in Schedule 1, and all of the
----------
foregoing that may in the future be developed or created by Business Successor
that which have use in, for, or with respect to products, services or trade
secrets (including, without limitation, the Licensed Products, Licensed Services
and * * * ) relating to fraud detection or mitigation
in the * * * .
3
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
1.19 * * * . The conduct of business pertaining to
--------------------
products or services for use in connection with * * * .
1.20 * * * . The business of * * *
-------------------------
based on combining or * * * products or services (including without
limitation, the Licensed Products and Licensed Services) * * * other products
and services.
1.21 * * * . The process of transmitting and
-----------------------
receiving signals used for communications purposes that can be accomplished
without * * * .
1.22 * * * . The conduct of business
-----------------------------
pertaining to * * * .
ARTICLE 2
LICENSE, PATENT ASSIGNMENT AND GRANT-BACK
-----------------------------------------
2.1 LICENSE. Subject to the provisions of Section 2.2, Licensor
-------
hereby grants to Licensee:
(a) an * * *
right and license under the Trade Secrets and the Copyrights (i) to
* * * products, including without limitation, the Licensed
Products and components of the Licensed Products, in the * * *
; and (ii) to * * * , including without limitation,
the Licensed Services to customers, in the * * * ; and
(b) a * * *
right and license under the Trade Secrets and the Copyrights to * * *
products (including, without limitation, the Licensed Products), or * * *
* * * services (including, without limitation, the Licensed Services) in the
* * * .
2.2 RESERVATION OF RIGHT. * * * reserves * * * to * * *
--------------------
the Trade Secrets or the Copyrights for * * * or * * *
and in the * * * , and * * * is granted to * * * to
practice or use the Trade Secrets or the Copyrights in the * * *
.
2.3 PATENT ASSIGNMENT AND GRANT BACK. Pursuant to the Assignment of
--------------------------------
Patents by TRW Inc. dated as of even date herewith, Licensor will assign to
Licensee its Patent Rights in those inventions (including without limitation all
foreign counterpart applications) identified in Schedule 4, Part A. Licensor
----------
will execute such additional documents provided by Licensee as are necessary to
record the Assignment of Patents and for the assignment of the foreign
counterpart applications and to assign and record the assignment to Licensee of
the Patent Rights to any inventions from Schedule 4, Part B that are filed as
----------
patent applications. In consideration thereof, Licensee shall and
4
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
hereby does grant back to Licensor an * * *
right and license to the Patent Rights * * * in the * *
* , and for * * * , except that the foregoing
license shall be * * * in the * * * .
ARTICLE 3
TERM
----
3.1 TERM. This Agreement commences as of the Effective Date and
----
will * * *
of the parties or in accordance with Section 11.3.
3.2 * * * TERMINATION. Except as otherwise expressly provided in
-------------------
Sections 3.1 and 11.3, this Agreement * * * to * * * during
its term.
ARTICLE 4
DELIVERY AND TECHNICAL ASSISTANCE
---------------------------------
4.1 DELIVERY.
--------
4.1(a)Delivery Upon Closing. Licensor has furnished Licensee copies
---------------------
of such documents, information and other materials in possession of Licensor,
including without limitation, materials relating to the Trade Secrets and the
Copyrights, as Licensor believes are reasonably necessary for Licensee to
understand, implement and use the Trade Secrets, Copyrights, Patent Rights,
Licensed Products and Licensed Services and to be able to manufacture Licensed
Products and provide Licensed Services.
4.1(b)Future Deliveries. Upon Licensee's reasonable written request
-----------------
from time to time and without charge (other than photocopy expense), Licensor
will furnish to Licensee copies of such additional documents, information and
other materials, in possession of Licensor, which have not previously been
provided to Licensee, including without limitation all materials relating to the
* * * , the Trade Secrets and the Copyrights as are reasonably
necessary for Licensee to understand, implement and use the Trade Secrets,
Copyrights, Patent Rights, Licensed Products and Licensed Services and to be
able to manufacture Licensed Products and provide Licensed Services.
4.2 TECHNICAL ASSISTANCE. Upon Licensee's reasonable written
--------------------
request * * * , Licensor shall, * * * and subject to
mutual agreement in good faith between the parties as to scheduling, scope of
work and the * * * , provide technical
assistance to Licensee in connection with the Trade Secrets, Copyrights and
Patent Rights, and in connection with the manufacture, use, delivery or sale of
Licensed Products and the provision, delivery or sale of Licensed Services. At
Licensee's request, such technical assistance shall include, without limitation:
5
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
(a) Advice and assistance by qualified engineers and other
personnel who have knowledge of the Copyrights or the Trade Secrets, or
experience in the manufacture and use of Licensed Products or the delivery of
Licensed Services; and
(b) Such other technical services and technical information that
Licensee may reasonably request in connection with this Agreement.
4.3 COMPENSATION. For any services rendered upon Licensee's request
------------
pursuant to Section 4.2, * * * customarily
charged to third parties consisting of * * * (including,
without limitation, * * *
, and will reimburse * * * for * * * incurred in connection
with the performance of such services (including but not limited to
* * * ).
ARTICLE 5
PROTECTION OF TRADE SECRETS
---------------------------
5.1 USE AND NON-DISCLOSURE. Licensee and Licensor will not use or
----------------------
permit the use of any Trade Secrets for any purpose not authorized by this
Agreement. Subject to the provisions of Section 5.2 and 5.3, Licensee and
Licensor will hold in confidence, and will not disclose or communicate to any
third person, any * * * . Licensee and Licensor will take or cause to be
taken all reasonably necessary precautions to prevent the disclosure or
communications of such * * * to third persons.
5.2 EXCEPTIONS. Licensee and Licensor may disclose * * * to
----------
its employees or to any person or entity in connection with bona fide business
or financing transactions to the extent that each such disclosure is reasonably
necessary for the purpose of manufacturing, selling, delivering, providing,
installing, repairing or servicing any product (including, without limitation
Licensed Products) or providing any services (including, without limitation
Licensed Services) or procuring goods and services required in connection
therewith or discussing or conducting such business or financing transaction;
provided that: (a) Licensee or Licensor clearly marks any document or other
material containing any * * * so disclosed to indicate that such documents
or materials contain the * * * , (b) Licensee or Licensor requires each
entity to whom such documents or materials are disclosed to sign a written
agreement limiting use thereof to the purpose stated in such agreement,
prohibiting the reproduction thereof and the disclosure thereof to any other
person and requiring the prompt return thereof when no longer needed or such
agreement is terminated, and (c) any reproduction, note or summary of such
documents or materials immediately upon the making thereof will become the
property of * * * . The foregoing restrictions on the use and disclosure of
the * * * shall not apply with respect to any * * * (i) that is in or
(through no improper action or inaction by the disclosing party or any agent or
employee) enters the public domain (and is readily available without substantial
effort), or (ii) in the case of Licensee only, that was rightfully in its
possession or known by Licensee prior to receipt from Licensor, or (iii) in the
case of Licensee only, that was rightfully disclosed to
6
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<PAGE>
Licensee by another person without restriction, or (iv) * * * after the
Effective Date.
5.3 ACCESSIONS. Each modification, improvement and revision of any
----------
of the Trade Secrets (except for direct reproductions thereof) that is made by
or for Licensee will become the property of Licensee.
ARTICLE 6
IMPROVEMENTS; FIRST RIGHT OF OFFER
----------------------------------
6.1 * * * . * * * shall promptly
---------------------------------
disclose to Licensee in writing all * * * .
6.2 FIRST RIGHT OF OFFER FOR NEW INVENTIONS. Licensee will have a
---------------------------------------
right of first offer to license New Inventions in the * * *
. Licensor shall not license or sell any New Inventions to any third party,
* * * , without first offering such New
Inventions to Licensee. Upon receipt of written notification from Licensor as
to the details of the New Invention and the specific terms of an offer ("Offer")
by Licensor to sell or license such New Inventions to Licensee, Licensee shall
have * * * to accept the Offer. In the event that Licensee
* * * , and no other
terms shall apply. If Licensee does * * * , then for a period of
* * * thereafter, Licensor may license such New Inventions to a third
party, but * * * .
6.3 LICENSEE IMPROVEMENT(S). Licensee shall * * *
-----------------------
all Licensee Improvements.
6.4 * * * RIGHT OF FIRST OFFER AND OBLIGATION TO DISCLOSE
-----------------------------------------------------------------
* * * AND LICENSEE IMPROVEMENTS. Notwithstanding anything to
- -------------------------------------------------
the contrary in this Agreement, the * * * shall
* * * after the Effective Date, and any * * * or
Licensee Improvements developed or created at any time after * * *
after the Effective Date * * * be included as part of the licenses granted
hereunder.
ARTICLE 7
TRADEMARKS
----------
7.1 PHONEPRINT TRADEMARK. Pursuant to the terms of an Assignment of
--------------------
U.S. Intent-To-Use Trademark Application executed by TRW as of even date
herewith, TRW will assign to Licensee its entire right, title and interest in
and to the application for the trademark "PhonePrint" and any and all trademarks
and service marks related thereto throughout the world. As of the Effective
Date, TRW and ESL will abandon and cease all use of the PhonePrint name and
mark.
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<PAGE>
7.2 TRW TRADEMARK. Licensee may use printed material bearing the
-------------
name and mark "TRW PhonePrint" for a period from the Effective Date through *
* * specifically in support of the * * * ; provided it
disclaims its affiliation with TRW Inc. when and as appropriate. Thereafter,
Licensee will cease use of the TRW name, mark or logo either by itself or in
connection with the PhonePrint name and mark. Notwithstanding anything in this
Agreement to the contrary, TRW reserves all right, title and interest to the TRW
name, mark and logo and Licensee may not use the TRW name, mark or logo in any
way except as provided in this Section 7.2. Licensor shall abandon and shall
not use the "TRW PhonePrint" name and mark, and will execute all documents and
take all action reasonably requested by Licensee to permit Licensee to use the
"PhonePrint" name and mark.
ARTICLE 8
PRODUCT LIABILITY * * *
---------------------------------
8.1 PRODUCT DEFECTS. With respect to Licensed Products sold, leased
---------------
or manufactured after the Effective Date, * * * will have * * *
for determining that the designs of the Licensed Products and components
* * * are manufactured in accordance with customary commercial
standards.
8.2 GENERAL * * * . Except as provided in Section 8.3,
-----------------------
* * * in respect of any and all * * *
resulting from a claim that * * * use of any Patent Rights, the Trade
Secrets, the Copyright, PhonePrint trademark and/or * * * manufacture, use
and/or sale of Licensed Products, components of such Licensed Products, or
Licensed Services causes injury or damage to persons or property; provided that
(i) * * * reasonably promptly notifies * * * in writing of any claims in
this regard, (ii) * * * provides * * * information, assistance and
authority to enable * * * to defend such claim, and (iii) * * * assumes
control of the defense and settlement of the claim.
8.3 INTELLECTUAL PROPERTY * * * .
-------------------------------------
a. * * * and its officers, directors,
agents, employees, consignees and customers * * * from any and
* * * resulting from: (i) the * * *
of any Trade Secrets, or (ii) * * * of any United States or
foreign copyright or United States patent issued on or before * * * ,
by the Patent Rights listed in Schedule 4 (Part A), Trade Secrets, Copyrights,
or PhonePrint trademark in connection with Licensee's manufacture, use and/or
sale of products (including, without limitation, the Licensed Products),
components of any such products, or * * * provision of services (including,
without limitation, the Licensed Services); * * *
The foregoing obligation of Licensor * * * with respect to
* * * (i) * * * of the Patent Rights,
Trade Secrets, Copyright, or PhonePrint trademark, (ii) not relating to the
Patent Rights, Trade Secrets, Copyright, or PhonePrint
8
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<PAGE>
trademark or portions or components thereof, or * * * the * * *
relates to * * * of the license granted under this
Agreement, (iii) to the extent the Licensed Products * * *
Trade Secrets and Copyrights licensed to Licensee hereunder and
* * * (and * * *
), (iv) where * * * activity after being
* * * thereof or after being
* * * that would have avoided the * * * , (v) to the
extent * * * to * * * ,
except to the extent that the * * *
working in connection with * * * (and who had knowledge of the
* * * ) * * * of such * * * at the time * * * was
required to notify * * * of such * * * pursuant to
* * * , or (vi) of a * * * to the extent that the * *
relates to * * * to a Licensed Product or Licensed Service,
* * * (and the * * *
would not have occurred but for * * * ).
b. * * *
from any and all * * *
from * * * of any * * * issued on or after * * *
(including, without limitation, of the rights of * * * and/or
* * * in * * *
), in connection with Licensee's manufacture, use and/or sale of products
(including, without limitation, the Licensed Products or components of such
Licensed Products or Licensed Services).
ARTICLE 9
GOVERNMENT APPROVAL
-------------------
9.1 COOPERATION. Licensor and Licensee promptly will seek all
-----------
necessary governmental approvals and licenses that may be required in connection
herewith and will cooperate with each other in every reasonable way to obtain
such approval. Nothing in this Agreement will be deemed to require either party
to agree to any revision or modification of this Agreement that may be required
to obtain any governmental approval.
ARTICLE 10
DEFAULT; REMEDY; TERMINATION
----------------------------
10.1 DEFAULT. A "default" shall exist under this Agreement if either
-------
party fails to perform any written obligation to be performed by it hereunder
within * * * after written notice from the other party that time for
such performance has passed or, if no such time is prescribed, within * *
* after written notice from the other party.
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10.2 REMEDY. If a party is in default hereunder, the party not in
------
default may pursue any remedy available to it at law or in equity if the noticed
default is not cured within the notice period. * * *
; this Agreement may be * * * only pursuant to * * * .
10.3 TERMINATION BY * * * . * * * may terminate this Agreement
-----------------------
only in the event that (i) * * * has not * * * under the
* * * ; and (ii) * * * has provided * * * to the * * * and
* * * of such * * * ; and (iii) * * * has * * * ,
within * * * after the receipt by * * * and the * * * of the *
* * described in (ii) above, of the * * * under the * * *
; and (iv) * * * to * * * and the * * * a * * *
following such * * * period and before * * * by * *
*.
10.4 PERFORMANCE AFTER TERMINATION. Upon termination of this
-----------------------------
Agreement pursuant to Section 11.3, * * *
, and (b) * * * , that
(i) is not contained in * * * , or (ii) has not become
available to the public or generally known in the trade
other than as a result of the improper action of * * *
, or its * * * , who have knowledge thereof.
10.5 LIMITATION OF LIABILITY. Subject to the exceptions noted below,
-----------------------
no party shall have liability exceeding $ * * * in the aggregate under this
Agreement, that certain Cooperation Agreement of even date herewith and that
certain Non-Competition Agreement of even date herewith ("Non-Competition
Agreement"). The foregoing limitation of liability shall not apply with respect
to: (i) a willful or intentional breach of this Agreement or the Non-
Competition Agreement; or (ii) matters relating to or arising in connection with
* * * of this Agreement. In the event any party to this
Agreement becomes aware of a breach hereunder by any other party to this
Agreement, the non-breaching party shall provide the breaching party with
written notice of the breach and a * * * period in which to cure such
breach.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 NOTICES. All notices and communications required or permitted
-------
to be given under this Agreement shall be sufficient only if written in English
and personally delivered, delivered by a major commercial rapid delivery
courier service with tracking capabilities or mailed by certified or registered
mail, return receipt requested, with postage or delivery charges prepaid and
addressed to a party at its address set forth below (unless by such notice a
different person or address will have been designated by notice pursuant to this
Section). If not received sooner, notice by mail will be deemed received five
(5) days after deposit in the U.S. mails.
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<PAGE>
Licensee: PhonePrint Inc.
207 E. Java Drive
Sunnyvale, CA 94088-3510
Attention: Kevin Compton
Licensor: TRW Avionics & Surveillance Group
495 Java Drive
Sunnyvale, CA 94088-3510
Attention: TRW Law Department
11.2 ASSIGNMENTS. TRW and ESL will have no right to assign or
-----------
transfer any of their respective rights or to delegate any of their duties under
this Agreement without the prior written consent of Licensee,
* * *
. Licensee can assign or sublicense any of its rights or licenses
under this Agreement at its sole option.
11.3 HEADINGS. The headings and titles to the Articles and Sections
--------
of this Agreement are inserted for convenience only and will not be deemed a
part hereof or affect the construction or interpretation of any provision
hereof.
11.4 REMEDIES. Unless otherwise expressly provided herein, the
--------
rights and remedies hereunder are in addition to, and not in limitation of,
other rights and remedies under this Agreement, and exercise of one right or
remedy will not be deemed a waiver of any other right or remedy.
11.5 MODIFICATION - WAIVER. No cancellation, modification,
---------------------
amendment, deletion, addition or other change in this Agreement or any provision
hereof, or waiver of any right or remedy herein provided, will be effective for
any purpose unless specifically set forth in a writing signed by the party to be
bound thereby. No waiver of any right or remedy in respect of any occurrence or
event on one occasion will be deemed a waiver of such right or remedy in respect
of such occurrence or event on any other occasion.
11.6 ENTIRE AGREEMENT. This Agreement supersedes all other
----------------
agreements, oral or written, heretofore made with respect to the subject hereof
and the transactions contemplated hereby and, with the Schedules hereto and in
conjunction with the Cooperation Agreement and Asset Purchase Agreement,
contains the entire agreement of the parties.
11.7 CONTROLLING LAW. All questions concerning the validity and
---------------
operation of this Agreement and performance of the obligations imposed upon the
parties hereunder will be governed by the substantive laws of the State of
California.
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11.8 SUCCESSORS AND ASSIGNS. The provisions of this Agreement will
----------------------
be binding upon and inure to the benefit of Licensor and Licensee and their
respective successors and authorized assigns. This provision will not be deemed
to expand or otherwise affect the limitations on assignment and delegation set
forth in Section 12.2.
11.9 PRODUCT MARKING. Licensed Products and/or Licensed Services
---------------
manufactured, delivered or sold by Licensee will be marked by Licensee in
conformance with the patent and copyright laws of the countries of manufacture,
use and sale.
11.10 PUBLICITY. Except as the other party gives its prior written
---------
consent, neither Licensor nor Licensee will use the name of the other party in
any publicity, product announcement, brochure, advertising, product labeling,
promotion or otherwise for any purpose.
11.11 COUNTERPARTS. This Agreement has been executed in several
------------
counterparts, each of which will be deemed to be an original copy hereof.
11.12 ATTORNEY'S FEES. In the event of any dispute or litigation
---------------
relating to this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees and court costs from the other party(ies).
[Remainder of This Page Intentionally Left Blank]
12.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
PHONEPRINT INC.
--------------------
Name
--------------------
Title
--------------------
Date
TRW INC.
--------------------
Name
--------------------
Title
--------------------
Date
ESL INCORPORATED
--------------------
Name
--------------------
Title
--------------------
Date
13.
<PAGE>
ESL PROPRIETARY INFORMATION
SCHEDULE 1
TRADE SECRETS
-------------
1. Proprietary * * * processing * * * that perform the
following functions on the * * * :
. Reduces the effects of * * * with * * * .
. * * * the call information in the * * *
including the * * * .
. * * * various * * * that are useful in * * *
* * *.
. Calculate * * * of each * * * and the * * *
as a whole. Use these * * * the use of each * * *
based on * * *.
2. Proprietary * * * that perform the following
functions:
. * * * the * * * into a * * * of the phone
emitter.
. * * * from the * * * from * * *
, * * * and * * * .
. * * * from new * * * with * * * to determine if
the * * * comes from the original phone or a different
(fraud) phone.
. Use * * * techniques to determine if the * * * is
similar or dissimilar to the existing * * *.
. Compares new * * * against * * * that were * * *
by phones that were * * * to be either * * *.
. Determine if the * * * or * * * are on * * * the
call to be * * * if fraud is * * * .
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<PAGE>
ESL PROPRIETARY INFORMATION SCHEDULE 1 TRADE SECRETS (cont.)
. Compare new * * * against * * * that were produced by
the * * * that the * * * claims to be.
. Compare new * * * against * * * that were produced by
the * * * (from * * *) the * * * claims to be.
. Use of * * * to * * * which were recently used by
* * * or * * * by PhonePrint.
. Issue a * * * to * * * the call when Fraud is
detected.
. * * * the Good/Fraud * * * on * * * matching based on
the * * * , * * * , * * * and * * * with
that * * * and other * * * information.
. Use of * * * and * * *.
. * * * that will * * * calls for
a period of time that are from the same * * * that has
* * * * * * .
3. Proprietary * * * that perform the following
functions:
. * * * retrieve information, via * * * or network, on call
* * * from the real time PhonePrint systems. This information
includes the * * * , measured *
* *
* * * .
. Combine * * * information from * * *
to * * * of all phones observed by all systems.
. Combine new * * * information with * * * to
* * * * * * .
. Transmit the * * * information to the * *
* PhonePrint Systems.
. Generate reports on various system functions from the * * *
information.
2
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<PAGE>
ESL PROPRIETARY INFORMATION SCHEDULE 1 TRADE SECRETS (cont.)
4. * * * and technologies involving methods of * * *
* * * . Use this information
to * * * the * * * that was * * *
. The * * * can come from a variety of means
including:
. Call was * * * that is known only to * * *
of the * *.
. Call was * * * on the * * * for the * * *
that * * * the call was * * * user.
. * * * with the * * * that he did ( * * * ) or did not ( * * * )
* * *.
. Combination of information from * * * that * * *
in good user's * * *.
. Calls flagged by * * * as from * * * or * * *
users.
5. * * * technology that perform the following functions to
* * * calls:
. Receive * * * and information from real time processes
indicating that a call is * * * .
. * * * to * * * containing information on the
call's * * * .
. * * * the * * * information in the * * *.
. * * * a * * * on the * * *.
. * * * both * * * and * * * .
6. Only the following portions of * * *
software:
. All libraries and included modules necessary to link and compile
the * * * program, which only includes the * * *
directory and * * * .
3
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<PAGE>
ESL PROPRIETARY INFORMATION SCHEDULE 1 TRADE SECRETS (cont.)
. The executables and help files in the * * * directory.
. One * * * of how to interface to the * * * program, the * *
* program to be * * * .
7. All * * * and software developed on the * * * not
listed above including:
. * * * software to process * * * to evaluate
* * * with * * * .
. * * * and software to evaluate performance
of each * * * and * * * .
8. Other * * * techniques including:
. * * * . * * * the call via * * * the *
* * .
. * * * . Interface with the * * * to * * *
by the same * * * occurring at the * * * .
. * * * . * * * to * * * the * * * (as in
the * * * in item 5 above) and to the * * * the
signal.
. * * * . * * * network to * * *
the call * * * the carrier's * * *.
4
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<PAGE>
SCHEDULE 2
LICENSED PRODUCTS
-----------------
.
. * * *
.
.
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<PAGE>
SCHEDULE 3
LICENSED SERVICES
-----------------
.
.
. * * *
.
.
.
.
.
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<PAGE>
SCHEDULE 4
PATENT RIGHTS
-------------
PART A
------
1. Patent Applications.
--------------------
* * * Patent Application, * * * Serial No. * * * , by
* * * . Corresponding * * *
are listed below.
Country Serial No. Filing Date
- ------- ---------- -----------
* * *
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<PAGE>
TRADE SECRETS
SCHEDULE 4
PATENT RIGHTS
-------------
PART B
------
* * * INVENTIONS
---------------------
This is a list of the inventions that apply to * * * of
* * * calls, and are believed to have been * * *
and * * * . Where noted, * * * may
be the sole or joint inventor. These * * * subject to the usual
considerations of determining * * * and * * * sale, offer sale and
delivery dates. * * * may or * * * for
the inventions. If * * * are not * * *, these items remain *
* * .
1. * * * that perform the following functions on
the * * * of the phone signal:
. * * * the * * * of * * * with * * * .
. * * *
. * * *
. * * *
2. Proprietary * * * that perform the following
functions:
. * * *
. * * * from the signal * * * from * * * .
. use * * * to determine if the * * * is
. * * * or * * * to the * * *.
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<PAGE>
TRADE SECRETS
SCHEDULE 4 PART B INVENTIONS (cont.)
. Determine if the * * * or * * * are on * * * the
call to be * * * if fraud is suspected.
. Compare * * * against * * * that were produced by the
* * * * and * * * the * * * to be.
. Use of * * * to * * * which were recently used
by * * * or * * * by * * * . This is for
the * * * , where a * * *
switches to a * * * after * * * gets * * * . (
* * * may be a * * * or * * *.)
. Vary the * * * on * * * based on the * *
* * * * and
* * * with that *
* * and other * * * .
. Use of * * * and * * * . ( *
* * may be a * * * or * * *.)
. * * * that will * * * for a
* * * that are from the * * * that has
been * * * over a * * *
.
3. Proprietary * * * that perform the following functions:
. Combine * * * from * * * to
* * * of * * * observed by * * * using
* * * and * * * .
4. * * * and technologies involving methods of * * *
.
. * * * a signature as the * * * or a * * * by
identifying at least * * * or * * *
. Use this information to * * * that was
* * * by that * * *. ( * * * may be a * * *
or * * *.)
. Call was made to * * * that is known only to * * *
of the * * *.
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<PAGE>
TRADE SECRETS
SCHEDULE 4 PART B INVENTIONS (cont.)
. Call was to * * * on the * * * list for the
* * * that indicates the call was by the * * *.
. Conversation with the * * * that he * * * or
* * * make a * * *.
. Calls * * * by * * * as from * * * or
* * * .
5. * * * technology that perform the following functions to *
* * calls (* * * may be a joint inventor or owner.):
. * * * to * * *
on the * * * .
. * * * the * * * in the * * *.
. * * * on the * * *.
. * * * both * * * and * * *.
6. Other * * * techniques that have been studied but have not been
implemented such as:
. * * * . * * * the call * * *
the * * * * * *.
. * * * . * * * with the * * * to
block * * * by the * * * occurring at the * * *.
. * * * . * * * to both the * * *
and to the * * * .
. * * * . * * * into the * * *
to * * * within the * * *.
7. The * * * initially drafted but not filed by * * *
for an * * *
including without limitation any and all inventions described in the * * *
.
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<PAGE>
EXHIBIT C
---------
Assignment of Lease
-------------------
C-1
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Agreement") is entered into as
of December 14, 1994, by and among PHONEPRINT, INC., a Delaware corporation
("PhonePrint") and ESL, INCORPORATED, a California corporation ("ESL"), with
reference to the following facts:
A. Concurrently herewith, ESL and PhonePrint have entered into an Asset
Purchase Agreement of even date herewith (the "Purchase Agreement") pursuant to
which PhonePrint is purchasing certain Assets (as defined in the Purchase
Agreement).
B. As a material inducement for the purchase of the Assets by PhonePrint
and pursuant to the terms of the Purchase Agreement, ESL desires to assign ESL's
rights to PhonePrint and to have ESL's obligations assumed by PhonePrint as
arising under a certain Lease and attached exhibits for the business premises of
ESL at 207 East Java Drive, Sunnyvale, California, dated June 30, 1992, as
amended April 15, 1993, June 30, 1993 and November 23, 1994 (the "Lease"), a
copy of which is attached hereto as Exhibit "A", by and between ESL and
Westminster Management Corporation, a Canadian corporation ("Lessor"), on the
terms and conditions set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
1. Assignment of Rights by ESL. ESL hereby assigns, transfers and sets
---------------------------
over to PhonePrint, all of ESL's right, title and interest in and to and under
the Lease effective as of the Closing Date (as defined in the Purchase
Agreement). ESL hereby represents to PhonePrint that ESL has performed all
material obligations required to be performed by it under the Lease through the
Closing Date, and neither ESL nor Lessor is in material default thereunder; and
no event has occurred that, with the lapse of time or giving of notice, or both,
(i) would constitute a material breach or material default thereunder by ESL or
Lessor or would cause or permit acceleration of any obligation of ESL or Lessor
or (ii) would materially and adversely affect any of the Assets or the business
to be conducted therewith.
2. Assumption of Obligations by PhonePrint. In reliance on the
---------------------------------------
foregoing representations and warranties, PhonePrint hereby accepts the
foregoing assignment and assumes, as of the Closing Date, all of ESL's
obligations under the Lease. ESL agrees that PhonePrint shall be responsible
only for liabilities, claims or obligations under the Lease that accrue on or
after the Closing Date. ESL further agrees to hold PhonePrint and its
successors and assigns harmless from any liability, claim or obligation under
the Lease that has arisen or may arise in connection with events or actions
occurring on or prior to the Closing Date. Except for the liabilities expressly
assumed in this Agreement, PhonePrint shall not assume or be responsible for any
liabilities or obligations of ESL whatsoever, regardless of amount, character or
description, whether accrued, contingent or otherwise, including, without
limitation, any liability for federal, state, or local income, sales, use,
property or other taxes or assessments arising out of or in connection with
operative events occurring on or prior to the Closing Date.
<PAGE>
3. Successors and Assigns. The rights under this Agreement may not be
----------------------
assigned, nor the obligations hereunder delegated, by ESL without the prior
written consent of PhonePrint in its sole discretion. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors, assigns, heirs,
legatees, executors and administrators of the parties. ESL acknowledges and
agrees that PhonePrint may assign its rights and delegate its duties hereunder,
subject to any restrictions found in the Lease, without the consent of ESL.
4. Governing Law; Jurisdiction and Venue; Severability. This Agreement
---------------------------------------------------
shall be governed by and construed in accordance with the laws of the State of
California, without regard to principles of conflicts of law. The parties agree
that any dispute regarding the interpretation or validity of this Agreement
shall be subject to the exclusive jurisdiction of the state and federal courts
in and for the County of San Diego, California, and each party hereby agrees to
submit to the personal and exclusive jurisdiction and venue of such courts.
5. Severability. If any term, covenant or condition of this Agreement
------------
is held to be to any extent invalid, void, or otherwise unenforceable by any
court or arbitrator, the remainder of this Agreement shall not be affected
thereby and each term, covenant and condition of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
6. Entire Agreement; Modification and Waiver. This Agreement, together
-----------------------------------------
with the agreements and documents referred to herein, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior and contemporaneous agreements and understandings. This
Agreement may be modified, amended or supplemented only by a written instrument
duly executed by all parties hereto. No covenant, term or condition or the
breach thereof shall be deemed waived, unless it is waived in writing and signed
by the party against whom the waiver is claimed. Any waiver of breach of any
covenant, term or condition shall not be deemed to be a waiver of any preceding
or succeeding breach of the same or any other covenant, term or condition. The
failure of any party to insist upon strict performance of any covenant, term or
condition hereunder shall not constitute a waiver of such party's right to
demand strict compliance therewith in the future. Time is of the essence for
purposes of each and every provision of this agreement.
7. Drafting Party. The provisions of this Agreement, and the documents
--------------
and instruments referred to herein, have been examined, negotiated, drafted and
revised by counsel for each party hereto and no implication shall be drawn nor
made against any party hereto by virtue of the drafting of this Agreement.
8. Counterparts. This Agreement may be executed in multiple copies,
------------
each of which shall be deemed an original and all of which shall constitute a
single agreement binding on all parties.
-2-
<PAGE>
9. Further Acts. ESL agrees to perform any further acts and execute any
------------
further documents that may be necessary to give effect to the agreements and the
intent of the parties hereunder, including, but not limited to, causing Lessor
to enter into a Consent to Assignment and Assumption Agreement substantially in
the same form as Exhibit "B" attached hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PHONEPRINT, INC., ESL, INCORPORATED,
a Delaware corporation a California corporation
By:______________________ By:__________________________________
Title:___________________ Title:_______________________________
[COUNTERPART SIGNATURE PAGE TO
ASSIGNMENT AND ASSUMPTION AGREEMENT]
<PAGE>
EXHIBIT "A"
L E A S E
- - - - -
1. PARTIES
-------
THIS LEASE is made as of this 30th day of June, 1992 by and between
WESTMINSTER MANAGEMENT CORPORATION, a Canadian corporation having its principal
place of business at 4921 Birch Street, Suite 100, Newport Beach, California
92660, hereinafter referred to as "Landlord", and ESL INCORPORATED, a California
corporation having a principal place of business at 495 Java Drive, Sunnyvale,
California 94088-3510, hereinafter referred to as "Tenant".
2. PREMISES
--------
A. Premises. Landlord does demise and lease unto Tenant and Tenant
--------
does hereby take and hire upon subject to the terms, covenants and conditions
herein contained, the Premises, situated in the City of Sunnyvale, County of
Santa Clara, State of California, known as 207 East Java Drive, located within
the Property as defined in Paragraph 2.B, which are more particularly shown and
-------------
as set forth in Exhibit "A" attached hereto and by reference made a part hereof,
-----------
together with the right to the reasonable and proportionate use of the Common
Area as defined in Paragraph 2.C.
-------------
B. Property: Building. The term "Property" shall mean that certain
------------------
real property, described as Parcel B as shown upon that certain Parcel Map
recorded in Book 383, Page 35 of Maps, which map was filed for record in the
office of the Recorder of the County of Santa Clara, State of California, on
March 28, 1977, in Book 391 of Maps, Page 47, together with the improvements
thereon and appurtenances thereto, subject to all easements thereof, consisting
of one (1) building (the "Building") containing a total building area of
approximately 34,440 square feet, in the City of Sunnyvale, County of Santa
Clara, State of California, all as more particularly shown on Exhibit "B".
-----------
C. Common Area. The term "Common Area" shall mean all areas and
-----------
facilities within the Property provided and designated by Landlord for the
general use, benefit and convenience of Tenant and other tenants and occupants
of any part of the Property, including without limitation, those portions of the
Building for the general use, benefit and convenience of all tenants of the
Building, such as common pipes, wires and appurtenant equipment serving the
Building, including the fire sprinkler system, the roof surface, parking areas,
sidewalks, landscaped and planted areas, driveways, truckways, retaining walls,
common neighbor walls, all exterior surface areas of the Building and all other
areas, facilities and improvements provided by Landlord for the common use of
Landlord and tenants of the Building, subject to the reasonable rules and
regulations
<PAGE>
and reasonable changes therein from time to time promulgated by Landlord
governing the use of the Common Areas.
D. Tenant's Percentage. The term "Tenant's Percentage" shall mean
-------------------
the percentage of the area of the Premises to the total area of the Building.
Tenant's Percentage is agreed to be forty-six and four-tenths percent (46.4%)
for the purpose of this Lease.
3. USE OF PREMISES
---------------
Tenant may use and occupy the Premises for office, light
manufacturing, warehouse and research and development uses and other lawful
purposes subject to the zoning ordinances of the City of Sunnyvale, California.
4. TERM
----
The term of this LEASE shall be for a period of six (6) months
commencing on July 15, 1992 ("Commencement Date").
5. RENT
----
Tenant shall pay to Landlord, in advance without deduction or offset,
on the first day of each month of the term hereof, rental for the Premises in
installments of Eight Thousand Dollars ($8,000) per month.
Rental shall be payable without notice or demand at the address stated
herein or to such persons or at such places as Landlord may designate in
writing. Tenant shall pay to Landlord one month's rent in the amount of Eight
Thousand Dollars ($8,000) upon the execution of the Lease which sum shall be
applied to the first full calendar month of the Lease. In the event the
Commencement Date does not fall on the first day of a calendar month, Tenant
shall pay to Landlord on the Commencement Date the pro rata portion of the
monthly rent applicable to the first partial month of the term. All rent shall
be paid to Landlord at:
c/o Strutt Parker California
4921 Birch Street, Suite 100
Newport Beach, CA 92660
6. COMMON AREA EXPENSES
--------------------
A. Landlord to Maintain. Landlord shall operate, replace, maintain
--------------------
and repair the Common Area. The manner in which such area shall be maintained
and the expenditures therefor shall be at the sole discretion of Landlord.
Landlord shall at all times have exclusive control of the Common Area and may at
any time temporarily close any part thereof and exclude anyone from any part
thereof. Landlord may change the configuration or
2
<PAGE>
location of the Common Area. In exercising any such rights, Landlord shall make
a reasonable effort to minimize any disruption of Tenant's business and shall
not interfere with access to the Premises by the bona fide customers, employees
and invitees of Tenant.
B. Tenant to Pay. During the term of this Lease, Tenant agrees to
-------------
pay, on a monthly basis as set forth in Section 7, as additional rent, Tenant's
---------
Percentage of all costs and expenses as may be paid or incurred by Landlord in
maintaining, operating, replacing and repairing the Common Area (hereinafter
referred to as the "Common Area Expenses") during the term of this Lease. The
Common Area Expenses may include, without limitation, the following: (i)
Assessments and dues, if any, payable under any covenants, conditions and
restrictions covering the Property; (ii) the cost of supplies, materials and
tools used in operation and maintenance of the Common Area; (iii) the cost of
gas, water, sewer usage and lighting used in the Common Area and the Building,
if not separately rendered to the Premises; (iv) the cost of landscaping
maintenance and reasonably required replacement; (v) the cost of maintenance and
repair of the concrete walkways, paved parking areas, roof surface and all other
portions of the Common Area; (vi) the cost of parking area sweeping service and
exterminator service.
7. ADDITIONAL RENT
---------------
From and after the Commencement Date, Tenant shall pay Landlord on the
first day of each calendar month of the term of this Lease, together with the
rent, as set forth in Section 5, Four Hundred Thirty-Eight Dollars ($438) as
---------
additional rent in payment of the estimated amount of Tenant's Percentage of the
Common Area Expenses. The foregoing estimated monthly charge may be adjusted by
Landlord at the end of any calendar year on the basis of Landlord's experience
and reasonably anticipated costs. Any such adjustment shall be effective as of
the first month of the calendar year for which Landlord has estimated costs.
Within sixty (60) days after the end of each calendar year or after
the expiration date of the Lease, Landlord shall furnish Tenant a statement
covering the calendar year, or portion thereof during which this Lease has been
in effect, and the payments made by Tenant with respect to such period as set
forth in Section 7. If Tenant's payments for Tenant's Percentage of the Common
---------
Area Expenses exceed the amount of the Tenant's Percentage of the actual Common
Area Expenses, Landlord shall refund the amount of the overpayments to Tenant.
If Tenant's payments for Tenant's Percentage of the Common Area Expenses are
less than the amount of the Tenant's Percentage of the actual Common Area
Expenses, Tenant shall pay to Landlord the amount of any deficiency within
thirty (30) days after written notice of the amount of such deficiency from
Landlord. The payments by Tenant of Tenant's Percentage of the Common Area
Expenses shall
3
<PAGE>
be prorated as of the Commencement Date and the expiration of the term of this
Lease.
Failure by Tenant to pay any of the amounts required to be paid under
this Section 7 shall constitute a default under the terms hereof in like manner
---------
as failure to pay rental when due.
8. NET LEASE
---------
This Lease is what is commonly called a "Net Lease", it being
understood that Landlord shall receive the rent set forth above free and clear
of any and all taxes, assessments, liens, charges or expenses in connection with
the ownership and operation of the Premises except as specifically set forth
herein. In addition to the rent reserved above Tenant shall pay to the parties
respectively entitled thereto all taxes, assessments, insurance premiums,
operating charges, maintenance charges, Common Area Expenses, and any other
charges, costs and expenses against the Premises which arise or may be
contemplated under any provisions of the Lease commencing upon the execution of
this Lease and thereafter during the term hereof. All of such charges, costs
and expenses shall constitute additional charges and upon the failure of Tenant
to pay any of such costs, charges or expenses, Landlord shall have the same
rights and remedies as otherwise provided in this Lease for the failure of
Tenant to pay rent.
9. LATE CHARGES
------------
It is agreed that Tenant shall be responsible for and shall pay
Landlord interest on all sums not paid within fifteen (15) days from the due
date thereof at ten percent (10%) per annum or the maximum rate allowed by law,
whichever is greater, from the due date to and including the date of payment.
In addition, Tenant shall pay Landlord a late charge equal to five percent (5%)
of the amount due as a fair and reasonable estimate of administrative,
processing and accounting costs incurred by Landlord as a result of Tenant's
failure to deliver any payment due hereunder within fifteen (15) days from the
due date thereof.
10. ACCEPTANCE OF PREMISES
----------------------
By execution of this Lease, Tenant accepts the Premises as being in
good and sanitary order, condition, and repair and accepts the building and
improvements on the demised Premises in the condition existing as of the
Commencement Date of the Lease. Landlord makes no representation, or warranty
with respect to the condition of the Premises or its fitness or availability for
any particular use, and Landlord shall not be liable for any latent or patent
defect therein.
4
<PAGE>
11. NO RIGHT TO HOLD OVER
---------------------
Tenant has no right to retain possession of the Premises or any part
thereof beyond the expiration or earlier termination of this Lease.
12. USES PROHIBITED AND WASTE
-------------------------
Tenant shall not commit, or suffer to be committed, any waste upon the
Premises, or any nuisance, or allow any sale by auction upon the Premises, or
allow the Premises to be used for any improper, unlawful or illegal purpose, or
place any loads upon the floor, walls, or ceiling in excess of the maximum
designed loads or which endanger the structure of the Premises. No waste
materials or refuse shall be dumped upon or permitted to remain upon any part of
the Premises outside of the building proper, nor shall articles of any nature be
stored upon or permitted to remain on any part of the Premises outside of the
building proper or other areas specifically designated therefor.
13. HAZARDOUS MATERIALS
-------------------
LANDLORD'S OBLIGATIONS:
----------------------
A. Upon the execution of this Lease and Tenant's entry onto the
Premises under this Lease, Landlord represents to Tenant that it shall have
delivered to Tenant the soil sample analysis for Hazardous Materials on the
Premises and Tenant represents to Landlord that it has received said soils
sample analysis.
B. If Hazardous Material is present on the Premises at the time of
Tenant's entry thereupon under this Lease, subject to subparagraph C of this
Section 13, Landlord shall be responsible for remediation, mitigation or removal
- ----------
of such Hazardous Materials as required by law and shall indemnify Tenant
against any suits, losses or damages because of pollution, seepage or
contamination caused by the Hazardous Materials.
C. Notwithstanding anything to the contrary in subparagraph B of
this Section 13, Tenant shall be responsible for any remediation, mitigation or
----------
removal required by law for any Hazardous Materials which were present prior to
Tenant's entry upon the Premises if the remediation, mitigation or removal is
required by law because of the negligent actions or omissions of Tenant which
affected or exposed such materials and such remediation, mitigation or removal
would not have been required but for the negligent act, error or omission of
Tenant.
D. Landlord agrees to indemnify, defend (using counsel reasonably
acceptable to Tenant) and hold harmless Tenant, its officers, employees and
agents from and against any claims, suits, damages, loss or costs (including
attorneys' fees
5
<PAGE>
and removal, clean-up or restoration costs) arising from Landlord's ownership,
possession or use of the Premises prior to the Commencement Date which results
in the presence of Hazardous Material on the Premises unless the Hazardous
Material is present as a result of the acts or omissions of Tenant, its agents,
or employees or as a result of Tenant's failure or neglect to perform in
accordance with the provisions of the Lease. This indemnification of Tenant by
Landlord includes without limitation costs incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present in the soil or
ground water on or under the Premises.
TENANT'S OBLIGATIONS:
--------------------
A. Tenant shall not cause or permit any Hazardous Materials to be
brought upon, kept or used in or about the Premises by Tenant, its agents,
employees, contractors or invitees, without prior written notice to Landlord.
Tenant shall not cause or permit any Hazardous Materials to be discharged into
the plumbing or sewage system of the Premises or onto the property underlying or
adjacent to the Premises. Tenant shall neutralize by filtering or taking other
action all Hazardous Materials generated by Tenant's activities on the Premises.
Tenant shall, at its sole cost and expense, comply with any and all rules,
regulations, codes, ordinances, statutes and other requirements of any federal,
state or local governmental authority respecting Hazardous Materials,
pollutions, harmful chemicals and other materials in connection with Tenant's
activities on or about the Premises. Tenant specifically agrees to comply with
any and all such requirements relating to the handling, use, storage and
disposal of Hazardous Materials and other materials which are considered by any
such governmental authority to be harmful, dangerous, toxic, flammable or
otherwise deserving of special care. Without limiting the foregoing, if the
presence of any Hazardous Material on the Premises, caused or permitted by
Tenant, results in any contamination of the Premises or the property under or
about the Premises, Tenant shall, at its sole cost and expense, promptly take
all actions as are necessary to return the Premises to the condition existing
prior to the introduction of any such Hazardous Material to the Premises;
provided that Landlord's approval of such actions shall first be obtained which
approval shall not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Premises. Tenant covenants that if it suspects pollution, seepage or
contamination of a Hazardous Material upon the Premises, it will promptly inform
Landlord of the condition.
B. If Tenant breaches the obligations stated above or if the
presence of Hazardous Material on the Premises caused or permitted by Tenant
results in contamination of the Premises, or
6
<PAGE>
if contamination of the Premises by Hazardous Materials otherwise occur for
which Tenant is liable under this Lease to Landlord for damage resulting
therefrom, then Tenant shall indemnify, defend (using counsel reasonably
acceptable to Landlord) and hold Landlord, its officers, employees and agents
harmless from any and all claims, judgments, damages, penalties, fines, costs,
liabilities or losses which arise during or after the Lease term as a result of
such contamination. This indemnification of Landlord by Tenant includes without
limitation costs incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work required by
any federal, state or local governmental agency or political subdivision because
of Hazardous Material present in the soil or ground water on or under the
Premises.
The obligations of Landlord and Tenant under this Section 13 shall
----------
survive the expiration of the Lease term.
14. TENANT IMPROVEMENTS
-------------------
A. Consent of Landlord. Tenant shall not be entitled to make any
-------------------
alterations, additions or improvements (collectively "Tenant Improvements") to
the Premises without Landlord's prior written consent.
Notwithstanding anything to the contrary herein, Tenant shall have no
obligation to repair damage to the Tenant Improvements caused by normal wear and
tear. Any Tenant Improvements including heating, lighting, electrical, air
conditioning, partitioning, drapery and carpeting installation made by Tenant,
which property by its installation has become an integral part of the building
shall be and become the property of Landlord.
B. Notice of Commencement and Completion. Tenant shall give
-------------------------------------
Landlord at least twenty (20) business days' prior written notice of the date of
commencement of construction of any Tenant Improvements to enable Landlord to
post and record a notice of non-responsibility on the Premises prior to the
commencement of such work. Within thirty (30) days after completion of
construction, Tenant shall furnish to Landlord copies of as-built drawings, or
other final plans and specifications and certificates of occupancy or finalized
building permits from the City of Sunnyvale for all Tenant Improvements. Tenant
covenants and agrees to assign to Landlord any and all guarantees or warranties
given for the work performed or materials used and/or installed as part of the
Tenant Improvements.
C. Inspection. Landlord or any of its agents may inspect the
----------
construction of the Tenant Improvements at any time.
7
<PAGE>
D. Liens. Tenant shall not permit to be enforced against the
-----
Premises any mechanics', materialmen's, contractors' or other liens arising
from, or any claims for damages growing out of, any work herein authorized or
otherwise arising (except from the actions of Landlord), and Tenant shall pay or
cause to be paid all of said liens and claims before any action is brought to
enforce the same against Tenant, Landlord or the Premises. Tenant agrees to
indemnify and hold Landlord and the Premises free and harmless from all
liability for any and all such liens and claims and all costs and expenses in
connection therewith. Landlord may require that Tenant provide to Landlord, at
Tenant's sole cost and expense, a lien and completion bond in an amount
acceptable to Landlord insuring completion of the Tenant Improvements. If any
claim of lien is recorded, Tenant shall pay such lien or record or deliver a
surety bond sufficient to release any such lien imposed within ten (10) days
after the earlier of the imposition of the lien or written request by Landlord.
If Tenant fails to remove such lien within the prescribed 10-day period, then
Landlord may do so at Tenant's expense, and Tenant shall reimburse Landlord for
all such expenses within five (5) days after written demand by Landlord. Such
reimbursement shall include all sums disbursed, incurred or deposited by
Landlord, including Landlord's costs, expenses and reasonable attorneys' fees
with interest thereon at the maximum interest rate permitted by law.
E. Removal. Tenant shall be under no obligation to remove, at the
-------
expiration or earlier termination of the Lease, any Tenant Improvements unless
Landlord notifies Tenant in writing at the time of the installation of said
Tenant Improvement that removal will be required.
15. CONDEMNATION
------------
If the whole or any part of the Premises shall be taken or condemned
by any competent authority for any public or quasipublic use or purpose, which
taking or condemnation shall render the Premises unfit for the use which Tenant
was utilizing the Premises immediately prior to the taking or condemnation, then
this Lease shall terminate on the date when the possession of the part so taken
shall be acquired for such use or purpose, and the rental payments made or
required to be made under this Lease by Tenant shall be abated and prorated as
of the date of possession by the condemnor arising from such taking.
16. DEFAULT
-------
If: (a) Tenant shall fail to pay any rent or other sum payable
hereunder when due and thereafter fail to pay for a period of ten (10) days
following receipt of notice of such failure; (b) Tenant shall fail to observe,
keep or perform any of the other terms, covenants, agreements or conditions
contained herein and on the part of Tenant to be observed or performed and
8
<PAGE>
such default continues for a period of thirty (30) days after written notice by
Landlord or beyond the time reasonably necessary for cure if such default is of
a nature to require more than thirty (30) days to remedy; (c) Tenant shall
become bankrupt or insolvent or make a transfer in fraud of creditors, or make
an assignment for the benefit of creditors, or take or have taken against Tenant
any proceedings of any kind under any provision of the Federal Bankruptcy Act or
under any other insolvency, bankruptcy or reorganization act and in the event
any such proceedings are involuntary, Tenant is not discharged from the same
within sixty (60) days thereafter; (d) a receiver is appointed for a substantial
part of the assets of Tenant; (e) Tenant shall abandon the Premises; or (f) this
Lease or any estate of Tenant hereunder shall be levied upon any attachment or
execution; then any such event shall constitute an event of default by Tenant.
Upon occurrence of any event of default by Tenant hereunder, Landlord may, at
its option and without any further notice or demand, in addition to any other
rights and remedies given hereunder or by law, do any of the following:
(i) Landlord shall have the right, so long as such default
continues, to terminate this Lease by giving to Tenant written notice of
such termination.
(ii) In the event of any such termination of this Lease,
Landlord may then or at any time thereafter, re-enter the Premises by any
lawful method available to Landlord and remove therefrom all persons and
property and again repossess and enjoy the Premises without prejudice to
any other remedies that Landlord may have by reason of Tenant's default or
of such termination.
(iii) In the event of any such termination of this Lease, and in
addition to any other rights and remedies Landlord may have, Landlord shall
have all the rights and remedies of a landlord provided by Section 1951.2
of the California Civil Code. The amount of damages which Landlord may
recover in event of such termination shall include, without limitation; (a)
the worth at the time of award (computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%)) of the amount by which the unpaid rent for
balance of the term after the time of award exceeds the amount of rental
loss that Tenant proves could be reasonably avoided; (b) any reasonable
legal expenses and other costs incurred by Landlord in effecting re-entry
or repossession of the Premises: (c) all reasonable costs incurred by
Landlord in restoring the Premises to good order and condition or in
remodeling, renovating or otherwise preparing the Premises for reletting;
and (d) all reasonable costs including, without limitation, any brokerage
commissions, incurred by Landlord in reletting the Premises.
9
<PAGE>
(iv) In the event Tenant breaches this Lease or abandons the
Premises and Landlord does not elect to terminate this Lease by reason of
such breach of abandonment, this Lease shall continue in full force and
effect, and in addition to any other rights and remedies Landlord may have,
Landlord shall have all of the rights and remedies of a landlord provided
by Section 1951.4 of the California Civil Code, including the right to
recover rent as it falls due. Without any obligation to do so, Landlord
may also relet the Premises as the agent of Tenant and for Tenant's account
for such term, which may extend beyond the term of this Lease, and upon
such other items and conditions as Landlord may deem appropriate. Landlord
may do all things reasonably necessary for such reletting, including
repair, remodeling and renovating of the Premises and Tenant shall
reimburse Landlord on demand for all reasonable costs incurred by Landlord
in connection therewith. In the event Landlord relets the Premises,
Landlord shall apply any sums received upon such reletting in the following
order of priority: (a) to the payment of any indebtedness other than rent
due hereunder from Tenant to Landlord, (b) to the payment of all reasonable
costs incurred by Landlord in restoring the Premises to good order and
repair, or in remodeling, renovating or otherwise preparing the Premises
for reletting, (c) to the payment of all reasonable costs (including,
without limitation, any brokerage commissions) incurred by Landlord in
reletting the Premises; (d) to the payment of rent due and unpaid
hereunder; (e) the balance, if any, to the payment of future rent as the
same may become due hereunder. Notwithstanding any determination by
Landlord not to elect to terminate this Lease, Landlord may at any time
elect to terminate this Lease for any previous breach or default hereunder
by Tenant which remains uncured or for any subsequent breach or default.
(v) After terminating this Lease, Landlord may remove any and
all personal property located in the Premises and place such personal
property in a public or private warehouse or elsewhere at the sole cost and
expense of Tenant. In the event that Tenant shall not immediately pay the
cost of storage of such personal property after the same has been stored
for a period of thirty (30) days or more, Landlord may sell to the extent
permitted by law, any or all thereof at a public or private sale in a
commercially reasonable manner and at such commercially reasonable times
and places as Landlord may deem proper, without notice to or demand upon
Tenant. To the extent that such sale is not permitted if such property is
owned by the U.S. government, Landlord shall dispose of the property in a
manner permitted by applicable law. Tenant waives all claims for damages
that may be caused by Landlord's removing or storing or selling the
personal property as herein provided, except where such damage is caused by
Landlord's negligence or
10
<PAGE>
willful misconduct, and Tenant shall indemnify and hold Landlord free and
harmless from and against any and all losses, costs and damages, including
without limitation all reasonable attorneys' fees and costs of Landlord
occasioned thereby.
17. WAIVER
------
No waiver of any breach or breaches of any provision, covenant, or
condition of this Lease shall be construed to be a waiver of any preceding or
succeeding breach of such provision, covenant or condition, or any other
provision, covenant or condition.
18. TIME
----
This section has been deleted by agreement of the parties.
19. MAINTENANCE AND REPAIR
----------------------
In addition to Landlord's obligation to maintain the Common Area as
provided in Section 6.A, Landlord at its cost shall maintain, in good condition,
-----------
the structural parts of the building that are a part of the Premises, which
structural parts include only the foundations, bearing and exterior walls
(excluding glass and doors) and structural members of the roof.
Tenant shall, during the term of this Lease, keep in good order,
condition and repair, the Premises and every part thereof, structural (except as
set forth above) or nonstructural. Tenant shall maintain a heating, ventilating
and air conditioning systems preventive maintenance contract with not less than
quarterly service, which shall be subject to the reasonable approval of Landlord
and paid for by Tenant and which shall provide for and include without
limitation replacement of filters, oiling and lubricating of machinery, parts
replacement, adjustment of drive belts, oil changes and other preventive
maintenance. If Tenant fails to perform Tenant's obligations under this
Section, Landlord may at Landlord's option after thirty (30) days' prior written
notice to Tenant (or sooner, at Landlord's discretion, in the event Landlord
determines that such repair is required on an emergency basis): (a) enter upon
the Premises subject to Tenant's applicable security requirements, and put the
same in good order, condition and repair, and the cost thereof together with
interest thereon at the greater of (i) ten (10) percent pier annum or (ii) the
lesser of (A) the maximum rate allowed by law or (B) five percent (5%) in excess
of the federal discount rate (which is the rate on advances to member banks
under Section 13 and 13(a) of the Federal Reserve Act) at the Federal Reserve
Bank of San Francisco on the 25th day of the month preceding the date the
repayment obligation arises (hereafter "Federal Discount Rate"), shall be due
and payable as
11
<PAGE>
additional rent to Landlord together with Tenant's next rental installment (or
within ten (10) days from receipt of notice if payments of monthly rental have
not yet commenced); (b) assume responsibility for maintenance and repair of the
Premises, or any part thereof, and require Tenant to reimburse Landlord on a
monthly basis for all expenses incurred thereby; and/or (c) exercise any and all
remedies available to Landlord pursuant to Section 16 herein.
----------
20. INSURANCE
---------
A. Insurance Coverage.
------------------
1. Landlord shall maintain: (i) insurance with respect to the
Premises against loss or damage by fire, lightning, windstorm, hail,
explosion, riot, riot attending a strike, civil commotion, aircraft,
vehicles, smoke and other risks from time to time included under "all risk"
policies, in an amount equal to at least one hundred percent (100%) of the
full replacement value of the Premises and in any event in an amount
sufficient to prevent Landlord or Tenant from becoming a co-insurer of any
partial loss under the applicable policies, which shall be written on a
replacement cost basis; (ii) explosion insurance in respect to any steam
and pressure boilers and machinery, including but not limited to air
conditioning units, power and lighting panels, and similar apparatus
located on the Premises in amounts subject to approval by Landlord.
Landlord may, at its option and at its cost, maintain insurance against
loss or damage to the Premises by earthquake and/or flood. Tenant will
reimburse Landlord for Landlord's annual cost of "all risk" insurance,
excluding Tenant's proportionate share of any cost attributable to coverage
for loss or damage due to earthquake or flood, within thirty (30) days of
receipt of an invoice for such costs from Landlord.
2. Tenant, at its expense, shall maintain with insurers approved by
Landlord, which approval shall not be unreasonably withheld: (i) insurance
with respect to Tenant's equipment, inventory, fixtures and personal
property located in, on or about the Premises against loss or damage by
fire, lightning, windstorm, hail, explosion, riot, riot attending a strike,
civil commotion, aircraft, vehicles, smoke and other risks from time to
time included under "all risk" policies, in an amount equal to at least one
hundred percent (100%) of the full replacement value thereof; (ii) public
liability and property damage insurance applicable to the Premises in an
amount of not less than Two Million Dollars ($2,000,000) combined single
limit which amount may be increased, if requested by Landlord, to the
amount customarily carried by owners and operators of similar properties
which insurance shall be primary not
12
<PAGE>
contributory to any other insurance available to Landlord; and (iii)
appropriate worker's compensation or other insurance against liability
arising from claims of workmen in respect of and during the period of any
work on the Premises. Tenant will comply with such other requirements as
Landlord or any mortgagee of Landlord may from time to time reasonably
request for the protection by insurance of their respective interests.
B. Policy Requirements. Any such insurance may, at Tenant's option,
-------------------
be provided through a blanket policy or policies provided the coverage and
limits of coverage applicable to the Premises are set forth on a certificate of
the insurer satisfactory to Landlord in form and substance.
C. Delivery of Policies. Upon the execution of this Lease and
--------------------
thereafter not less than thirty (30) days prior to the expiration date of any
policy delivered pursuant to this section, Tenant will deliver to the Landlord
the original of any policy or renewal policy, as the case may be, required by
this Lease, bearing notations evidencing the payment of premiums, except that,
in lieu of any such policy, Tenant may deliver a certificate of the insurer,
satisfactory to Landlord in substance and in form, as to the issuance and
effectiveness of such policy, and naming Landlord as Certificate Holder and Loss
Payee, as its interests may appear and the amount of coverage afforded thereby.
21. HOLD HARMLESS
-------------
Tenant agrees to indemnify and hold harmless Landlord against and from
any and all claims of damage or injury arising from Tenant's use of the Premises
or the conduct of its business on the Premises, or Tenant's failure to comply
with any of the terms or conditions of this Lease, except and only to the extent
that such claim or damage is caused by Landlord's negligence or willful
misconduct. Tenant as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons in, upon, or about
the Premises from any cause other than Landlord's negligence or willful
misconduct, and Tenant hereby waives all such claims against Landlord.
Landlord agrees to indemnify and hold harmless Tenant against and from
any and all claims of damage or injury to the extent arising from Landlord's
active negligence or willful misconduct or Landlord's failure to comply with any
of its obligations under the terms of this Lease.
22. RIGHT OF ENTRY
--------------
Landlord, or its agents, may at any reasonable time upon reasonable
advance notice enter in and upon the Premises to
13
<PAGE>
make repairs, post notices, inspect said Premises, or show the Premises to
prospective tenants or purchasers.
23. QUIET ENJOYMENT
---------------
Landlord covenants and agrees that Tenant, upon performing the
covenants, agreements and conditions of this Lease to be kept and performed by
Tenant, shall lawfully and quietly hold, occupy and enjoy said demised Premises
during the term of this Lease, without hindrance or molestation by Landlord, or
any person or persons claiming under Landlord.
24. SUBORDINATION
-------------
Tenant agrees that this Lease may, at the option of Landlord, be
subject and subordinate to any mortgage, deed of trust or other instrument of
security which has been or shall be placed on the land and/or building of which
the Premises form a part, and this subordination is hereby made effective
without any further act of Tenant. Tenant shall, at any time hereinafter, on
demand execute any instruments, releases, or other documents that may be
reasonably required by Landlord or any mortgagee, or trustor or beneficiary
under any deed of trust for the purpose of subjecting and subordinating this
Lease to the lien of any such mortgage, deed of trust or other instrument of
security, and the failure of Tenant to execute any such instruments, releases,
or documents shall constitute a default hereunder. Notwithstanding such
subordination, Tenant's right to quiet possession of the Premises shall not be
disturbed if Tenant is not in default and so long as Tenant shall pay the rent
and observe and perform all of the provisions of this Lease, unless this Lease
is otherwise terminated pursuant to its terms. Landlord agrees to request any
lender whose loan is currently secured by the Premises to agree to execute a
non-disturbance agreement in favor of Tenant.
25. SIGNS
-----
Tenant shall not place, nor permit to be placed, upon the exterior
walls, roof or any portion of the Premises, any signs, advertisements or notices
whatsoever without the prior written consent of Landlord, which consent shall
not be unreasonably withheld.
26. UTILITIES AND SERVICES
----------------------
Tenant shall pay the cost of all utilities, water, sewer rent,
garbage, telephone and other communication services rendered to and exclusively
metered at the Premises. Domestic water is not metered to the Premises but to
the Building and shall be paid by Tenant as a Common Area Expense. Landlord
shall determine the reasonable proportion of the domestic water costs
attributable to Tenant based on Landlord's knowledge of water costs to the
Building at those times when the Premises have been
14
<PAGE>
unoccupied and no domestic water costs were attributable to the Premises but
only to that part of the Building occupied by other tenants. Tenant shall also
be responsible for any janitorial and other services obtained by Tenant to be
supplied to or consumed on the Premises.
27. TAXES AND ASSESSMENTS
---------------------
Tenant shall pay all real and personal property taxes applicable to
the Premises during the term of this Lease. Tenant shall be responsible for any
increase in the real property taxes resulting from a reassessment of the value
of the Premises by the County of Santa Clara due to a change of ownership unless
such change of ownership is a transfer of the Premises to a "related entity" of
Landlord. "Related entity" means any entity which is controlled by Landlord or
any entity which controls Landlord. On or before April 1 and December 1 of each
calendar year during the term of this Lease, except as set forth herein, Tenant
shall pay to Landlord, as additional rent, Tenant's Percentage Share of the real
property taxes as set forth on the county's tax statement for the Premises.
Landlord shall give Tenant at least thirty (30) days' prior written notice of
the amount so due. If any such taxes shall cover any period of time prior to or
after the expiration of the term hereof, Tenant's share of such taxes shall be
equitably prorated as determined by Landlord to cover only the period of time
within the tax fiscal year during which this Lease shall be in effect. Tenant
shall pay to Landlord such prorated amount within thirty (30) days after written
notice from Landlord of the amount so due, and Landlord shall pay such taxes
directly to the county tax assessor. If Tenant shall fail to pay any such
taxes, Landlord shall have the right to (a) pay the same, in which case Tenant
shall immediately repay such amount to Landlord plus interest at the greater of
(i) ten percent (10%) or (ii) the lesser of (A) the maximum allowed by law or
(B) the Federal Discount Rate as defined in Section 19 from the due date to and
----------
including the date of payment; and/or (b) exercise any and all remedies
available to Landlord pursuant to Section 16 herein.
----------
As used herein, the term "real property tax" shall include any form of
assessment, license fee, rent tax, levy, penalty, taxes based on vehicles
utilizing parking areas in the Premises, or taxes (other than income, franchise,
transfer, inheritance or estate taxes) imposed by any authority having the
direct or indirect power to tax, including any city, county, state or Federal
Government, or any school, agricultural, lighting, drainage or other improvement
district thereof, as against any legal or equitable interest of Landlord in the
Premises or in the real property of which the Premises are a part, as against
Landlord's right to rent or other income therefrom. If any assessment is
payable in installments, Landlord agrees that Tenant shall be responsible only
for those installments coming due during the term of the Lease.
15
<PAGE>
Nothing herein shall prevent Tenant from contesting and Tenant may
contest, and institute all proceedings reasonably necessary to contest, the
validity and amount of any property tax provided Tenant protects the Premises
and the interest of Landlord and the beneficiary of a deed of trust upon the
Premises against any lien upon the Premises by a surety bond in an amount equal
to one and one-half (1 1/2) times the amount contested, issued by an insurance
company acceptable to Landlord and which indemnifies and saves Landlord harmless
from all loss and expense, including attorneys' fees, arising from any such
contest.
28. ASSIGNMENT AND SUBLETTING
-------------------------
Tenant shall not assign this Lease or sublet the Premises, either in
whole or in part, nor mortgage or otherwise hypothecate the leasehold interest
of Tenant, or any part or parts thereof without first obtaining in each and
every instance, Landlord's written consent, which consent Landlord may withhold
in its sole and absolute discretion. Tenant may, without obtaining Landlord's
consent (a) assign or transfer this Lease to any successor corporation, provided
all or a majority of the assets of Tenant are transferred to the successor
corporation, or to a parent corporation which wholly-owns Tenant, a subsidiary
wholly-owned by such parent, or a subsidiary wholly-owned by Tenant, provided
that any such successor corporation or assignee assumes Tenant's obligations
hereunder, or (b) sublet the Premises to any of the entities referenced in
Section 28(a).
- -------------
No sublease by Tenant shall relieve Tenant of any of its obligations
under this Lease or reduce, diminish or impair such obligations. No assignment
by Tenant shall relieve Tenant of any of its obligations under this Lease or
reduce, diminish or impair such obligations.
29. DAMAGE TO OR DESTRUCTION OF PREMISES
------------------------------------
A. Partial or Total Damage - Defined. The term "Total Damage" when
---------------------------------
used herein shall mean damage or destruction to the Premises to the extent that
the cost of repair is fifty percent (50%) or more of the replacement cost of the
entire Premises at the time of such damage or destruction.
The term "Partial Damage" when used herein shall mean damage to the
Premises to the extent that the cost of repair is less than fifty percent (50%)
of the replacement cost of the entire Premises at the time of such damage.
B. Partial or Total Damage - Insured. In the event of Total or
---------------------------------
Partial Damage to the Premises from a casualty covered under an insurance policy
required to be maintained pursuant to Section 20 hereof, Landlord shall
----------
immediately commence such repair or restoration if such repair or restoration
16
<PAGE>
can be completed within thirty (30) days following the date of such damage or
destruction.
To the extent that the insurance proceeds are inadequate to pay in
full the cost of repair or restoration of the Premises, or if insurance proceeds
are not available due to Tenant's default hereunder, Tenant shall be responsible
for all such costs in excess of any applicable insurance proceeds received by
Landlord and all such sums shall be paid by Tenant to Landlord upon demand prior
to Landlord's use of any applicable insurance proceeds.
C. Partial or Total Damage - Uninsured. In the event of Total or
-----------------------------------
Partial Damage to the Premises from a casualty not covered under an insurance
policy required to be maintained pursuant to Section 20 hereof, Landlord may
----------
elect to repair such damage and restore the Premises if such reparation or
restoration can be completed within thirty (30) days at Landlord's sole cost,
and this Lease shall continue in full force and effect or Landlord may give
notice to Tenant within thirty (30) days after the date of occurrence of such
damage, that it elects not to repair or restore the Premises in which event
Tenant may elect to repair such damage and restore the Premises at its sole
cost. If Tenant does not repair the Premises at its sole cost, this Lease will
be deemed terminated as of the date of occurrence of the Partial or Total
Damage.
D. Abatement and Adjustment of Rent. If Partial or Total Damage
--------------------------------
occurs and Landlord or Tenant repairs or restores the Premises pursuant to the
provisions of this Section 29, the Rent, Common Area Expenses and other charges
----------
payable by Tenant hereunder for the period during which such damage, repair or
restoration continues shall be paid as due.
Upon termination of this Lease pursuant to this Section, a pro rata
adjustment of rent, taxes, insurance and other charges payable hereunder (based
upon a thirty (30) day month) shall be made.
30. ESTOPPEL CERTIFICATE
--------------------
Tenant shall, at any time and from time to time upon request by
Landlord, execute, acknowledge and deliver to Landlord a statement in writing
certifying that (a) this Lease is unmodified and in full force and effect (or if
there have been modifications that the same is in full force and effect as
modified and identifying the modifications); (b) the dates to which the rent and
other charges have been paid; (c) the term of the Lease and any option to extend
the term; (d) the amount of any security deposit; (e) so far as the person
making the certificate knows, Landlord is not in default under any provisions of
this Lease; and (f) any other matters as may be reasonably requested by
Landlord. It is intended that any such
17
<PAGE>
statement may be relied upon by any person proposing to acquire Landlord's
interest in this Lease or any prospective mortgage of, or assignee of any
mortgage upon, such interest. Notwithstanding the time periods set forth in
Section 16 of this Lease, Tenant shall be in default under the terms of this
- ----------
Lease if Tenant fails to deliver to Landlord the statement required by this
section within ten (10) days of receipt by Tenant of written request for such
statement.
31. REGULATORY COMPLIANCE
---------------------
Tenant agrees to comply with all Legal Requirements including, but not
limited to those dealing with Hazardous Materials and Insurance Requirements
related to Tenant's use, occupancy or possession of the Premises including the
making of all necessary alterations or repairs to the Premises in order for said
Premises to comply thereunder.
32. OPTION TO EXTEND
----------------
Provided that Tenant is not in default under any of the terms of this
Lease at the date on which the options granted herein are exercised or at the
expiration of the original term or extended term, as appropriate, Tenant shall
have the option to extend this Lease for three (3) successive periods of one
month each, subject to Landlord's rights as set forth in subsection 33.A. Each
---------------
such period of one month is referred to herein as the "Option Term". The
options to extend shall be exercised by giving Landlord written notice of
Tenant's irrevocable exercise of the Option Term not less than thirty (30) days
prior to the expiration of the original term or extended term as applicable
("Tenant's Notice"). All terms and conditions of this Lease shall apply to the
option Terms.
33. LEASING RIGHTS
--------------
A. Landlord's Right of Refusal. Landlord shall have the right to
---------------------------
refuse Tenant's exercise of any Option Term if Landlord has identified another
tenant (the "Long-Term Tenant") to lease the Building for a term of three (3)
years or more and has negotiated with such Long-Term Tenant to such extent as to
reasonably anticipate entering into a lease with the Long-Term Tenant.
B. Tenant's Right to Lease. If Tenant is not in default under any
-----------------------
of the terms of this Lease at the time Landlord identifies the Long-Term Tenant,
Landlord shall offer to Tenant a first right to lease the Premises on
substantially the same terms upon which Landlord is prepared to lease the
Premises to the Long-Term Tenant, other than those terms which would normally
apply only to a new rather than an existing tenant.
18
<PAGE>
Tenant shall have five (5) business days after receipt of written
notice of the terms upon which Landlord is prepared to lease the Premises to the
Long-Term Tenant to accept such terms in writing. Tenant's failure to respond
to Landlord's notice within said five (5) business days shall be deemed
rejection of the terms by Tenant, and Landlord may elect to proceed to lease the
available space to the Long-Term Tenant, for a term to commence following the
expiration of Tenant's then existing original term of Option Term.
34. BROKER'S COMMISSION
-------------------
Landlord and Tenant warrant and represent to each other that they have
had no dealings with any real estate brokers or agents in connection with the
negotiation of this Lease, except for CPS Realty Group, represented by James
Regan and Greg Davies.
Tenant agrees to indemnify and hold Landlord harmless from any cost,
expense or liability (including reasonable attorneys' fees in connection
therewith) for any compensation, commissions or charges claimed by any real
estate broker or agent, other than those specifically named herein, employed or
claiming to represent or to have been employed by Tenant in connection with the
negotiation of this Lease or any extension thereof.
Landlord agrees to indemnify and hold Tenant harmless from any cost,
expense or liability (including reasonable attorneys' fees in connection
therewith) for any compensation, commissions or charges claimed by any real
estate broker or agent, other than those specifically named herein, employed or
claiming to represent or to have been employed by Landlord in connection with
the negotiation of this Lease or any extension thereof.
The foregoing shall survive the termination of this Lease.
35. SURRENDER OF PREMISES
---------------------
Tenant, at the expiration of this Lease, shall deliver up the Premises
in good condition and repair (damage by acts of God, fire, and normal wear and
tear excepted), with all interior walls cleaned and painted, the air
conditioning and heating equipment serviced by Tenant and, if necessary, a
reputable serviceman and with all floors cleaned or waxed, together with
alterations, additions, and improvements which may have been made in, to, or on
the Premises. If the Premises are not surrendered at the end of the term or
sooner termination of this Lease, Tenant shall indemnify Landlord against loss
or liability resulting from delay by Tenant in so surrendering the Premises
including, without limitation, any claims made by any succeeding Tenant founded
on such delay.
19
<PAGE>
36. INTERPRETATION
--------------
This Lease shall be construed according to the laws of the State of
California, but the language in all parts of this Lease shall in all cases be
construed simply according to its fair meaning and not strictly for or against
Landlord or Tenant. Wherever the context so requires, words used herein in the
masculine gender will be deemed to include the feminine and neuter, and the
words used herein in the singular shall be deemed to include the plural.
37. DEFINITIONS
-----------
The term "Insurance Requirements" when used herein shall mean all
terms of an insurance policy required to be carried by Tenant pursuant to
Section 20 covering or applicable to the Premises or any part thereof, all
- ----------
requirements of the issuer of any such policy, and all orders, rules,
regulations and other requirements of the National Board of Fire Underwriters
(or any other body exercising similar functions) applicable to or affecting the
Premises or any part thereof or any use or condition of the Premises or any part
thereof.
The term "Legal Requirements," when used herein shall mean acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions and requirements of all
governments, departments, commissions, boards, courts, authorities, agencies,
officials and officers, foreseen or unforeseen, ordinary or extraordinary, which
now or at any time hereafter may be applicable to the Premises or any part
thereof or any of the adjoining sidewalks, curbs, streets or ways, or any use or
condition of the Premises or any part thereof.
The term "Hazardous Material" when used herein shall mean any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of California or the United States
Government. The term "Hazardous Material" includes, without limitation, any
material or substance which is (i) defined as a "hazardous waste," "extremely
hazardous waste" or "restricted hazardous waste" under Sections 25115, 25117 or
25122.7, or listed pursuant to Section 25140, of the California Health and
Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii)
defined as a "hazardous substance" under Section 25316 of the California Health
and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous
Substance Account Act), (iii) defined as a "hazardous material," "hazardous
substance," or "hazardous waste" under Section 25501 of the California Health
and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response
Plans and Inventory), (iv) defined as a "hazardous substance" under Section
25281 of the California Health and Safety Code, Division 20, Chapter 6.7
(Underground
20
<PAGE>
Storage of Hazardous Substance), (v) petroleum, (vi) asbestos, (vii) listed
under Article 9 or defined as hazardous or extremely hazardous pursuant to
Article 11 of Title 22 of the California Administrative Code, Division 4,
Chapter 20, (viii) designated as a "hazardous substance" pursuant to Section 311
of the Federal Water Pollution Control Act (33 U.S.C. (S) 1317), (ix) defined as
a "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq. (42 U.S.C. (S) 6903),
or (x) defined as a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S) 9601 et seq. (42 U.S.C. (S) 9601).
38. BINDING EFFECT
--------------
This Lease shall bind and inure to the benefit of the parties hereto
and their respective heirs, representatives, successors or assigns (provided
that this Lease shall not inure to the benefit of any assignee pursuant to an
assignment which is not in compliance with the terms of this Lease relating to
assignment and subletting).
39. COVENANTS, CONDITIONS AND RESTRICTIONS
--------------------------------------
Tenant acknowledges that it has read and understood the Covenants,
Conditions and Restrictions recorded in Book 9640, Page 443, and as assigned by
instrument recorded in Book C583, Page 685, of the Official Records of Santa
Clara County, California and will abide by the provisions thereof as they apply
to the use and occupancy of the Premises. Landlord has obtained a consent from
the Declarant under said Declarations to the use contemplated under this Lease.
40. NOTICES
-------
All notices to be given or served hereunder, whether pursuant to the
terms of this Lease or any provisions of law, shall be given or served in
writing at the address stated herein or to such persons or at such places as
Landlord or Tenant may designate in writing. Any such notice sent by United
States registered mail, postage prepaid shall be deemed delivered and received
seventy-two (72) hours following deposit in the U.S. Mail; any such notice sent
in any other manner shall be deemed received upon actual receipt.
TO LANDLORD AT: c/o Strutt & Parker California
4921 Birch Street, Suite 100
Newport Beach, California 92660
TO TENANT AT: 495 Java Drive
Sunnyvale, California 94088-3510
Attention: General Services Manager
21
<PAGE>
WITH A COPY TO: Walter E. Vashak
Senior Counsel
Avionics and Surveillance Group
One Rancho Carmel
RC1/3065
San Diego, California 92127
41. ENTIRE AGREEMENT
----------------
This Lease is the entire agreement between the parties and there are
no agreements or representations between the parties except as expressed herein.
42. ATTORNEYS' FEES
---------------
In the event any action shall be brought by either party hereto
against the other regarding terms and conditions of this Lease, the prevailing
party shall recover a reasonable sum as attorneys' fees and costs.
43. COUNTERPARTS
------------
This Lease may be signed in counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
LANDLORD TENANT
WESTMINSTER MANAGEMENT ESL INCORPORATED,
CORPORATION, a Canadian a California corporation
corporation
By: illegible By: illegible
-------------------- -----------------
Its: President & CEO Its: President
--------------- ----------------
By:___________________
Its:______________
22
<PAGE>
BORREGAS AVENUE
[DIAGRAM]
EXHIBIT A
<PAGE>
BORREGAS AVENUE
[DIAGRAM]
EXHIBIT B
<PAGE>
FIRST AMENDMENT TO LEASE
BETWEEN
WESTMINSTER MANAGEMENT CORPORATION
AND
ESL, INC.
This First Amendment to Lease (the "First Amendment") is made and
entered into as of this 15 day of April, 1993 by and between WESTMINSTER
MANAGEMENT CORPORATION, a Canadian corporation ("Landlord") and ESL, INC., a
California corporation ("Tenant").
RECITALS
A. On or about June 30, 1992, Landlord and Tenant entered into a
Lease (the "Lease") of those certain premises commonly known as 207 E. Java
Drive, Sunnyvale, California ("the Premises"') as more particularly described
therein.
B. The Lease was for a term of six (6) months commencing July 15,
1992. The Tenant was provided an option to extend the Lease for three (3)
successive periods of one month each.
C. In lieu of Tenant exercising its option to extend the term a
month at a time for a total of three (3) months, Landlord and Tenant agreed in a
letter agreement dated January 11, 1993 and signed by both parties to extend the
Lease term from January 15, 1993 through April 30, 1993 on all the same terms
and conditions as the original term of the Lease.
D. Tenant now wishes to extend the Lease term for an additional two
months ending June 30, 1993. Landlord and Tenant have agreed the rent payable
under the Lease should be increased for said two additional months.
E. Landlord and Tenant agree to amend the Lease in order to evidence
the agreement of Landlord and Tenant as to the extension of the term of the
Lease through April 30, 1993, to further extend the term through June 30, 1993
and to establish the rent to be paid by the Tenant for the Premises during the
extended term.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, the parties hereto
agree to amend the Lease as follows:
1. Expiration Date. Section 4 of the Lease is hereby deleted and
----------------
the following substituted therefore:
The term of this Lease shall commence July 15, 1992 ("Commencement Date")
and end June 30, 1993 ("Expiration Date").
<PAGE>
2. Rent. The first paragraph of Section 5 of the Lease is hereby
-----
deleted and the following substituted therefore:
Tenant shall pay to Landlord, in advance without deduction or offset, on
the first day of each month of the extended term of the Lease, rental for
the Premises in monthly installments as follows:
July 15, 1992 through April 30, 1993 $8,000.00
May 1, 1993 through June 30, 1993 $9,500.00
3. Confirmation of Lease. As amended hereby, the, Lease shall
----------------------
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment To Lease as of the day and year first above written.
"LANDLORD" "TENANT"
Westminster Management Corporation, ESL Corporation,
a Canadian corporation a California corporation
By: /s/ David Greenwood By: /s/ Arthur L. Money
------------------- --------------------
David Greenwood Arthur L. Money
Its: President Its: President
<PAGE>
SECOND AMENDMENT TO LEASE
BETWEEN
WESTMINSTER MANAGEMENT CORPORATION
AND
ESL, INCORPORATED
This Second Amendment to Lease (the "Second Amendment") is made and
entered into as of this 30th day of June, 1993 by and between WESTMINSTER
MANAGEMENT CORPORATION, a Canadian corporation ("Landlord") and ESL, INC., a
California corporation ("Tenant").
RECITALS
A. On or about June 30, 1993, Landlord and Tenant entered into a
Lease of those certain premises commonly known as 207 E. Java Drive, Sunnyvale,
California (the "Premises"), as more particularly described therein (the
"Initial Lease").
B. The Premises are part of a larger building of approximately
34,440 square feet known as 1308 Borregas Drive/207 E. Java Drive, Sunnyvale,
California (the "Building"). Cermetek Microelectronics, Inc. ("Cermetek")
occupies that part of the Building known as 1308 Borregas Drive (the "Borregas
Premises") under a Lease which expires February 15, 1995 (the "Cermetek Lease").
C. The Initial Lease was originally for a term of six (6) months
commencing July 15, 1992. The Term was extended through June 30, 1993 by that
certain First Amendment To Lease between Landlord and Tenant, dated April 15,
1993 (the "First Amendment"). The Initial Lease dated June 30, 1992 and the
First Amendment together are hereinafter referred to as the "Lease."
D. Landlord and Tenant now wish to extend the term of the Lease for
an additional twenty (20) months commencing July 1, 1993 and ending February 15,
1995.
E. Tenant wishes to make certain alterations to the Premises and to
install certain improvements as described in Exhibit A hereto (the
"Improvements"), and Landlord and Tenant agree each shall pay a portion of the
cost of such Improvements.
F. Tenant wishes to be granted, and Landlord wishes to grant to
Tenant, the right to lease the Borregas Premises if the Cermetek Lease is
terminated prior to February 15, 1995.
G. Tenant also wishes to be granted, and Landlord wishes to grant to
Tenant, the option to lease the entire Building upon the expiration of the
Cermetek Lease on February 15, 1995.
<PAGE>
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, the parties hereto
agree to amend the Lease as follows:
1. Expiration Date. Section 4 of the Lease is hereby deleted and
---------------
the following substituted therefore:
The term of this Lease shall commence July 15, 1992 ("Commencement Date")
and end June 30, 1996 ("Expiration Date")
2. Improvements. The Tenant shall be entitled to make the
------------
Improvements described in Exhibit A hereto pursuant and subject to the terms and
conditions set forth in Section 14 of the Lease.
Prior to obtaining Landlord's consent to the Improvements, Tenant
shall provide Landlord with detailed drawings and specifications of such
Improvements for Landlord's approval. Following such approval, material
revisions to the approved plans and specifications shall be made by Tenant
unless first submitted to and approved by Landlord. Construction of the
Improvements shall be in compliance with all recorded covenants affecting the
Building and all federal, state and municipal laws, codes, ordinances, rules and
regulations pertaining to the Property. The construction shall be performed in
compliance with federal and state health and safety laws and regulations.
Upon presentation by Tenant to Landlord of: a) a certificate of
occupancy, or finalized building permit record, from the City of Sunnyvale for
the Improvements; b) certification from Tenant's contractor, or other person
selected by Landlord, that construction of the Improvements has been completed
in compliance with the plans and specifications approved by Landlord; and c)
evidence that thirty (30) days have passed since the filing by Tenant of a
notice of completion has been filed with the office of the Recorder of the
County of Santa Clara, Landlord shall pay to Tenant Ten Thousand and 00/100
Dollars ($10,000) as its share of the cost of the Improvements. All other costs
of the Improvements shall be at the expense of Tenant.
3. Right to Lease. Should the Cermetek Lease be terminated and the
--------------
Borregas Premises be vacated by Cermetek prior to February 15, 1995, Tenant
shall have the right to lease the Borregas Premises for the term remaining under
the Cermetek Lease. Landlord shall provide the Borregas Premises to Tenant in
clean and sanitary condition with all plumbing, electrical and HVAC systems in
operating condition after Landlord has had a reasonable period of time following
vacation of the Borregas Premises by Cermetek to assure the Borregas Premises
are in such condition. Landlord shall make no representation or warranty with
respect to the condition of the Borregas Premises or its fitness or availability
for any
<PAGE>
particular use, and Landlord shall not be liable for any latent or patent defect
therein.
From the date the Borregas Premises are made available to Tenant,
Tenant shall assume the obligations of Tenant under the Cermetek Lease for
payment to Landlord for the Cermetek Premises of monthly rent in the amount of
Twelve Thousand Three Hundred Sixty-One and 50/100 Dollars ($12,361.50) and
53.6% of Common Area Expenses as additional rent in a monthly amount of Five
Hundred Seven Dollars and 00/100 ($507), subject to annual adjustment as set
forth in Section 7 of the Lease. All other obligations of Landlord and Tenant
with regard to the Borregas Premises shall be as set forth in this Lease.
If Tenant desires occupancy of the Borregas Premises prior to February
15, 1995 and the Cermetek Lease has not been terminated, Tenant shall give
written notice of its desire to lease the Borregas Premises to Landlord and
Landlord shall use reasonable effort to terminate the Cermetek Lease and remove
Cermetek from the Borregas Premises. If Cermetek terminates the Cermetek Lease
after Tenant's request, Tenant shall be obligated to lease the Borregas Premises
on the terms set forth in this Section 3.
4. Option to Extend. Whether Tenant has or has not leased the
----------------
Borregas Premises as of February 15, 1995, and provided that Tenant is not in
default of any terms of this Lease, Tenant (but not a sublessee or assignee of
Tenant unless a successor corporation as described in Section 28 of the Lease)
shall have the option to lease the Building and Property for a term of six and
one half (6 1/2) years (the "Option Term"). The Option Term shall commence as
soon as the Borregas Premises are vacated by Cermetek and are prepared for
occupancy by Tenant. The option shall be exercised by giving Landlord written
notice of Tenant's irrevocable exercise of the Option Term not later than May
15, 1994 nor sooner than February 15, 1994 ("Tenant's Notice").
All terms and conditions of this Lease shall apply to the Option Term
except that the initial monthly rent payable pursuant to Section 5 hereof shall
be the Fair Market Rent as hereinafter defined or Twenty-One Thousand Eight
Hundred Sixty-Two Dollars and 00/100 ($21,862) whichever is greater. For all
purposes under the Lease during the Option Term, the Premises shall consist of
the entire "Property," as defined in the Lease,and only those portions of the
"Common Area," as defined in the Lease, which are outside the Building shall be
deemed to be Common Area during the Option Term. All areas of the Building
defined as part of the Common Area in the Lease shall be part of the Premises
and Tenant shall be obligated to maintain such Premises in the manner set forth
in Section 19 of the Lease.
Fair Market Rent is to be determined in accordance with this paragraph
4. Fair Market Rent shall be the fair rental value of the Building as compared
to the fair rental
<PAGE>
value being obtained under new leases at the time Landlord receives Tenant's
Notice on comparable buildings for leases with a term of six years or more and
shall include periodic increases in rent based either on an established
schedule, increases in the consumer price index or periodic reviews to market,
whichever measure is then the custom between Landlords and Tenants in the Santa
Clara Valley. The Fair Market Rent and method of determining the periodic
increases shall be determined by agreement of Landlord and Tenant within thirty
(30) days of receipt by Landlord of Tenant's Notice, or in the absence of such
agreement, by a real estate appraiser with at least five years full time
appraisal experience in the area where the Building is located who shall be
selected by Landlord with reasonable approval of Tenant within forty-five (45)
days after receipt by Landlord of Tenant's notice. Said appraiser shall make a
determination which shall be binding on each party as soon as reasonably
possible after such appraiser's selection.
Brokers Commission. Section 34 of the Lease is hereby amended to
-------------------
provide that no brokerage commission is due to any real estate brokers or agents
in connection with the negotiation of this Second Amendment.
6. Confirmation of Lease. As amended hereby, the Lease shall
---------------------
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment To Lease as of the day and year first above written.
"LANDLORD" "TENANT"
Westminster Management Corporation, ESL Corporation,
a Canadian corporation a California corporation
By: /s/ David Greenwood By: /s/ Arthur L. Money
-------------------- --------------------
David Greenwood Arthur L. Money
Its: President Its: President
<PAGE>
IMPROVEMENTS
1. Completion of T-Bar ceiling and installation of fluorescent lights in
the workstation area (rear two thirds of facility). . . .rework of
HVAC ducting would be required to facilitate air flow to workstation
areas.
2. Carpeting throughout workstation area (rear two thirds of facility).
3. Installation of 10 new offices.
4. Repair/upgrade of HVAC units.
5. Repair cabinetry and upgrade condition of cafeteria.
EXHIBIT A
<PAGE>
THIRD AMENDMENT TO LEASE
BETWEEN
WESTMINSTER MANAGEMENT CORPORATION
AND
ESL, INCORPORATION
This Third Amendment to Lease (the "Third Amendment") is made and
entered into as of this 23rd day of November, 1994 by and between WESTMINSTER
MANAGEMENT CORPORATION, a Canadian corporation ("Landlord") and ESL, INC., a
California corporation ("Tenant").
RECITALS
A. On or about June 30, 1992, Landlord and Tenant entered into a
Lease of those certain premises commonly known as 207 E. Java Drive, Sunnyvale,
California (the "Premises"), as more particularly described therein (the
"Initial Lease").
B. The Premises are part of a larger building of approximately
34,440 square feet known as 1308 Borregas Drive/207 E. Java Drive, Sunnyvale,
California (the "Building").
C. The Initial Lease was originally for a term of six (6) months
commencing July 15, 1992. The term of the Lease was extended through June 30,
1993 by that certain First Amendment to Lease between Westminster Management
Corporation and ESL Incorporated, dated as of April 15, 1993 (the "First
Amendment") and was further extended through Febraury 15, 1995 by that certain
Amentment to Lease between Westminster Management Corporation and ESL
Incorporated, dated as of June 30, 1994 (the Second Amendment).
D. Landlord and Tenant now wish to clarify certain changes made to
correct typing errors in the Second Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. For the purpose of clarifying the date of the Second Amendment,
the Second Amendment is hereby stated to be dated as of June 30, 1994.
2. For the purpose of clarifying paragraph A. of the Second
Amendment, the date of the Lease is June 30, 1992.
<PAGE>
3. For the purpose of clarifying paragraph 1. Expiration Date of the
Second Amendmment, the Expiration Date of the Lease if February 15, 1995.
4. As clarified and amended hereby, the Lease shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as of the day and year first above written.
"LANDLORD" "TENANT"
Westminster Management Corporation, ESL Corporation,
a Canadian corporation a California corporation
By: /s/ David Greenwood By: /s/ Arthur L. Money
-------------------- --------------------
David Greenwood Arthur L. Money
Its: President Its: President
<PAGE>
EXHIBIT "B"
Consent to Assignment and Assumption Agreement
----------------------------------------------
Westminster Management Corporation, a Canadian corporation ("Lessor"),
hereby fully and without restriction: (a) consents to and approves the
assignment of rights and assumption of obligations under the Lease as set forth
in the foregoing Assignment and Assumption Agreement ("Agreement") and (b)
acknowledges that Lessor has received the notice required by Section 28 of the
Lease with respect to the transfer of the premises covered by the Lease and that
this consent shall constitute the prior written consent of Lessor as required by
and contemplated in Section 28 of the Lease. Lessor hereby represents and
warrants to PhonePrint, Inc., a Delaware corporation ("PhonePrint"), that the
Lease remains in full force and effect, that neither ESL nor Lessor is in any
material default thereunder and no event has occurred, that with the lapse of
time or giving of notice or both: (i) will constitute a material breach or
material default thereunder by ESL or Lessor or cause or permit acceleration of
any obligation of ESL or Lessor or (ii) would materially and adversely effect
any of the rights or obligations of ESL (or any successor thereto including
PhonePrint) under the Lease. Further, Lessor hereby represents and warrants to
PhonePrint that as of the Closing Date, no rents or other amounts are owed to
Lessor under the Lease by ESL nor are there any other financial obligations owed
by ESL to Lessor thereunder as of the Closing Date referred to under the
Purchase Agreement.
"LESSOR"
WESTMINISTER MANAGEMENT CORPORATION
By: /s/ illegible
--------------------------------
Title: President
-----------------------------
B-1
<PAGE>
EXHIBIT D
---------
AirTouch Assignment
-------------------
D-1
<PAGE>
EXHIBIT 10.5
AIRTOUCH ASSIGNMENT AGREEMENT
-----------------------------
This Assignment Agreement (the "Agreement") is entered into as of December
14, 1994, by and between ESL Incorporated, a California corporation ("ESL"), and
PhonePrint, Inc., a Delaware corporation ("PhonePrint"), with reference to the
following facts:
WHEREAS, ESL is a party to that certain Development and License Agreement
by and between AirTouch Communications Incorporated, formerly known as PacTel
Corporation ("AirTouch") and ESL dated as of October 4, 1993, as amended by
First Amendment to the Development and License Agreement dated October 23, 1993
(collectively, the "AirTouch Agreement"), a copy of which is attached hereto as
Exhibit A.
- ---------
WHEREAS, ESL is willing to grant to PhonePrint and PhonePrint desires to
acquire from ESL, all of ESL's rights and obligations under the AirTouch
Agreement.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions set forth below, the parties hereto agree as follows:
1. ASSIGNMENT OF RIGHTS AND OBLIGATIONS. ESL hereby assigns to
------------------------------------
PhonePrint, and PhonePrint hereby accepts, all of ESL's rights and obligations
under the AirTouch Agreement. The parties agree that this instrument
constitutes a present assignment of the AirTouch Agreement, but is subject to
the continuing indemnification and other obligations contained in that certain
Asset Purchase Agreement between the parties of even date herewith.
2. OWNERSHIP. ESL represents and warrants that ESL is the sole and
---------
exclusive owner of all of such rights.
3. COVENANTS. ESL covenants that ESL has full right to convey the rights
---------
herein assigned, and that ESL has not executed and will not execute any
agreement in conflict herewith.
4. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one in the same instrument.
5. GOVERNING LAW. This Agreement shall be governed by and construed under
-------------
the internal laws of the State of California, without regard to any rules of
conflicts of law applicable to agreements made and to be performed in such state
by and among residents of such state.
<PAGE>
6. FURTHER ASSURANCES. Each of the parties hereto shall execute and
------------------
deliver all additional documents and shall do any and all acts and things
reasonably required in connection with the performance of the obligations
undertaken in the Agreement and to effectuate in good faith the intent of the
parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PHONEPRINT, INC., ESL INCORPORATED,
a Delaware corporation a California corporation
By: /s/ illegible By: /s/ illegible
------------- -------------------------
Title: Chairman Title: Senior Vice President
---------- --------------------
[COUNTERPART SIGNATURE PAGE TO
ASSIGNMENT AND ASSUMPTION AGREEMENT]
<PAGE>
EXHIBIT A
AGREEMENT WITH AIRTOUCH
-----------------------
A-1
<PAGE>
DEVELOPMENT AND LICENSE AGREEMENT
This Development and License Agreement (the "Agreement") is made and
effective as of the later date signed below (the "Effective Date") by and
between ESL Incorporated, a California corporation and a TRW Company with
offices located at 495 Java Drive, Sunnyvale, California 94088-3510 ("ESL"), and
PacTel Corporation, a California corporation with offices located at 2999 Oak
Road, Walnut Creek, California 94596 ("PacTel")
WITNESSETH:
WHEREAS, ESL wishes to develop, and PacTel wishes to have developed, the
"Licensed Products," as that term is defined below; and
WHEREAS, PacTel has expertise in cellular telephony, including ***
*** , alpha and beta testing, field test facilities, and
FCC and regulatory requirements, such as experimental licenses; and
WHEREAS, ESL has expertise in emitter recognition and identification
technology including, but not limited to, *** , developing
and maintaining a database of authorized and unauthorized emitter security
patterns, emitter recognition, and enabling cellular systems to determine
whether to deliver services depending on certain ***
levels; and
WHEREAS, ESL intends to manufacture, have manufactured, use, market, sell
and distribute the Licensed Products in accordance with the terms hereof; and
WHEREAS, PacTel intends to provide business and technical development
support to ESL in accordance with the terms hereof including, but not limited
to, *** ***
; and
WHEREAS, each party intends to bear the costs associated with it own
efforts in the development of the Licensed Products;
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the parties hereby agree as follows:
ARTICLE 1
Definitions and Priority
----------- --- --------
1.1 Definitions. The following words and phrases will have the meanings
------------
set forth below:
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
1.1.1 Agreement. The term the "Agreement" means this Development and
----------
License Agreement between ESL and PacTel, including the following Exhibits
attached hereto, and any amendments thereto:
Exhibit A: The ***
*** . As of the Effective Date, this exhibit is in *** and
the parties *** .
Exhibit B: Statement of Work, Milestones and Functional and Interface
Specifications. As of the Effective Date, this
*** .
Exhibit C: Nondisclosure Agreement, dated *** .
1.1.2 Develop or Development. The term "develop" or "development,"
------- -- ------------
as used herein, means engineering, design, layout, hardware and Licensed
Software generation, prototyping, characterization, qualification, fabrication,
testing, and preparation of data sheets and application notes.
1.1.3 Licensed Products. The term "Licensed Products" means the
-------- ---------
*** , and any *** , developed in accordance
with the functional and interface specifications set forth in Exhibit B hereto,
and made under the *** and the ***
therein or by the use of *** .
1.1.4 *** . The term " *** " means the
------------------
*** and *** and their *** and
*** relating to the Licensed Products, together with any
*** *** .
1.1.5 *** . The term " ***
-----------------------------
" means PacTel's *** containing ***
, as described in Exhibit A, that is used in the Licensed Products for the
*** telephone usage, together with any ***
and other intellectual property rights thereto. The term " ***
" does not include any subscriber information.
1.1.6 *** . The term " *** " means the
-----------------
*** *** and *** for the
scheduling and *** operations within the Licensed Products, as
described in Exhibit A, together with any *** and other
intellectual property rights thereto.
1.1.7 *** . The term " ***
------------------------------
" means the information, as described in Exhibit A, that is directly related to
the *** *** and the production, manufacture, use,
operation, repair, maintenance, modification or reconstruction thereof, together
with any *** and other
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
intellectual property rights thereto. This includes, but is not limited to,
information in the form of blueprints, drawings, plans, photographs,
instructions, masks, Licensed Software and documentation.
1.1.8 Gross Sales Price. The term "Gross Sales Price" means the
----- ----- ------
amount that is the price at which each Licensed Product is sold or delivered to
the customer or user. In the event that the Gross Sales Price is less than the
*** , as a result of *** or *** under arrangements
with the customer or user, or in the event Licensed Products are *** or
otherwise *** , then for purposes of this Agreement, the Gross Sales
Price shall be the sales price ***
*** .
1.1.9 Net Sales Price. The term "Net Sales Price" means the Gross
--- ----- ------
Sales Price, net of expenses for transportation, shipping, insurance, boxing,
handling or similar charges, taxes and duties, if any, and other costs
incidental to shipment.
1.1.10 Affiliate. The term "Affiliate" means any corporation,
----------
partnership or other business entity in which either party hereto owns or
controls more than fifty percent (50%) of the voting stock or otherwise has more
than fifty percent (50%) of the right to control the entity.
1.1.11 Equity Partner. The term "Equity Partner" means any
------ --------
corporation, partnership or other business entity in which either party hereto
owns or controls between five percent (5%) and fifty percent (50%) of the voting
stock or otherwise has between five percent (5%) and fifty percent (50%) of the
right to control the entity.
1.2 Priority. In the event of any inconsistency between the text of the
---------
Agreement and the provisions of any of the Exhibits, the text of the Agreement
shall prevail.
ARTICLE 2
Scope of Work, Cost Sharing and Payment
----- -- ----- ---- ------- --- -------
2.1 Development by PacTel. PacTel will enhance its ***
----------- -- -------
and *** and will perform such other tasks as are set forth
in Exhibit B. PacTel agrees to provide ESL with access to its spectrum and
network to facilitate ESL's work on the Licensed Products. PacTel will be
responsible for *** including, but not limited to,
*** and *** , in *** , for *** of
the Licensed Products, and in *** localities only, for ***
release of the Licensed Products. PacTel will provide functional system
specifications including operating and support requirements.
2.2 Development by ESL. ESL will develop an *** for
----------- -- ----
wireless subscriber systems and perform such other tasks to develop the Licensed
Products as are set forth in Exhibit B.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
2.3 Commercialization by ESL. ESL will commercialize the Licensed
----------------- -- ----
Products to meet the functional and interface specifications in Exhibit B, i.e.,
ESL will *** *** so that the Licensed
Products will be in manufacturable form for worldwide marketing, sales,
distribution and support by ESL to end user customers.
2.4 Cost Sharing. Each party will bear its own costs associated with its
---- --------
respective development efforts described above.
2.5 *** Developments. ESL will have the ***
------- -------------
*** including, without limitation, any upgrades,
modifications, improvements, enhancements, derivatives or other changes to the
Licensed Products. If ESL exercises such rights, it shall have a license in
accordance with *** and ***
, as that term is defined herein. In each instance, ESL will have a reasonable
amount of time to ***
*** its rights under this Section.
ARTICLE 3
Term
----
The term of the Agreement will be *** years from the Effective Date,
unless sooner terminated in accordance with Article 9 hereof. Unless a
termination notice is given by either party hereto six (6) months prior to
expiration of such ***-year period, the Agreement shall be renewed
automatically for *** year from the date of expiration of the said period
under the same terms and conditions. Neither party will make any claims or
demands against the other party for any damages, losses, expenses or costs, if
any, incurred as a result of the expiration, termination without cause, or non-
renewal of the Agreement.
ARTICLE 4
Licenses Granted and Royalties
-------- ------- --- ---------
4.1 License to ESL. Subject to the terms and conditions of this Agreement,
PacTel hereby grants to ESL a worldwide, *** , ***, *** *** right
and license under PacTel's *** *** :
(a) to make, have made, copy and/or use the Licensed Products, including
the *** ;
(b) to sell the Licensed Products, including the ***
; and
(c) to provide support for the Licensed Products, including the
*** *** .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
4.2 License to PacTel. Subject to the terms and conditions of this
------- -- -------
Agreement, ESL hereby grants to PacTel a *** , non-exclusive, non-
transferable, *** right and license under ESL's *** to
copy and use the *** for PacTel's internal business purposes in
the United States only during the term of this Agreement.
4.3 Royalties. In consideration of the rights, licenses and benefits
----------
conferred upon ESL hereunder, during the term of this Agreement, *** will pay
to *** a *** in the amount of *** of
the *** of all ***
*** . *** will have no obligation
to pay *** . In
no event will more than *** .
Notwithstanding the foregoing, *** will be payable on any
*** , by a customer. In order to maintain the
*** shall pay to *** ***
*** during the *** and
*** *** thereafter,
*** . The first of such
*** later than *** , and every ***
thereafter during the term hereof. Should *** fail to make such
*** , the ***
*** shall retain only a ***
. The amounts of the *** and *** and
*** at the end of the *** of this
Agreement.
4.4 Accounting and Payment. Within *** after every
---------- --- --------
anniversary date of the Agreement during the term hereof, from and after the
date both parties agree that Licensed Products may be released for production,
*** will render to *** a certified check (or other form of payment
acceptable to ***) in the amount of all *** *** on account of
activities of *** under the Agreement during the calendar year preceding the
year in which such *** is required to be made. Further, *** will
transmit to *** , accompanying each such payment, an accurate, itemized
statement (certified upon request) setting forth in sufficient detail for
verification, the basis upon which such *** is determined and made. All
*** will be made to the order of *** in *** and will be
payable at *** address as set forth in Article 13.
4.5 Records and Audit. *** will keep complete and accurate books and
------- --- ------
records, containing adequate details for the calculation of the amounts of all
*** from the *** to *** hereunder. All such books and records will be
available for reasonable time periods during regular business hours, for a
period of three (3) years following the end of the calendar year to which they
pertain, for inspection and audit by *** accountants or independent
auditors for the purpose of verifying all *** submitted by ***. The
obligations of *** under this Article 4 will survive any termination or
expiration of the Agreement.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
4.6 Product Marketing.
------- ----------
(a) ESL will at all times have the sole discretion to set and determine
all terms and conditions of sale of all Licensed Products, including price,
position, distribution channels and name (including ESL trademarks, trade names
or logos). ESL will be responsible for distribution of the Licensed Products in
its sole discretion.
(b) ESL will at all times have the sole discretion to develop and approve
marketing materials and activities for, the Licensed Products. Further, ESL
will at all times during the term of the Agreement be responsible for
manufacturing, assembling and distributing the components that comprise the
Licensed Products.
(c) PacTel has adopted and owns certain trademarks and service marks used
in identifying and marketing PacTel technology, products and services, logos,
trade names and related acronyms and the like, whether or not registered (the
"PacTel Trademarks"). ESL recognizes and consents for all purposes that the
PacTel Trademarks constitute the exclusive property of PacTel and cannot be used
by ESL pursuant to this license, except as specified in the Agreement, nor will
ESL use any confusing similar trademark, logo, trade name or the like. PacTel
hereby grants to ESL the non-exclusive right to use the following statement in
the marketing of the Licensed Products: " ***
*** ." Nothing contained in the Agreement will be construed as
conferring any additional rights upon ESL to use in advertising, publicity or
other promotional activities any PacTel Trademark, other than specifically set
forth in the preceding sentence, unless PacTel grants to ESL its prior express
written consent. ESL will use the PacTel trade name with such words qualifying
or identifying the relationship of PacTel and ESL as PacTel, from time to time,
may reasonably prescribe. PacTel will have the sole right, but not the
obligation, to register and enforce the PacTel Trademarks and other marks it
adopts, acquires or uses in the United States or in any foreign country and all
rights generated by use of same by ESL will inure directly to the benefit of
PacTel.
(d) The parties will mutually plan and agree upon the contents, form and
manner of publicity with respect to the Licensed Products and will not respond
to inquiries from members of the public media, if such inquiries concern the
contents of the Agreement and details of the transactions contemplated by the
Agreement. In no event will the parties act unilaterally with regard to such
disclosures, unless otherwise required to by law.
(e) PacTel will provide to ESL *** , *** , and such
additional information that ESL may require in order to promote the Licensed
Products. In addition, PacTel will *** for Licensed Product ***
on *** .
(f) ESL reserves the right to ESL-developed trademarks, trade names, logos
and related acronyms and the like, whether or not registered, to identify the
Licensed Products or other ESL developed technology, products and services, so
long as such trademarks, etc., are not confusingly similar to the PacTel
Trademarks.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
ARTICLE 5
Ownership of Inventions and Technical Information
--------- -- ---------- --- --------- -----------
5.1 Patent Applications. Each party agrees to notify the other party
------ -------------
within ninety (90) days following the filing of a patent application with
respect to any invention relating to the Licensed Products first reduced to
practice during the term of the Agreement.
5.2 PacTel Inventions. All inventions developed conceived or first
------ -----------
reduced to practice, as those terms are used before the U.S. Patent
and.Trademark Office, by statute and under common law, solely by PacTel
personnel, will be the sole and exclusive property of PacTel. PacTel will
retain any and all rights to file any patent applications thereon and such
inventions shall be subsumed under ***
*** above.
5.3 ESL Inventions. All inventions developed, conceived or first reduced
--- -----------
to practice, as those terms are used before the U.S. Patent and Trademark
Office, by statute and under common law, solely by ESL personnel, will be the
sole and exclusive property of ESL. ESL will retain any and all rights to file
any patent applications thereon ***
in ***
with the ***
for the term of this Agreement.
5.4 Joint Inventions.
----- -----------
(a) Inventions developed, conceived or first reduced to practice, as those
terms are used before the U.S. Patent and Trademark Office, by statute and under
common law, jointly by the parties (the "Joint Inventions"), will be jointly
owned by the parties, each party having an equal and undivided interest therein,
without the duty to account to the other for any use made of such Joint
Inventions. Notwithstanding the foregoing, neither party may use the Joint
Inventions in any way which would harm the other's ownership interest therein.
The parties agree to mutually determine whether a patent application or
applications will be filed on such Joint Inventions, the party which will
prepare and file such application or applications, and the country or countries
in which the same are to be filed. The patent expenses incurred will be divided
equally between the parties.
(b) If the parties are not able to mutually agree to file an application
or applications on a Joint Invention, either one of the parties may elect to
assume such expenses (the "Electing Party"). The Electing Party will control the
preparation and prosecution of any such application and all rights in any
patents granted thereon will belong exclusively to the Electing Party. The party
declining to bear its share of the expenses of prosecuting or maintaining
patents covering a Joint Invention (the "Declining Party") agrees to execute any
and all forms, assignments or other documents to effect the foregoing; provided,
however, that the Declining Party will ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
***
*** ; provided further, however, that such
Declining Party will ***
*** or the U.S. Government. Neither party may, without the prior
written consent of the other party (which consent may be withheld for any
reason, in its sole and absolute discretion), assign or otherwise transfer its
interest in any Joint Invention, except as expressly provided herein.
5.5 Protection and Use of *** .
---------- --- --- -- ------------------------
(a) Each party agrees it will not disclose (unless compelled to disclose
by judicial or administrative process, or in the opinion of such party's
counsel, by other requirement of law), use, or permit the use by others of such
other party's *** *** , at any time during the Agreement, or at any time
thereafter, for a period of *** after the disclosure thereof. Without
limiting the foregoing, each party agrees to do the following with respect of
any such *** : (i) instruct and require all of its employees and agents to
maintain the confidentiality of such information; (ii) exercise either at least
the same degree of care to safeguard the confidentiality of such information as
that party exercises to safeguard the confidentiality of its own information of
a similar type, or a reasonable degree of care, whichever is greater; and (iii)
restrict disclosure of such information to those of its employees who have a
need to know consistent with the purposes for which such information was
disclosed. Each party further agrees not to remove or destroy any proprietary or
confidential legends or markings placed upon documentation or other materials
which contain or set forth the *** of the other party.
(b) The party receiving *** will obtain the
written agreement of any permitted transferee or licenses to hold in confidence
the information transferred to such transferee or licensee in accordance with
terms no less restrictive than those set forth above.
(c) The receiving party may disclose the other party's ***
to its employees, agents, suppliers and subcontractors to the extent that each
such disclosure is reasonably necessary for manufacturing, using, selling,
installing and/or servicing Licensed Products, or procuring goods and services
required in connection therewith; provided, however, that the receiving party
will take all desirable and necessary actions to preserve the confidentiality of
such information including, but not limited to: (i) marking any documents or
other material containing any ***
*** so disclosed to indicate that same contains proprietary data and
***
*** ; (ii) requiring each party to whom same is disclosed to sign a
written agreement limiting the use thereof to authorized purposes, prohibiting
the further reproduction or disclosure thereof and requiring the prompt return
thereof when no longer needed; and (iii) providing that any reproduction, notes
or summaries thereof, immediately upon the making thereof, will become the
property of the disclosing party and will be delivered to the disclosing party
with, and upon the return of, the *** *** .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
(d) Each reproduction of any *** , together with
each modification and revision thereof, made by or for the receiving party, will
automatically become the property of the disclosing party, will be deemed the
disclosing party's *** *** for all purposes hereunder and will be
clearly marked accordingly.
(e) Upon *** , the receiving party
will immediately discontinue the use of, and will promptly return to the
disclosing party or its designee, all *** , together
with copies thereof, in the possession or control of the receiving party,
together with all written documentation and/or other materials containing
information relating to the *** . The receiving
party further agrees that it will not, for a period of *** after the
date of any termination or expiration of this Agreement, use or disclose to any
third party any of disclosing party's *** , except
such information an the disclosing party has previously made generally available
to the public.
ARTICLE 6
*** *** Support Services, Minimum Order
--------- --------- ------- --------- ------- -----
6.1 *** . ESL will sell the Licensed Products to
------------------
PacTel ***
*** . *** that the ***
to *** and
*** as ***
to its
*** of *** , for *** delivered
within ***
*** calendar days before or *** after *** the
*** to *** . Such ***
shall be *** by an additional *** for ***
by *** , taking into account the fact that
*** on *** by *** and *** . In *** of
the *** of *** to the ***
agrees to *** a *** on ***
by *** who were introduced to *** . No *** will be
*** on any *** , but
*** by an *** . Further, *** shall give *** to
*** by *** and/or its *** , and to the extent that
*** after
*** and its *** have *** , *** may make a ***
to *** for *** to *** to *** . *** will have no
obligation to *** with *** and/or *** , if
*** to *** written request within five (5) business days after the
date of such written request. In addition to the foregoing,
*** shall have the *** to conduct all *** for
all new versions of the *** and/or the *** .
6.2 Minimum Order. PacTel shall place a minimum order for ***
------- ------
Licensed Products by December 31, 1993, at a *** of
***
*** , *** in accordance with the terms of Section
6.1. It is understood that such Licensed Products will initially be installed by
December 31, 1993, for *** PacTel, and that upon ***
of the finished Licensed Products, ESL shall *** such ***
, *** versions no later than March 31, 1994. ***
of the price is payable upon installation
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
and the balance of *** is due when such ***
pass all acceptance criteria set forth in Exhibit B. Provided that such initial
*** Licensed Products pass all acceptance criteria no later than March 31,
1994, PacTel shall place a follow-on order of *** Licensed
Products by March 31, 1994, at a *** *** of
*** , *** in accordance with the terms of Section 6.1
above. Finished, *** of the Licensed Products shall be
installed *** no later than August 30, 1994
6.3 Maintenance and Support. ESL agrees to provide maintenance and
----------- --- --------
support, including all software upgrades and support, to PacTel and its
Affiliates ***
*** .
ARTICLE 7
Indemnification
---------------
7.1 PacTel Indemnity. PacTel shall, at its own expense, defend, or at its
------ ----------
option, settle any suit, claim or proceeding brought against ESL insofar as such
suit or proceeding is based on a claim that PacTel does not have sufficient
right, title and interest in PacTel's ***
and/or ***
*** (collectively " *** ") delivered to ESL under
this Agreement for the design, manufacture, use and sale of the Licensed
Products or that such information constitutes a direct infringement of any
United States trade secret, patent, trademark, copyright or any other
proprietary right of any third party, and PacTel shall indemnify and hold ESL
harmless against all costs, expenses and damages arising from such claim
including, without limitation, reasonable attorneys' fees and shall pay all
settlements and costs finally awarded therein against ESL, provided that PacTel
is promptly informed and furnished a copy of each communication, notice or other
action relating to the alleged infringement and is given all authority,
information and assistance necessary to defend or settle such suit or
proceeding.
7.2 ESL Indemnity. ESL shall, at its own expense, defend, or at its
--- ----------
option, settle any suit, claim or proceeding brought against PacTel insofar as
such suit or proceeding is based on a claim that
***
*** (collectively "ESL Licensed Materials")
licensed to PacTel hereunder or that such information constitutes a
*** ***
of any third party, and ESL shall ***
***
*** PacTel, provided that *** and *** a
copy of each communication, *** relating to the ***
and is *** all *** , information and *** to
*** .
7.3 PacTel Limitations on Indemnity. PacTel shall not be obligated to
------ ----------- -- ----------
defend or be liable for costs and damages to the extent that infringement arises
out of a
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
modification of the PacTel *** after delivery by PacTel, out of
combination of the PacTel *** with other goods or devices not
supplied by PacTel, or from other fault or action of ESL.
7.4 ESL Limitations on Indemnity. ESL shall not be obligated to defend or
--- ----------- -- ----------
be liable for costs and damages to the extent that infringement arises out of
compliance with PacTel's specifications, from a modification of the ESL Licensed
Materials after delivery by ESL, out of combination of the ESL Licensed
Materials with other goods or devices not supplied by ESL, or from other fault
or action of PacTel.
ARTICLE 8
Default and Termination
------- --- -----------
8.1 Default. An event of default on the part of either party will exist
--------
under the Agreement if:
(a) Such party fails to perform any material obligation required to be
performed by it under any provision of the Agreement within the time specified
in such provision, or if no time is specified, within *** after written
notice from the other party that such performance has become due.
(b) Such party becomes insolvent, is unable to pay its debts as they
become due, makes an assignment for the benefit of creditors, files a petition
in any state insolvency proceeding or ceases to carry on its business; or
(c) A receiver or liquidator is appointed for any of such party's
properties or assets, or a petition is filed against such party in any state
insolvency proceeding and such petition is not withdrawn within 30 days after
such appointment or filing.
8.2 *** . Subject to any other provisions hereof
-----------------
***
the *** hereunder, if *** , as *** in this
*** , exists on the part of either party, then the *** may
***
*** and may *** any other ***
to *** .
8.3 Mutual Termination. The parties may mutually agree to terminate the
------ ------------
Agreement at any time.
ARTICLE 9
Arbitration and Dispute Resolution
----------- --- ------- ----------
If a dispute arises between the parties relating to the interpretation or
performance of the Agreement or the grounds for the termination thereof, the
parties agree to meet to try to resolve the dispute. Such meeting will be
attended by individuals with decision-making authority to attempt, in good
faith, to negotiate a resolution of the
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
dispute prior to pursuing other available remedies. If, within thirty days
after such a meeting, the parties have not succeeded in negotiating a resolution
of the dispute, either party may request that such dispute be resolved through
final and binding arbitration. Such arbitration will be conducted by three (3)
arbitrators familiar with the wireless telecommunications industry and will be
held in San Francisco, California, in accordance with the then-current Rules of
Conciliation and Arbitration of the American Arbitration Association. Such
arbitrators will be selected by mutual agreement of the parties, or failing such
agreement, each party will select one arbitrator and the two selected
arbitrators will usually agree upon the selection of a third arbitrator. The
arbitrators will be bound to apply California law, and where applicable, federal
statutory law. The parties will be afforded a reasonable period of time to
conduct discovery prior to the arbitration. A court reporter will be present at
all arbitration proceedings in order to transcribe them and such transcription
will be the official record of such proceedings for purposes of any judicial
enforcement or review proceeding. The arbitrators' decision will be binding on
the parties and will specify the basis for any award and the types of damages
awarded. The parties will bear the cost of such arbitration equally and the
prevailing party in any such arbitration will be entitled to reasonable
attorneys fees, in addition to any other award ordered by the arbitrators. The
prevailing party in any judicial enforcement or review proceeding shall also be
entitled to reasonable attorneys' fees and costs, in addition to any other award
ordered by the court. If judicial enforcement is sought by either party,
judgment may be entered in any court of competent jurisdiction. This Article
shall survive any expiration or termination of the Agreement and shall continue
to be enforceable in the event of the bankruptcy of a party.
ARTICLE 10
Limitation of Liability
---------- -- ---------
Notwithstanding anything in the Agreement to the contrary, in no event will
either party be liable to the other for loss of profits, or for any indirect,
incidental, special or consequential damages arising from this Agreement,
however caused, whether as a consequence of the negligence of the one party or
otherwise; and the sole and exclusive liability and maximum liability of one
party to the other hereunder, whether arising in warranty, contract, tort or
otherwise, shall not exceed $ *** .
ARTICLE 11
Licenses and Permits
-------- --- -------
PacTel, at its own expense, will obtain from the appropriate agencies or
departments of the government all experimental licenses during product
development and ***
*** the Licensed Products under this Agreement. This obligation of PacTel
is limited to ***
as more specifically set forth in Section 2.1 above.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
ARTICLE 12
Miscellaneous Provisions
------------- ----------
12.1 Any notice, demand, request, statement or other writing required or
permitted by the Agreement, will be deemed to have been sufficiently given when
personally delivered or mailed by certified or registered mail, postage prepaid,
addressed as follows:
If to PacTel: PacTel Corporation
390 No. Wiget Lane, Suite 200
Walnut Creek, California 94598
Attn: *** , Director
Technology Transfer
With a copy to: PacTel Corporation
2999 Oak Road, MS 800
Walnut Creek, California 94596
Attn: General Counsel
If to ESL: ESL Incorporated, MS __/__
495 Java Drive
Sunnyvale, California 94088
Attn: *** , New Venture Manager
12.2 The Agreement constitutes the entire agreement between the parties and
supersedes all previous agreements and understandings relating to the subject
hereof. The Agreement may not be altered, amended or modified, except by a
written instrument signed by the duly authorized representatives of both
parties.
12.3 The Agreement may not be assigned to any third party, in whole or in
part, by either party without the prior written consent of the other party. An
assignment to Affiliate of either party will not be deemed a third party and
will not require prior written consent from the other party.
12.4 Failure or successive failures on the part of either party, its
successors and assigns, to enforce any covenant or agreement herein, or any
waiver or successive waivers on its or their part of any covenant or condition
of the Agreement will not operate as a discharge of such covenant, agreement or
condition, render the same invalid or impair the right of either party, its
successors or assigns, to enforce the same.
12.5 Headings included in the Agreement are for convenience only and are
not to be used to interpret the Agreement between the parties.
12.6 Any news release, including photographs, films, advertisements,
publicity, public announcements or confirmation of same, to be released by
either party concerning
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
the activities of the other party or on any part of the subject matter of the
Agreement will be subject to the prior written approval of the other party. The
parties further agree that news releases made by either party will recognize the
participation and contributions of the other party. The nature of this
relationship will remain confidential to both parties.
12.7 No failure or omission on the part of either party to carry out or
observe any of the terms or provisions of the Agreement will be deemed a breach
of the Agreement, if same will arise or result from force majeure or from any
cause reasonably beyond the control of PacTel or ESL. Should such delay occur,
the date or dates of performance by the affected party will be extended for a
period equal to the number of days during which performance is so delayed. The
affected party will give the other party written notice of such delay within
fifteen (15) working days after identification of the delay.
12.8 Notwithstanding anything in the Agreement to the contrary, PacTel has
no obligation under the Agreement to perform any act whatsoever which would
violate the terms of the Modification of Final Judgment in U.S. v. Western
---------------
Electric Co., 552 P. Supp. 131 (D.D.C. 1982) (the "MFJ"). Following written
- ------------
notice to ESL, PacTel may discontinue performance of any activity required
herein or terminate the Agreement immediately, if in PacTel's sole opinion, such
discontinuation or termination is necessary in order to comply with the MFJ. In
the event that PacTel has determined that only certain activities, but not the
entire Agreement, must be discontinued, ESL will have the option to continue or
terminate the Agreement. In the event that ESL elects to continue the
Agreement, the parties will mutually agree upon royalty or payment terms which
will reasonably compensate ESL for PacTel's inability to perform certain of
PacTel's obligations hereunder.
12.9 Nothing in the Agreement will be construed to constitute ESL as the
partner or agent of PacTel, nor will either party have any authority to bind the
other. Each party will remain an independent contractor responsible only for
its own actions.
12.10 This Agreement has been entered into, will be governed by and
construed in accordance with the substantive laws of the State of California
applicable to agreements made and to be performed wholly within such
jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed by their duly authorized
representatives as of the Effective Date.
ESL INCORPORATED PACTEL CORPORATION
A TRW COMPANY
By:/s/ Arthur L. Money By:/s/ C. Lee Cox
-------------------- ---------------
Name:Arthur L. Money Name:C. Lee Cox
------------------ -------------
Title:President Title:President
----------------- ------------
Date:01 October 1993 Date:10/4/93
------------------ -------------
<PAGE>
DRAFT
EXHIBIT A ***
PACTEL
***
***
***
***
Application No:
***
*** to provide input.
***
N/A
***
*** to be provided includes:
. ***
. ***
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT A
ESL
***
*** has *** under the ***:
***
***
*** software is the *** software which will maintain database
information, apply *** of *** , and
*** .
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B DRAFT
STATEMENT OF WORK
PacTel
Regulatory
PacTel will apply for the *** , tariff modifications and
approvals necessary to *** the ***
product within *** Markets.
Product Specifications
PacTel will translate its market requirements into a complete generic
description of functionality, features, performance and compatibility
characteristics. This will include installation, platform and market location
considerations.
Procurement Requirements
PacTel will provide a description of the procurement procedures, methods and
requirements within its organization.
Field Testing
PacTel will support technology, prototype and product evaluations by providing
ESL access to *** and ***. Evaluations shall
include, but not be limited to, the following: ***
***
*** used for evaluation and deployment shall be selected by PacTel based on
technical and business considerations. The *** will allow *** to test its
product under various conditions including extreme *** and ***.
PacTel will assist with the definition of test requirements and conditions.
*** of the product will be based on the *** as
included herein.
Work In Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B DRAFT
Operations Training and Support
PacTel will provide documentation specifications including a statement of
requirements and objectives covering installation, maintenance,
repair/replacement and operational procedures. PacTel will assist with
development and implementation of a detailed plan addressing system integration,
FOT training and ongoing vendor support.
***
PacTel will provide *** as described in Exhibit A.
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B
STATEMENT OF WORK
ESL
Product Development
ESL will design, develop, and test new technology developments, taking into
account PacTel's requirements, for the advancement of the ***
Product.
Field Testing & Evaluation
***
*** will be performed at designated PacTel cell sites. With PacTel
assistance, ESL will generate the definition of the test requirements and
conditions for each test and ***
*** of the product. *** of the product will be based upon
the ***
*** as included herein.
Upon *** of the *** units, ESL will manufacture the quantity of
units being procured by PacTel to the agreed upon production configuration and
functionality performance.
Operations Training & Support
ESL will generate product installation and FOT training documentation taking
into consideration PacTel requirements for installation, maintenance,
replacement/repair, and operational procedures.
***
ESL will *** with PacTel in *** of the
***
*** . This will include engineering and manufacturing consideration through
test and evaluation of the *** and *** units.
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B
Milestones
.
.
.
.
.
. *** ***
.
.
.
.
.
.
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
PAC(TM) TEL
Corporation
A Pacific TelesisCompany
THE *** SYSTEM
GENERIC PRODUCT SPECIFICATIONS
GENERAL EQUIPMENT SPECIFICATIONS
This section describes the physical and electrical specifications that are
important to operation in a ***. Most *** are air conditioned and shielded. To
work in most *** the following specifications are required. If more stringent,
FCC Type Acceptance requirements shall apply.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
ITEM SPECIFICATION COMMENTS
<S> <C> <C>
- ------------------------------------------------------------------------------------------
*** *** ***
*** ***
- ------------------------------------------------------------------------------------------
*** *** ***
***
- ------------------------------------------------------------------------------------------
*** ***
- ------------------------------------------------------------------------------------------
*** *** ***
- ------------------------------------------------------------------------------------------
*** *** No performance
degradation
- ------------------------------------------------------------------------------------------
*** *** Normal cell site power
- ------------------------------------------------------------------------------------------
*** *** ***
- ------------------------------------------------------------------------------------------
*** ***
- ------------------------------------------------------------------------------------------
*** *** Check FCC specifications
- ------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
PAC(TM) TEL
Corporation
A Pacific Telesis Company
THE *** SYSTEM
GENERIC PRODUCT SPECIFICATIONS
*** (USING JAMMING)
Additional equipment is required to implement the *** function. This includes a
*** can be used to terminate in process calls as required. This equipment is
controlled by the *** system.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ITEM SPECIFICATION COMMENTS
<S> <C> <C>
- --------------------------------------------------------------------------------
*** *** Only mobile receive is needed
- --------------------------------------------------------------------------------
*** *** Monitor cell site transmit
- --------------------------------------------------------------------------------
*** *** ***
***
- --------------------------------------------------------------------------------
*** *** ***
*** ***
***
- --------------------------------------------------------------------------------
*** *** Need to control SAT
frequency and
presence of 10 kHz
- --------------------------------------------------------------------------------
*** *** ***
*** ***
***
- --------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
PAC(TM) TEL
Corporation
A Pacific TelesisCompany
THE *** SYSTEM
GENERIC PRODUCT SPECIFICATIONS
SYSTEM INTEGRATION
The *** system must integrate into the existing *** and *** functions.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
ITEM SPECIFICATION COMMENTS
<S> <C> <C>
- -------------------------------------------------------------------------------------------
*** *** Security features must be in place
- -------------------------------------------------------------------------------------------
*** *** Database must be remotely modified
- -------------------------------------------------------------------------------------------
*** *** Activity must be available for further
analysis at the host site
- -------------------------------------------------------------------------------------------
*** ***
- -------------------------------------------------------------------------------------------
*** ***
- -------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
TECHNICAL DRAFT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*** *** *** Must capture information on
*** all registrations and attempts
within test sites
- --------------------------------------------------------------------------------------------
***
- --------------------------------------------------------------------------------------------
***
- --------------------------------------------------------------------------------------------
***
- --------------------------------------------------------------------------------------------
*** ***
***
- --------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
*** DRAFT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Hardware Installation Operations review prior Commercial equipment ***
to final commercial ***
roll-out
***
-
- ***
-
-
- -----------------------------------------------------------------------------------------------------------------
Software Installation Operations review prior Commercial equipment ***
to final commercial
roll-out
- -----------------------------------------------------------------------------------------------------------------
Installation Documentation Operations review prior Published documentation Must include:
to final commercial roll-out -
- ***
-
-
- -----------------------------------------------------------------------------------------------------------------
Trouble-Shooting Operations review prior Commercial equipment Must include:
Capabilities to final commercial - ***
roll-out
- -----------------------------------------------------------------------------------------------------------------
Alarming Operations review prior Commercial equipment ***
to final commercial
roll-out
- -----------------------------------------------------------------------------------------------------------------
Monitoring Operations review prior Commercial equipment ***
to final commercial
roll-out
- -----------------------------------------------------------------------------------------------------------------
Reporting Operations review prior Commercial equipment ***
to final commercial
roll-out
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
DRAFT
*** SATISFACTION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Transparency Subjective evaluation *** and commercial roll- ***
through live drive test out ***
- ---------------------------------------------------------------------------------------------------------------
Billing Records Evaluation of affected Commercial roll-out of ***
customer bills through *** *** configuration
***
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
DRAFT
*** MITIGATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
*** Identification *** *** ***
***
Review of *** ***
performance
reports ***
- --------------------------------------------------------------------------------------------
Terminations Review of *** ***
performance
reports ***
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT C
NONDISCLOSURE AGREEMENT
-----------------------
THIS NONDISCLOSURE AGREEMENT is made as of this 22 day of April, 1993
("Effective Date"), by and between PACTEL CORPORATION, a California corporation
(hereinafter referred to as "PacTel"), with offices located at 2999 Oak Road,
Walnut Creek, California 94596, and ESL INCORPORATED, a California corporation
(hereinafter referred to as "Vendor"), with offices located at 495 Java Drive,
Sunnyvale, California 94088-3510 (collectively "the Parties") which agree as
follows:
WHEREAS each Party wishes to evaluate and understand its potential
involvement in a project of mutual interest; and
WHEREAS PacTel may find it necessary to disclose to Vendor certain
confidential and proprietary information and intellectual property of PacTel,
relating to PacTel and its operations, which will be used by Vendor only for its
work on PacTel projects; and
WHEREAS Vendor may find it necessary to disclose to PacTel certain
confidential and proprietary information relating to Vendor and its operations
which will be used by PacTel only to evaluate its potential use of Vendor's
services; and
WHEREAS each Party is willing to release such Information to the other
on a confidential basis, and is willing to enter into this Agreement;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, PacTel and Vendor agree as follows:
1. All Information as defined below, provided by one Party (the
"Originator") to the other will be treated as confidential.
"Information" shall include all information in written, oral or other
tangible or intangible forms which may include, but is not limited to,
discoveries, ideas, concepts, know-how, techniques, designs,
specifications, drawings, blueprints, tracings, diagrams, models,
samples, flow charts, data, computer programs, disks, diskettes,
tapes, marketing plans, customer names and other technical, financial
or business information.
2. For a period of ten (10) years following the effective date of this
Agreement, each Party shall:
-1-
<PAGE>
a. restrict disclosure of the Information solely to those of its
employees with a need to know, and not to disclose it to other
parties; and,
b. advise its employees of the obligation of confidentiality
hereunder; and,
c. require its employees to use the same degree of care as is used
with that Party's own proprietary information.
3. Notwithstanding anything to the contrary herein, neither Party shall
have any obligation to preserve the confidentiality of any Information
that:
a. was previously known by it free of any obligation to keep it
confidential; or,
b. is distributed to third parties by the Originator without
restriction; or,
c. is or becomes publicly available, by other than unauthorized
disclosure by the Party receiving the Information; or,
d. is wholly and independently developed by the Party receiving the
Information.
4. All Information shall be deemed the property of the Originator, and,
upon request, the other Party will return all Information received in
tangible form to the Originator or destroy all such Information.
5. Nothing contained in this Agreement shall be construed as granting or
conferring any rights by license or otherwise in any Information
disclosed by the Originator.
6. This Agreement shall be governed and construed in accordance with the
laws of the State of California and shall benefit and be binding upon
the Parties hereto and their respective successors and assigns.
7. Since either Party may choose not to do business with the other in the
future, each acknowledges that the other is not responsible or liable
for any business decisions made by either in reliance upon disclosures
made during any meetings between the Parties or in reliance on any
results of the discussions.
-2-
<PAGE>
8. This Agreement shall continue until terminated in writing by either
Party. The obligation to protect the confidentiality of Information
received prior to such termination shall survive the termination of
this Agreement.
9. Each Party agrees that it will make no copies or otherwise reproduce
the data provided by the other, and further agrees to remove all such
data from its files and return all data to the other if requested to
do so.
PACTEL CORPORATION ESL INCORPORATED
("PacTel") ("Vendor")
By: _____________________ By: ______________________
Lyn R. Daniels Name:______________________
Chief Financial Officer Title:_____________________
and Treasurer
-3-
<PAGE>
FIRST AMENDMENT TO
THE DEVELOPMENT AND LICENSE AGREEMENT
DATED OCTOBER 4, 1993
BETWEEN
ESL INCORPORATED AND PACTEL CORPORATION
This First Amendment is made this 4th day of October, 1993, by and between
ESL Incorporated ("ESL") and PacTel Corporation ("PacTel").
WHEREAS, the parties entered into a Development and License Agreement,
dated October 4, 1993; and
WHEREAS, the parties now wish to amend that Agreement to correct certain
terms thereof;
NOW THEREFORE, the parties agree as follows:
1. In Section 2.5 of the Agreement the following clause shall be added at
the end of the second sentence:
", and shall be subject to the terms and conditions of this Agreement, with
the exception of Sections 6.2 and 6.3."
2. Section 5.5 of the Agreement is hereby deleted and the following is
substituted therefor:
5.5 Protection and Use of *** .
---------- --- --- -- --------------------
(a) Each party agrees it will not disclose (unless compelled to disclose by
judicial or administrative process, or in the opinion of such party's counsel,
by other requirement of law), use, or permit the use by others of such other
party's *** , *** and/or *** ,
at any time during the Agreement, or at any time thereafter, for a period of ***
years after the disclosure thereof. Without limiting the foregoing, each party
agrees to do the following with respect of any such *** , ***
and/or *** : (i) instruct and require all of its employees and agents to
maintain the confidentiality of such information; (ii)
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
exercise either at least the same degree of care to safeguard the
confidentiality of such information as that party exercises to safeguard the
confidentiality of its own information of a similar type, or a reasonable degree
of care, whichever is greater; and (iii) restrict disclosure of such information
to those of its employees who have a need to know consistent with the purposes
for which such information was disclosed. Each party further agrees not to
remove or destroy any proprietary or confidential legends or markings placed
upon documentation or other materials which contain or set forth the ***
*** of the other party.
(b) The party receiving *** , ***
and/or *** will obtain the written agreement of any
permitted transferee or licensee to hold in confidence the information
transferred to such transferee or licensee in accordance with terms no less
restrictive than those set forth above.
(c) The receiving party may disclose the other party's ***
*** and/or *** to its
employees, agents, suppliers and subcontractors to the extent that each such
disclosure is reasonably necessary for manufacturing, using, selling, installing
and/or servicing Licensed Products, or procuring goods and services required in
connection therewith; provided, however, that the receiving party will take all
desirable and necessary actions to preserve the confidentiality of such
information including, but not limited to: (i) marking any documents or other
material containing any ***
*** so disclosed to indicate that same contains proprietary data
and *** and/or *** ; (ii)
requiring each party to whom same is disclosed to sign a written agreement
limiting the use thereof to authorized purposes, prohibiting the further
reproduction or disclosure thereof and requiring the prompt return thereof when
no longer needed; and (iii) providing that any reproduction, notes or summaries
thereof, immediately upon the making thereof, will become the property of the
disclosing party and will be delivered to the disclosing party with, and upon
the return of, the ***
and/or *** .
(d) Each reproduction of any ***
and/or *** , together with each modification and
revision thereof, made by or for the receiving party, will automatically become
the property of the disclosing party, will be deemed the disclosing party's
*** and/or *** for all purposes
hereunder and will be clearly marked accordingly.
(e) Upon *** , the receiving party
will immediately discontinue the use of, and will promptly return to the
disclosing party or its designee, all ***
and/or *** , together with copies thereof, in the
possession or control of the receiving party, together with all written
documentation and/or other materials containing information relating to the
*** *** and/or *** .
The receiving party further agrees that it will not for a period of ***
after the date of any termination or expiration of this Agreement, use or
disclose to any third party any of disclosing party's
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** and/or ***
, except such information as the disclosing party has previously made generally
available to the public.
3. In Article 9, the following sentence shall be added at the end:
"Any judicial review under this Article shall be limited to arbitrator
misconduct or the arbitrators' non-compliance with or failure to observe
the terms and conditions of this Agreement."
4. Except as amended herein, the Agreement between the parties, dated
October 4, 1993, shall remain in full force and effect.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as of the date first written above.
ESL INCORPORATED PACTEL CORPORATION
By:______________________ By:_________________________
Name:____________________ Name:_______________________
Title:___________________ Title:______________________
<PAGE>
EXHIBIT E
---------
Patent Assignment
-----------------
<PAGE>
PATENT APPLICATION ASSIGNMENT
WHEREAS, TRW Inc., an Ohio corporation, having its principal place of
business at 1900 Richmond Road, Cleveland, Ohio 44124 (hereinafter referred to
as the "Assignor") holds all right, title and interest in and to the
_____________ Patent Application, "____________________________________," Serial
No. _________, by _____________, dated ______, Docket No. _______, including all
continuations, revisions, patents, reissues, re-examinations, foreign
counterpart applications and extensions thereof (hereinafter referred to as the
"Patent Application"); and
WHEREAS, Assignor desires to assign its entire right, title and
interest in and to the Patent Application to PhonePrint, Inc., a California
corporation (hereinafter referred to as the "Assignee"), pursuant to the terms
of that certain License and Technical Assistance Agreement, dated as of
______________.
NOW, THEREFORE, for good and valuable consideration to the Assignor,
the receipt of which is hereby acknowledged, the Assignor has agreed to and does
hereby assign and transfer unto the Assignee its entire right, title and
interest in and to any and all inventions disclosed in the Patent Application,
the Patent Application, and in any and all patents obtained for said inventions
by the Patent Application or any continuations, revisions, renewals or
substitutions thereon, and any reissues or re-examinations thereof.
Assignor further agrees that it will, at Assignee's reasonable
expense, (a) cooperate with Assignee in the prosecution of U.S. patent
applications and foreign counterparts on the inventions and any improvements,
(b) execute, verify and acknowledge and deliver all such further papers,
including patent applications and instruments of transfer, and (c) perform such
other acts as Assignee lawfully may request to obtain or maintain Letters Patent
and Registrations for the inventions and improvements in any and all countries,
and to vest title thereto in Assignee or Assignee's successors and assigns.
IN TESTIMONY WHEREOF, I hereby set my hand this ____ day of _________,
19___.
TRW Inc.
By: _________________________________
Assistant Secretary
State of California )
County of )
On ____________________, before me, __________________________, the undersigned
officer, personally appeared _________________________, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
________________________________
Notary Public
My Commission Expires: _________________________
<PAGE>
EXHIBIT F
---------
Trademark Assignment
--------------------
F-1
<PAGE>
ASSIGNMENT OF U.S. INTENT-TO-USE TRADEMARK APPLICATION
WHEREAS, TRW Inc., an Ohio corporation, having its principal place of
business at 1900 Richmond Road, Cleveland, Ohio 44124 (hereinafter referred to
as the "Assignor") owns a certain Intent-To-Use-Trademark Application in the
United States Patent and Trademark Office for "PHONEPRINT," Serial No.
74/531385, filed May 31, 1994, in Class 9. The goods are electronic cellular
network access control system comprised of signed analysis hardware and software
which receives, authenticates and blocks unauthorized cellular transmission
(hereinafter referred to as the "Trademark Application").
WHEREAS, PhonePrint, a California corporation (hereinafter referred to
as the "Assignee") has acquired Assignor's interest in and to the Trademark
Application and any and all trademarks and service marks related thereto
throughout the world.
NOW, THEREFORE, for good and valuable consideration to the Assignor,
the receipt of which is hereby acknowledged, (i) the Assignor has agreed to and
does hereby assign unto the Assignee its entire right, title and interest in and
to the Trademark Application and any and all trademarks and service marks
related thereto throughout the world, together with the goodwill of the business
related thereto and concurrent with the transfer of certain tangible assets as
indicia of said goodwill; and (ii) the Assignor authorizes the Commissioner of
Patents and Trademarks of the United States to assign the Trademark Registration
to the Assignee in accordance with the terms of this instrument.
IN TESTIMONY WHEREOF, I hereby set my hand this ____ day of
___________, 19__.
TRW, Inc.
By: _________________________________
Assistant Secretary
State of California )
County of )
On ____________________, before me, __________________________, the undersigned
officer, personally appeared _________________________, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
________________________________
Notary Public
My Commission Expires: _________________________
<PAGE>
EXHIBIT G
---------
Order and Contract Assignment
-----------------------------
G-1
<PAGE>
PURCHASE ORDER AND SUPPLY CONTRACT
----------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
This Assignment and Assumption Agreement is made as of this 14th day of
December, 1994 by and between ESL Incorporated, a California corporation having
a place of business at 495 Java Drive, Sunnyvale, California (the "Transferor"),
and PhonePrint, Inc., a Delaware corporation having a place of business at 207
E. Java Drive, Sunnyvale, California (the "Transferee").
WHEREAS, the Transferor is a party to those certain purchase orders and
supply contracts (and all amendments and modifications thereof) (collectively,
the "Agreements") listed on Exhibit A attached hereto (and such Agreements were
---------
contemplated by the parties to be included within the definition of Assumed
Obligation as set forth in Paragraph 1.4 of that certain Asset Purchase
Agreement of even date herewith), with certain of the vendees and suppliers set
forth therein; and
WHEREAS, the Transferor desires to assign to the Transferee, and the
Transferee desires to take by assignment, all of the Transferor's right, title
and interest under the Agreements, and the Transferee desires to assume all of
the Transferor's duties and obligations with respect thereto.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. The Transferor does hereby transfer, assign and set over to the
Transferee the Transferor's entire right, title and interest in and to the
Agreements.
2. The Transferee does hereby assume and agree to pay, perform and
discharge any and all obligations and liabilities of the Transferor existing as
of November 30, 1994 under or arising out of the Agreements and any other
documents relating thereto, subject to the indemnification obligations of the
Transferor and Transferee in that certain Asset Purchase Agreement of even date
herewith.
3. This Assignment and Assumption Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the parties hereto.
4. This Assignment and Assumption Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one in the same instrument.
5. This Assignment and Assumption Agreement shall be governed by and
construed under the internal laws of the State of California, without regard to
any rules of conflicts of law applicable to agreements made and to be performed
in such state by and among residents of such state.
<PAGE>
6. Each of the parties hereto shall execute and deliver all additional
documents and shall do any and all acts and things reasonably required in
connection with the performance of the obligations undertaken in the Assignment
and Assumption Agreement and to effectuate in good faith the intent of the
parties.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment and
Assumption Agreement as of the date hereof.
TRANSFEROR:
ESL INCORPORATED, a California corporation
By:________________________________________
Its:_______________________________________
TRANSFEREE:
PHONEPRINT, INC., a Delaware corporation
By:________________________________________
Its:_______________________________________
[SIGNATURE PAGE TO PURCHASE ORDER AND SUPPLY CONTRACT
ASSIGNMENT AND ASSUMPTION AGREEMENT]
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
PHONEPRINT INC.
- ---------------------------------------------------------------------------------
OUTSTANDING COMMITMENTS
- ---------------------------------------------------------------------------------
AS OF NOVEMBER 30, 1994
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
PART TOTAL PURCHASE PURCHASE
- ---------------------------------------------------------------------------------
P.O. # VENDOR NUMBER QTY PRICE EXTENSION
<C> <S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
401254 Amco Engineering 120-1095-001 41 475.60 19,500
- ---------------------------------------------------------------------------------
400012 Ariel Corp 125-0098-001 750 969.92 727,440
- ---------------------------------------------------------------------------------
401623 Arow Components 615-0504-001 7000 0.01 84
- ---------------------------------------------------------------------------------
401623 Arow Components 630-0501-001 2000 0.13 260
- ---------------------------------------------------------------------------------
400686 Custom Computer Service 125-0215-001 120 260.00 31,200
- ---------------------------------------------------------------------------------
401231 E Squared 125-0250-001 70 700.00 49,000
- ---------------------------------------------------------------------------------
401724 Isis Surface Mounting 590-0234-001 59 36 2,124
- ---------------------------------------------------------------------------------
401639 Kent Electronics 460-0271-001 375 3.97 1,489
- ---------------------------------------------------------------------------------
401389 Lambda Electronics 180-0114-001 100 23.50 2,350
- ---------------------------------------------------------------------------------
401226 Maxpeed Corp 125-1279-001 50 347.00 17,350
- ---------------------------------------------------------------------------------
400053 Rugged Computer Systems 190-0151-001 631 3,518.00 2,219,858
- ---------------------------------------------------------------------------------
401719 Rugged Computer Systems, Inc. 190-0151-001 10 505 5,050
- ---------------------------------------------------------------------------------
401262 Vanderbend 510-1041-001 100 30.93 3,093
- ---------------------------------------------------------------------------------
401272 Vanderbend 510-1004-001 200 7.22 1,444
- ---------------------------------------------------------------------------------
401275 Vanderbend 510-1024-001 250 8.19 2,048
- ---------------------------------------------------------------------------------
401277 Vanderbend 510-1027-001 100 2.25 225
- ---------------------------------------------------------------------------------
401278 Vanderbend 510-1031-001 200 10.51 2,102
- ---------------------------------------------------------------------------------
401279 Vanderbend 510-1032-001 200 10.12 2,024
- ---------------------------------------------------------------------------------
401279 Vanderbend 510-1032-001 200 1.40 280
- ---------------------------------------------------------------------------------
401282 Vanderbend 510-1037-001 100 11.57 1,157
- ---------------------------------------------------------------------------------
401283 Vanderbend 510-1038-001 200 16.95 3,390
- ---------------------------------------------------------------------------------
401284 Vanderbend 510-1040-001 200 32.47 6,494
- ---------------------------------------------------------------------------------
401285 Vanderbend 510-1042-001 300 7.63 2,289
- ---------------------------------------------------------------------------------
401287 Vanderbend 510-1054-001 100 9.46 946
- ---------------------------------------------------------------------------------
401288 Vanderbend 510-1055-001 40 109.11 4,364
- ---------------------------------------------------------------------------------
401296 Vanderbend 520-1020-001 150 3.23 485
- ---------------------------------------------------------------------------------
400067 Voctron Labs 461-0109-001 180 335.00 60,300
- ---------------------------------------------------------------------------------
401306 Ward Bagby 676-0100-001 385 5.15 1,983
- ---------------------------------------------------------------------------------
401307 Ward Bagby 676-0101-001 385 4.00 1,540
- ---------------------------------------------------------------------------------
401308 Ward Bagby 680-0563-001 380 14.00 5,320
- ---------------------------------------------------------------------------------
401309 Ward Bagby 680-0565-001 120 42.40 5,088
- ---------------------------------------------------------------------------------
401310 Ward Bagby 676-0102-001 300 16.35 4,905
- ---------------------------------------------------------------------------------
401311 Ward Bagby 680-0564-001 200 1.45 290
- ---------------------------------------------------------------------------------
401584 DC Electronics 150-1452-001 100 19.14 1,914
- ---------------------------------------------------------------------------------
401559 DC Electronics 150-1450-001 140 26.89 3,765
- ---------------------------------------------------------------------------------
401589 DC Electronics 150-0426-001 325 15.11 4,911
- ---------------------------------------------------------------------------------
401512 DC Electronics 150-0409-008 200 6.49 1,298
- ---------------------------------------------------------------------------------
401735 DC Electronics 150-1456-001 25 3.50 88
- ---------------------------------------------------------------------------------
401699 Arow Components 630-0522-001 1500 0.213 320
- ---------------------------------------------------------------------------------
401699 Arow Components 607-0506-001 1000 0.15 150
- ---------------------------------------------------------------------------------
400799 DC Electronics 1 2,000.00 2,000
- ---------------------------------------------------------------------------------
401631 Applied Specialties 1 211.2 211
- ---------------------------------------------------------------------------------
401312 Ward Bagby 90 23.25 2,093
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Watkins Johnson 262,350
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
PHONEPRINT INC.
- ---------------------------------------------------------------------------------
OUTSTANDING COMMITMENTS
- ---------------------------------------------------------------------------------
AS OF NOVEMBER 30, 1994
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
PART TOTAL PURCHASE PURCHASE
- ---------------------------------------------------------------------------------
P.O. # VENDOR NUMBER QTY PRICE EXTENSION
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
401076 Ask Group 4 2,756.00 11,024
- ---------------------------------------------------------------------------------
401077 Ask Group 48 310.00 14,880
- ---------------------------------------------------------------------------------
401077 Ask Group 1 1,450.00 1,450
- ---------------------------------------------------------------------------------
401075 Hewlett Packard 1 2,193.00 2,193
- ---------------------------------------------------------------------------------
401075 Hewlett Packard 1 355.30 355
- ---------------------------------------------------------------------------------
401075 Hewlett Packard 1 224.40 224
- ---------------------------------------------------------------------------------
401075 Hewlett Packard 1 635.80 636
- ---------------------------------------------------------------------------------
401075 Hewlett Packard 1 469.20 469
- ---------------------------------------------------------------------------------
401067 Mobilecomm* 1 1,200.00 1,200
- ---------------------------------------------------------------------------------
401696 Sealed Air Corp. 1 2650 2,650
- ---------------------------------------------------------------------------------
401696 Sealed Air Corp. 1 950 950
- ---------------------------------------------------------------------------------
401736 Sun Microsystems 5 2640 13,200
- ---------------------------------------------------------------------------------
401722 Vanstar 2 120.88 242
- ---------------------------------------------------------------------------------
401729 Vanstar 1 2362 2,362
- ---------------------------------------------------------------------------------
401729 Vanstar 1 369 369
- ---------------------------------------------------------------------------------
401729 Vanstar 1 120 120
- ---------------------------------------------------------------------------------
401804 Vanstar 1 5 5
- ---------------------------------------------------------------------------------
401801 Ward Bagby 285 2.95 841
- ---------------------------------------------------------------------------------
401801 Ward Bagby 1 186.12 186
- ---------------------------------------------------------------------------------
401504 AT&T Capital* 1 2,078.00 2,078
- ---------------------------------------------------------------------------------
401558 AT&T Capital* 1 2,332.00 2,332
- ---------------------------------------------------------------------------------
401541 AT&T Capital* 1 1,515.00 1,515
- ---------------------------------------------------------------------------------
401647 AT&T Capital* 1 596.00 596
- ---------------------------------------------------------------------------------
401709 AT&T Capital* 1 466.00 466
- ---------------------------------------------------------------------------------
401726 AT&T Capital* 1 892.00 892
- ---------------------------------------------------------------------------------
401734 AT&T Capital* 1 2,332.00 2,332
- ---------------------------------------------------------------------------------
401253 California Furniture* 1 312.00 312
- ---------------------------------------------------------------------------------
401253 California Furniture* 1 336.00 336
- ---------------------------------------------------------------------------------
401253 California Furniture* 1 160.00 160
- ---------------------------------------------------------------------------------
401805 Frame Technology Corp 2 550.00 1,100
- ---------------------------------------------------------------------------------
401805 Frame Technology Corp 1 49.00 49
- ---------------------------------------------------------------------------------
401805 Frame Technology Corp 1 260.00 260
- ---------------------------------------------------------------------------------
401733 JMW Consultants Inc. 1 14650 14,650
- ---------------------------------------------------------------------------------
401733 JMW Consultants Inc. 1 6208.65 6,209
- ---------------------------------------------------------------------------------
401237 Rent A Computer* 1 985.00 985
- ---------------------------------------------------------------------------------
401261 Rent A Computer* 1 1,405.00 1,405
- ---------------------------------------------------------------------------------
401576 Rent A Computer* 1 340.00 340
- ---------------------------------------------------------------------------------
401667 Vanstar 2 3520.28 7,041
- ---------------------------------------------------------------------------------
401700 Tel-Lan Communications 12 12 144
- ---------------------------------------------------------------------------------
Consultant Mal Gurian-December Retainer & Expenses 30,500
- ---------------------------------------------------------------------------------
Consultant Gary Odegard-December Retainer & Expenses 5,500
- ---------------------------------------------------------------------------------
Consultant Jack Hsu-December Retainer & Expenses 9,000
- ---------------------------------------------------------------------------------
Consultant Robert Lux-Billed at straight hourly rate as used
- ---------------------------------------------------------------------------------
Consultant Hill & Knowlton 28,824
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL COMMITMENTS 3,634,950
===========
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
* Indicates month-to-month rental
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT H
---------
General Conveyance
------------------
H-1
<PAGE>
GENERAL CONVEYANCE, BILL OF SALE AND ASSIGNMENT
-----------------------------------------------
ESL INCORPORATED, a California corporation (the "Seller"), hereby grants,
conveys, transfers, assigns, sets over and delivers, as of December 14, 1994
(the "Effective Date"), unto PHONEPRINT, INC., a Delaware corporation ("Buyer"),
pursuant to that certain Asset Purchase Agreement between the Seller and Buyer
dated December 14, 1994 (the "Purchase Agreement"), all of the Seller's right,
title and interest in and to all the assets and properties (whether tangible or
intangible and whether real, personal or mixed and whether owned or leased by
Seller), of every kind, character and description and wherever situated which
are either (i) identified in Exhibit A to the Purchase Agreement; or (ii) listed
---------
on Schedule 1 attached hereto (the assets and properties in (i) and (ii) above
----------
shall collectively be the "Assets").
TO HAVE AND TO HOLD the Assets unto Buyer, its successors and assigns
forever.
The Seller and TRW Inc., an Ohio corporation ("TRW") and their successors
hereby agree to take all actions reasonably necessary to obtain any necessary
consent for the transfer of the Assets to Buyer and, upon the receipt of such
consent, to provide to the Buyer the benefits of title to such Assets. All the
Assets shall automatically be deemed to have been transferred and assigned to
Buyer as of the Closing Date (as defined in the Purchase Agreement). Pending
such formal transfer and assignment, Buyer shall be entitled to the full
economic benefit of ownership of the Assets and shall not be liable for any
loss, damage or charge arising out of acts or omissions occurring prior to the
Closing Date with respect to the Assets or the conduct of Seller's business.
The obligation of the Seller, TRW and their successor shall be to take all
reasonable action necessary to obtain the consents and to provide to the Buyer
the benefits of title to all of the Assets referred to above.
THE SELLER AND TRW HEREBY CONSTITUTE and appoint Buyer and Buyer's
successors and assigns, the true and lawful attorneys of the Seller and TRW with
full power of substitution, in the name of the Seller or otherwise, and on
behalf and for the benefit of Buyer, its successors and assigns, to demand and
receive from time to time any and all Assets transferred or intended so to be;
to give receipts, releases and acquittances for or in respect of the same of any
part thereof; and to take any action necessary to effect the transfer to Buyer
of full legal title in and beneficial ownership of any Asset hereby transferred
and assigned or intended so to be. The Seller and TRW declare that the
foregoing powers are coupled with an interest and shall not be revocable by it
in any manner or for any reason.
<PAGE>
THE SELLER AND TRW FOR THEMSELVES AND THEIR SUCCESSORS, AGREE THAT they or
such successors will hereafter cause the execution and delivery of any further
assignments, instruments of transfer, bills of sale, powers of attorney or
conveyances and perform other acts, as may be necessary or desirable fully to
vest in Buyer title to and enjoyment of the Assets assigned and transferred or
intended so to be pursuant to the Agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the Seller and TRW have caused this General Conveyance,
Bill of Sale and Assignment to be executed as of the date first written above.
"SELLER":
ESL INCORPORATED, a California corporation
By:_________________________________________
Title:_____________________________
"TRW":
TRW INC., an Ohio Corporation
By:_________________________________________
Title:_____________________________
[SIGNATURE PAGE TO GENERAL CONVEYANCE,
BILL OF SALE AND ASSIGNMENT]
<PAGE>
SCHEDULE 1
----------
List of Specific Assets
-----------------------
Schedule 1-1
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
PHONEPRINT INVENTORY MODEL M MODEL A MODEL E TOTAL
<S> <C> <C> <C> <C>
-------------------------------------------------------------------
1) Consigned Units 56 1 5 20 9 1
-------------------------------------------------------------------
2) Finished Goods 61 31 84 176
-------------------------------------------------------------------
3) Work In Progress N/A N/A N/A N/A
-------------------------------------------------------------------
4) Material Unit Equivalents 0 0 61 61
-------------------------------------------------------------------
5) Engineering Test Units 6 0 1 7
-------------------------------------------------------------------
6) Raw Materials N/A N/A N/A $979,124
-------------------------------------------------------------------
</TABLE>
1) Units shipped to customers on consignment at 11/30/94.
2) Finished Goods Inventory as of 11/30/94. Does not include the cost of
installation kits noted below in (b) below.
3) Work In Process (WIP) value is included in Material Unit Equivalents
calculation.
4) Material Unit Equivalents is calculated by adding material stock and WIP on
hand plus additional future purchases of $153,000 (see note (a) below). The
model E unit has the highest material content of the three Phone Print
models. Using this material in different product mixes would result in
different equivalent unit combinations.
5) Units that are in the field and in-house for purposes of Engineering test.
6) Remaining stock balance of $979,124 at 1995 standards. Included in this
number is material at vendors valued at $167,009 (see note (c) below) and
spares valued at $260,699 described in note (c) and (d).
NOTES:
(a) ESL's current estimate is approximately $153,000 to make up material
shortages required to build the 61 equivalent units shown above as item 4,
excluding labor and testing.
(b) Installation kit material nominally valued at $34,000 Is required to
complete 176 units of Finished Goods.
(c) The $167,009 of material under evaluation at vendors could potentially be
written-off based on final evaluation and recommended disposition
(d) Inventory has been re-valued based on latest material cost experience and
time standards.
<PAGE>
<TABLE>
<CAPTION>
PhonePrint Inc.
Fixed Assets
MAKE MODEL DESCRIPTION ASSET#
<S> <C> <C> <C>
HP 7550A CMPTR,PLOTTER,GRPH C0012235
APPLE MACPLUS COMPUTER,PERSONAL C0014120
APPLE MACPLUS COMPUTER,PERSONAL C0014342
APPLE MACPLUS COMPUTER,PERSONAL C0014542
APPLE MACPLUS COMPUTER,PERSONAL C0016103
AST PREMIUM 286 COMPUTER,PERSONAL C0017172
APPLE MAC II COMPUTER,PERSONAL C0017215
APPLE MAC II COMPUTER,PERSONAL C0019273
APPLE M0402 CMPTR,MONITOR,MONO C0019285
APPLE M0402 CMPTR,MONITOR,MONO C0019290
APPLE MAC II COMPUTER,PERSONAL C0019291
APPLE MAC II COMPUTER,PERSONAL C0019589
RADIUS 218 CMPTR,MONITOR C0019590
APPLE MACII Mac IIC1 w/Ext Kybd C0019941
RADIUS TPD/19 CMPTR,MONITOR C0020185
APPLE MAC II COMPUTER,PERSONAL C0020195
RADIUS TPD/19 CMPTR,MONITOR C0021173
APPLE CENTRIS COMPUTER,PERSONAL C0021600
DELL COMPUTERS466/ M COMPUTER,PERSONAL C0021988
DELL COMPUTERS466/ M COMPUTER,PERSONAL C0021989
APPLE CENTRIS COMPUTER,PERSONAL C0021990
APPLE CENTRIS COMPUTER,PERSONAL C0021991
RADIUS 350 CMPTR,MONITOR,COLOR C0021992
RADIUS 350 CMTR,MONITOR,COLOR C0021993
T1 2559821 CMPTR,PRINTER,LASER C0021994
APPLE QUADRA CENTRIS 650 C0022026
APPLE CENTRIS COMPUTER,PERSONAL C0022035
APPLE CENTRIS COMPUTER,PERSONAL C0022037
APPLE CENTRIS COMPUTER,PERSONAL C0022137
APPLE CENTRIS COMPUTER,PERSONAL C0022138
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022139
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022140
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022141
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022142
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022143
APPLE CENTRIS COMPUTER,PERSONAL C0022144
RADIUS 348 CMPTR,MONITOR,COLOR C0022145
RADIUS 348 21" Color Monitor C0022146
APPLE PRO 630 CMPTR,PRINTER,LASER C0022147
NCA 4542NT CMPTR,DRIVE,DISK C0022151
NCA MXT1240S CMPTR,DRIVE,DISK C0022196
APPLE QUADRA (610) COMPUTER,PERSONAL C0022479
APPLE QUADRA (610) COMPUTER,PERSONAL C0022480
APPLE QUADRA (610) COMPUTER,PERSONAL C0022481
APPLE QUADRA (610) COMPUTER,PERSONAL C0022482
APPLE QUADRA (610) COMPUTER,PERSONAL/21" Clr Monitor C0022483
APPLE QUADRA (610) COMPUTER,PERSONAL/21" CLr Monitor C0022484
RADIUS 381 CMPTR,MONITOR,COLOR C0022485
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PhonePrint Inc.
Fixed Assets
MAKE MODEL DESCRIPTION ASSET #
<S> <C> <C> <C>
RADIUS 381 CMPTR,MONITOR,COLOR C0022486
DELL COMPUTERS466/M-66 COMPUTER,PERSONAL C0022528
DELL COMPUTERS466/M-66 COMPUTER,PERSONAL C0022529
CHAPLET SYS NBD486T COMPUTER,PERSONAL,LPTP C0022619
SUN S10GXN-40 WORKSTATION C0023073
SUN S10GXN-40 WORKSTATION C0023074
SUN 4/15EC-32 WORKSTATION C0023075
SUN 4/15EC-32 WORKSTATION C0023076
SUN 4/10EC-8 WORKSTATION C0023077
SUN X547A-ST CMPTR,DRIVE,DISK C0023078
SUN X547A-ST CMPTR,DRIVE,DISK C0023079
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023101
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023102
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023103
APPLE QUADRA COMPUTER,PERSONAL C0023104
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023105
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023106
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023107
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023108
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023109
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023110
APPLE QUADRA (610) COMPUTER,PERSONAL C0023111
MICRONET SS-Dl6OOO COMPUTER,DRIVE,TAPE,DAT C0023115
486 COMPUTER C0023197
HP 7550A CMPTR,PLOTTER,GRPH C0023308
DELL COMPUTERS486DX2-66 COMPUTER,PERSONAL C0023309
DELL COMPUTERS486DX2-66 COMPUTER,PERSONAL C0023310
DELL COMPUTERS486DX2-66 COMPUTER,PERSONAL C0023311
IFR SYSTEMS COM-120A CMPTR,MONITOR C0023404
IBM 425SX/SI COMPUTER,PERSONAL C0023529
IBM 425SX/SI COMPUTER,PERSONAL C0023530
APPLE QUADRA COMPUTER,PERSONAL C0023531
APPLE QUADRA COMPUTER,PERSONAL C0023532
APPLE QUADRA COMPUTER,PERSONAL C0023533
APPLE QUADRA COMPUTER,PERSONAL C0023534
APPLE QUADRA COMPUTER,PERSONAL C0023535
APPLE QUADRA COMPUTER,PERSONAL C0023536
APPLE POWER MAC COMPUTER,PERSONAL C0023537
APPLE POWER MAC COMPUTER,PERSONAL C0023538
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023605
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023606
APPLE POWERMAC COMPUTER,PERSONAL C0023621
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023634
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023635
APPLE QUADRA COMPUTER,PERSONAL C0023647
APPLE QUADRA COMPUTER,PERSONAL C0023648
APPLE QUADRA COMPUTER,PERSONAL C0023649
APPLE QUADRA610 COMPUTER,PERSON C0023782
PERSONAL COMPUTER C0023783
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PhonePrint Inc.
Fixed Assets
MAKE MODEL DESCRIPTION ASSET#
<S> <C> <C> <C>
APPLE PB DUO 280/280C Power Book Duo 280c w/17" Disp C0023903
Power Book Duo 280c w/17" Disp C0023904
APPLE M3077 (POWERMAC) CMPTR,PERSONAL C0023906
17 COLOR MONITOR C0023907
APPLE M2017 CMPTR,PERSONAL C0023908
APPLE M2612 CMPTR,MONITOR,COLOR 20" C0023909
Powerbook 180 C0023924
Powerbook 180 C0023925
APPLE 6100 (POWERMAC) CMPTER,PERSONAL C0023926
APPLE 6100 (POWERMAC) CMPTER,PERSONAL C0023927
APPLE M2464 (POWER PC) MONITOR,CMPTR C0023935
APPLE C-0890 MONITOR,COLOR (20") C0023936
APPLE M2464 (POWER PC 7100) MONITOR,CMPTR C0023937
APPLE C-0890 MONITOR,COLOR C0023938
APPLE 8100 CMPTR,PERSONAL C0023939
SPARC STAT C0023964
5 GB TAPE C0023965
SUN 4/10FC2- WORKSTATION C0023969
SUN 4/15FC2- WORKSTATION,CLASSIC C0023970
RADIUS C0507 MONITOR,COLOR 17" C0023971
APPLE QUADRA 605 CMPTR,PERSONAL C0023972
APPLE QUADRA 605 COMPUTER,PERSONAL C0023973
SPORTSTER N/A CMPTR,PERSONAL C0023974
APPLE M2332 POWERBOOK C0023991
APPLE M2332 POWERBOOK C0023992
INTEL 486 DXL 486 COMPUTER C0023995
APPLE 7100 PERSONALCOMPUTER C0023996
APPLE 7100 PERSONALCOMPUTER C0023997
COMPAQ PROLINEA FOR PAYROLL C0024046
APPLE POWERBOOK 520 FOR FINANCE C0024047
APPLE POWERBOOK 520 FOR FINANCE C0024048
APPLE 7100 PERSONALCOMPUTER C0024049
APPLE 7100 PERSONALCOMPUTER C0024050
Pentium 90 MHZ for Stoddard C0024111
Pentium 90 MHZ for Stoddard C0024112
TEKTRONIX 7Al8N SCOPE,PN,DUAL C0004026
TEKTRONIX 7Al8N SCOPE,PN,DUAL,CH C0004028
TEKTRONIX 7704 SCOPE,GP,MF C0004208
HP 6267B PWR SUPP, DC C0004227
TEKTRONIX 475DM43 SCOPE,PORTABLE C0004280
POWER DESIGN TP325 POWER SUPPLY, TRIPLE C0004357
TEKTRONIX 7A26 SCOPE,PN,DUAL CH C0004400
TEKTRONIX 7B80 SCOPE,PN,TIME BASE C0004649
TEKTRONIX 7B53A SCOPE,PN,DUAL C0004879
HP 6002A PWR SUPP, DC C0005290
TEKTRONIX 7B53A SCOP,PN,TIME BASE C0005319
KROHN-HITE 3202R FILTER,TUNABLE C0005370
HP 3964A RCRDR,INSTRUMENT C0005438
TEKTRONIX 7A26 SCOPE,PN,DUAL CH C0005452
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PhonePrint Inc.
Fixed Assets
MAKE MODEL DESCRIPTION ASSET #
<S> <C> <C> <C>
TEKTRONIX 7B85 SCOPE,PN,TIME BASE C0005598
SD TIMECODE READER 8132 C0005825
HP 436A METER,POWER,MW C0006519
HP 8656A GEN,SIGNAL C0007157
HP 197B CAMERA,SCOPE C0007573
HP 8970A METER,NOISE C0007647
TEKTRONIX 485 SCOPE,PORTABLE C0007725
HP 5335A COUNTER,ELEC C0007925
ESL PROJ 5110 MODULE, AMPL, BIAS C0011605
TEKTRONIX 2445 SCOPE,PORTABLE C0011887
TEKTRONIX 2465CTS O'SCOPE SNBO52750 C0012315
HP 16OG LOGIC ANALYZER C0012426
HP 6024A POWER SUPPLY C0012969
IBM 6180-002 CMPTR,PLOTTER,CLR C0013809
HP 3335A GEN,SYNTHESIZER C0014059
HP 5385A COUNTER,ELEC C0017628
HP HP 6632A PWR,SUPP,DC C0019030
FLUKE MFG 6080A GEN,SIGNAL C0019122
HP 6632A PWR,SUPP,DC C0019126
HP 6632A PWR,SUPP,DC C0019128
HP 5087A AMPL,DISTR C0021441
IFR SYSTEMS COM120A MONITOR, COMMUNICATION C0021580
IFR SYSTEMS 120A RECEIVER,COMM C0021984
NCA PERIPHERAL CMPTR,DRIVE,DISK C0021985
MXT1240S
NCA PERIPHERAL CMPTR,DRIVE,DISK C0021986
MXT1240S
II INC ZPB34A-006 CCA,DSP C0022048
BURR-BROWN ZPBI007001 CONVERTER, A/D C0022049
NCA 4542NT CMPTR,DRIVE,DISK C0022150
DIGITAL EQ 4000/90 SYSTEM,VAC C0022191
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022197
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022198
STANFORD RES SR620 COUNTER,UNIVERSAL C0023118
STANFORD RES FS700 FREQ STD,LORAN C0023119
LOW PHASE NOISE OSCIL C0023196
PANASONIC KX-B520 PRINTBOARD,ELECTRONIC C0023375
COMBINET CB-400 BRIDGE,ETHERNET C0023433
NOISE COM UFX7109 GEN,NOISE,PROGRAMMABLE C0023434
4MM TAPE DRIVE C0023551
HP 8560E ANAL, SPECTRUM C0023814
AUTOCAD SYSTEM C0023823
17 MONITOR C0023824
LASER PRINTER C0023825
2 GB HD, SCSI-II, Cable C0023963
4.2 GB MUL C0023966
4.2 GB MUL C0023967
4.2 GB MUL C0023968
CSC 1924EXT DRIVE,DISK,SCSI C0023975
CSC 1924EXT DRIVE,DISK,SCSI C0023976
RADIUS C0507 DRIVE,DISK,SCSI C0023977
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PhonePrint Inc.
Fixed Assets
MAKE MODEL DESCRIPTION ASSET#
<S> <C> <C> <C>
2 GB SCSI C0023978
2 GB SCSI C0023979
2 GB SCSI C0023980
2 GB SCSI C0023981
2 GB SCSI C0023982
2 GB SCSI C0023983
CSC 1924EXT DRIVE,DISK,SCSI C0023985
2 GB SCSI C0023986
19-2 GB HD & 13 TERMINATORS C0023987
2 GB SCSI C0023988
Xyplex Server C0023999
Sun Workstation C0024096
Self-Const Equip PHONEMAID, SIG GENERATORS(2) Self-Const
POWER 36100RF PWR SUPPLY, DC C0001464
DESIGN
TEKTRONIX 2335 SCOPE,PORTABLE C0007583
TEKTRONIX 496P ANAL,SPECT C0007792
HP 6653A POWER SUPPLY C0022979
HP 6653A POWER SUPPLY C0022980
HP 6653A POWER SUPPLY C0022981
HP 6673A POWER SUPPLY C0022982
HP 6543A POWER SUPPLY C0022983
HP 6543A POWER SUPPLY C0022984
HP 6543A POWER SUPPLY C0022985
HP 6543A POWER SUPPLY C0022986
TEKTRONIX TAS475 SCOPE,PORTABLE C0023312
TEKTRONIX 2232 SCOPE,PORTABLE C0023314
HP 8568B ANAL,SPECT C0023405
HP 8482B SENSOR,POWER C0023406
HP 8657B GEN,SIGNAL C0023407
HP 437B METER,POWER,MW C0023408
HP 5385A COUNTER,ELEC C0023473
POWER SUPPLY C0023574
HP 5385A COUNTER,ELEC C0023704
DRIVE CONTROL C0023784
DSP32C Board C0023874
CSC 1924EXT DRIVE,DISK,SCSI C0023984
Marconi Signal Generator C0024035
Rugged Computers C0024109
Rugged Computers C0024110
IBM SEL III TYPEWRITER C0006472
APPLE PRO 630 Laserwriter Pro 630 C0022148
HP FAX 950 FAX-EXPENSED C0023902
HP 451MX LASERJET PRINTER C0024045
HP 8591E ANAL,SPECT,PORTABLE C0023831
SUN X822A STORAGE PACK,5GB C0023954
SUN X569A DRIVE,DISK 4.2GB C0023955
SUN X569A DRIVE,DISK 4.2GB C0023956
SUN X569A DRIVE,DISK 4.2GB C0023957
Xyplex Server C0023998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PhonePrint Inc.
Fixed Assets
MAKE MODEL DESCRIPTION ASSET #
<S> <C> <C> <C>
Xyplex Server C0024127
Xyplex Server C0024128
LEE ENG XB024-10 PLATFORM LIFTER C0023120
LEE ENG XB024-10 PLATFORM LIFTER C0023121
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023160
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023161
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023162
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023163
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023164
WORK BENCHES C0023539
WIRE SHELF CARTS C0023540
Floor Scale C0024036
Instapak Model 750 Packaging C0024129
Stockroom Security Enclosure C0022850
HP HP3100 C0023841
</TABLE>
<PAGE>
EXHIBIT I
---------
Non-Competition Agreement
-------------------------
I-1
<PAGE>
NON-COMPETITION AGREEMENT
-------------------------
THIS NON-COMPETITION AGREEMENT ("Agreement") is entered into as of December
14, 1994 ("Effective Date"), by and among PHONEPRINT, INC., a Delaware
corporation ("Buyer"), ESL INCORPORATED, a California corporation and a TRW
Company ("Seller") and TRW INC., an Ohio corporation, with reference to the
following facts:
A. Buyer is purchasing certain of the assets of Seller (the "Assets"),
pursuant to that certain Asset Purchase Agreement dated as of the Effective Date
(the "Purchase Agreement"). Seller has previously established a business unit
known as "PhonePrint" (the "Business Unit") that has been engaged in the
research, development and sale of products ("PhonePrint Products") used for
fraud mitigation in the wireless communications field.
B. Seller intends to license certain of its technology relating to the
PhonePrint Products to Buyer pursuant to that certain License and Technical
Assistance Agreement ("License Agreement").
C. Buyer intends to maintain and operate a business based, in substantial
part, on the Assets.
D. The execution of this Agreement by the Seller is a material inducement
for Buyer's execution of the Purchase Agreement.
E. The parties hereto desire to provide for the protection of the value
of the Assets being acquired by Buyer pursuant to the Purchase Agreement, and to
provide protection to the business and confidential information of Buyer.
E. TRW is the parent company of Seller, and is interested in and benefits
from the transactions described in the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
terms, covenants and conditions contained in the Purchase Agreement and this
Agreement, the parties hereby agree as follows:
1. NON-COMPETITION. During the term of the Agreement, without the prior
---------------
written consent of Buyer, neither Seller nor any Business Successor (as that
term is defined in Section 3 of this Agreement), shall, directly or indirectly,
(a) use the Trade Secrets as defined in the License Agreement except as provided
therein or (b) except to the extent that the License Agreement specifically
permits the use of Trade Secrets by Seller, engage in any business involving the
sale of products designed primarily for fraud mitigation in the Wireless
Communications Field (as that term is defined in the License Agreement), in any
county of the State of California, in the remainder of the United States or in
the world.
<PAGE>
2. PERMITTED ACTIONS. The provisions of Section 1 apply to Seller and
-----------------
the Business Successors only, and subject to the terms of Section 1, shall not
be deemed to restrict Seller from (a) continuing in those lines of businesses
that do not involve a violation of this Agreement; (b) continuing the research,
development, manufacture, and sale of wireless communications systems and
subsystems sold by Seller; or (c) continuing new technology developments in the
wireless communications area.
3. BUSINESS SUCCESSOR. For purposes of Section 1 of this Agreement,
------------------
"Business Successor" is defined as the Tactical and National Lines of Business
of TRW's Avionics and Surveillance Group and any successor unit or subunit
(whether or not separately incorporated), of TRW conducting some or all of those
businesses currently carried on by Seller. Under no circumstances are the
covenants contained in Section 1 of this Agreement binding on any part of TRW
other than Seller or Business Successor to Seller.
4. TERM. This Agreement shall extend for a period of four (4) years
----
after the Effective Date, or until such earlier time as Buyer (or its successors
or assigns) ceases to conduct a business involving the research, development or
sale of products designed primarily for fraud mitigation in the wireless
communications field.
5. REMEDIES. Seller and TRW acknowledge and agree that their compliance
--------
with the covenants contained in Section 1 hereof are reasonable and necessary to
protect the goodwill and value of the Assets and other proprietary interests of
the Seller being acquired by Buyer pursuant to the Purchase Agreement and of the
Buyer. Seller and TRW further acknowledge and agree that a breach of the
covenants in Section 1 hereof will result in immediate, irreparable and
continuing damage to Buyer for which there will be no adequate remedy at law;
and agrees that in the event of any such breach or violation or any threatened
or intended breach or violation of the aforesaid covenants, the Buyer and its
respective successors and assigns shall be entitled to temporary, preliminary
and permanent injunctive relief and/or restraining orders enjoining and
restraining such breach or violation or such threatened or intended breach or
violation and/or other equitable relief (without needing to post any bond or
other security) in addition to such other and further relief as may be proper.
Seller and TRW hereby represent (i) that they have thoroughly reviewed the terms
of this Agreement, including the geographic areas and time periods stated
herein, (ii) that their experience and/or abilities are such that observance of
this Agreement will not cause them undue hardship or unreasonably interfere with
their ability to conduct business, and (iii) that they have reviewed the
limitations imposed by this Agreement with independent counsel.
6. SEVERABILITY. In the event any portion of this Agreement shall for
------------
any reason be held to be illegal or unenforceable to any extent, such portion
shall be deemed to read in such a way so as to render it legal and enforceable
to the maximum extent
-2-
<PAGE>
possible in every respect, so as to effectuate the parties' expressed intent to
the maximum extent possible, and the remaining portions of this Agreement shall
remain in full force and effect. Without limitation, the parties agree and
intend that the covenants and agreements contained in this Agreement shall be
deemed to be a series of separate covenants and agreements, one for each and
every political subdivision of the Covered Area. If, in any judicial
proceeding, a court shall refuse to enforce in such action separate covenants
and agreements deemed included herein then, at the option of Buyer, wholly
unenforceable covenants and agreements shall be deemed eliminated from the
provisions hereof for the purpose of such proceeding to the extent necessary to
permit the remaining separate covenants and agreements to be enforced in such
proceeding. This Agreement is separate and severable from the Purchase
Agreement and the various agreements executed pursuant thereto. The Purchase
Agreement and the various agreements executed pursuant thereto shall remain in
full force and effect notwithstanding any holding that this Agreement is illegal
or unenforceable to any extent.
7. NOTICES. All payments, notices, requests, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
delivered personally (which shall include delivery by courier or overnight
delivery service) or sent by certified or registered mail, postage prepaid,
certified or return receipt requested or sent by telecopier or other similar
facsimile transmission to the parties at their respective address set forth
below or at such other address as shall be given in writing by a party to the
other parties. Items delivered personally or by telecopier or facsimile shall
be deemed delivered on the date of actual delivery; items sent by certified or
registered mail shall be deemed delivered three (3) days after mailing.
Seller: ESL Incorporated
495 Java Drive
Sunnyvale, CA 94088-3510
Attn: TRW Legal Department
TRW: TRW Inc.
One Rancho Carmel
San Diego, CA 92128
Attn: TRW Legal Department
Buyer: PhonePrint, Inc.
207 E. Java Drive
Sunnyvale, CA 94088
Attn: Kevin Compton
-3
<PAGE>
8. AMENDMENTS AND WAIVERS. This Agreement may be modified, amended or
----------------------
supplemented only by a written instrument duly executed by all parties hereto.
No covenant, term or condition or the breach thereof shall be deemed waived,
unless it is waived in writing and signed by the party against whom the waiver
is claimed. Any waiver of breach of any covenant, term or condition shall not
be deemed to be a waiver of any preceding or succeeding breach of the same or
any other covenant, term or condition. The failure of any party to insist upon
strict performance of any covenant, term or condition hereunder shall not
constitute a waiver of such party's right to demand strict compliance therewith
in the future.
9. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by a party
----------------------
without the prior written consent of the parties hereto; provided, however, the
Buyer may assign its rights and delegate its obligations under this Agreement to
a purchaser of all or substantially all of the business, stock or assets of the
Buyer in whatever form or to any of Buyer's Affiliates without the consent of
the Seller. Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
10. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be
-------------------------------------
governed by and construed in accordance with the laws of the State of
California, without regard to principles of conflicts of law.
11. ATTORNEYS' FEES. In the event that any legal action becomes necessary
---------------
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled, in addition to its court costs, to such reasonable attorneys' fees,
expert witness fees and legal expenses as may be fixed by a court of competent
jurisdiction.
12. COUNTERPARTS. This Agreement may be executed in multiple copies, each
------------
of which shall be deemed an original and all of which shall constitute a single
agreement binding on all parties.
13. ENTIRE AGREEMENT. This Agreement (together with documents and
----------------
agreements entered into herewith) constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings. Each party to this
Agreement acknowledges that no representations, inducements, promises or
agreements have been made by any party, or any one acting on behalf of any
party, that are not embodied in this Agreement with respect to the subject
matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day of the year first above written.
"BUYER" "SELLER"
PHONEPRINT, INC., ESL INCORPORATED,
a Delaware corporation a California corporation
BY: ________________________ BY: ________________________
TITLE: ______________________ TITLE:_______________________
"TRW"
TRW INC.,
an Ohio corporation
BY: _________________________
TITLE: ______________________
[SIGNATURE PAGE TO NON-COMPETITION AGREEMENT]
<PAGE>
EXHIBIT J
---------
Pledge Agreement
----------------
J-1
<PAGE>
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of December 14,
1994, is made between PhonePrint, Inc., a Delaware corporation ("Pledgor"), and
ESL Incorporated, a California corporation ("Secured Party").
Pledgor and Secured Party hereby agree as follows:
SECTION 1 Definitions; Interpretation.
---------------------------
(a) All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to them in the Note.
(b) As used in this Agreement, the following terms shall have the
following meanings:
"Event of Default" has the meaning set forth in Section 6.
----------------
"Lien" means any mortgage, deed of trust, pledge, security interest,
----
assignment, deposit arrangement, charge or encumbrance, lien, or other type of
preferential arrangement.
"Note" means that certain Promissory Note of even date herewith made
----
by Pledgor in favor of Secured Party, as amended, modified, renewed, extended or
replaced from time to time.
"Pledged Collateral" has the meaning set forth in Section 2(a).
------------------
"Pledged Notes" means the Promissory Notes described in Schedule 1.
------------- ----------
"Obligations" means the indebtedness, liabilities and other
-----------
obligations of Pledgor to Secured Party under or in connection with this
Agreement and the Note, including, without limitation, all unpaid principal of
the Note, all interest accrued thereon and all other amounts payable by Pledgor
to Secured Party thereunder or in connection therewith, whether now existing or
hereafter arising, and whether due or to become due, absolute or contingent,
liquidated or unliquidated, determined or undetermined.
"Person" means an individual, corporation, partnership, joint venture,
------
trust, unincorporated organization, governmental agency or authority, or any
other entity of whatever nature.
"UCC" means the Uniform Commercial Code as the same may, from time to
---
time, be in effect in the State of California; provided, however, in the event
-------- -------
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the security interest in any Pledged Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean
1.
<PAGE>
the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.
(c) Where applicable and except as otherwise defined herein, terms
used in this Agreement shall have the meanings assigned to them in the UCC.
(d) In this Agreement, (i) the meaning of defined terms shall be
equally applicable to both the singular and plural forms of the terms defined;
and (ii) the captions and headings are for convenience of reference only and
shall not affect the construction of this Agreement.
SECTION 2 Security Interest.
-----------------
(a) As security for the payment and performance of the Obligations,
Pledgor hereby pledges, assigns, transfers, hypothecates and sets over to
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in, to and under (i) the Pledged Notes, (ii)
all rights, interests and claims with respect to the Pledged Notes, (iii) any
securities, property, interest and other payments and distributions issued as an
addition to, in redemption of, in renewal or exchange for, in substitution or
upon conversion of, or otherwise on account of, the Pledged Notes, and (iv) all
cash and non-cash proceeds of the Pledged Notes and any of the foregoing, in
each case from time to time received or receivable by, or otherwise paid or
distributed to, the Pledgor, and whether presently existing or owned or
hereafter arising or acquired and wherever located (collectively, the "Pledged
Collateral").
(b) Pledgor hereby agrees to deliver to or for the account of Secured
Party, at the address and to the Person or Persons to be designated by Secured
Party, the Pledged Notes, which shall be accompanied by duly executed
assignments in blank, in form and substance satisfactory to Secured Party.
(c) If Pledgor shall become entitled to receive or shall receive any
securities or other instruments or obligations as an addition to, in redemption
of, in renewal or exchange for, in substitution or upon conversion of, or
otherwise on account of, the Pledged Notes, Pledgor shall accept the foregoing
as Secured Party's agent, shall hold the foregoing in trust for Secured Party,
shall segregate the foregoing from other property or funds of Pledgor, and shall
deliver the foregoing forthwith to or for the account of Secured Party, at the
address and to the Person to be designated by Secured Party, accompanied by a
duly executed assignment in blank, in form and substance satisfactory to Secured
Party. Upon accepting any of the foregoing, Secured Party shall promptly send a
notification to Pledgor with a description thereof, which notification shall be
deemed to be a Schedule to this Agreement and may be attached hereto.
(d) Pledgor shall execute and deliver to Secured Party concurrently
with the execution of this Agreement, and at any time and from time to time
thereafter, all financing statements, assignments, continuation financing
statements, termination statements, indorsements, and other documents and
instruments, in form reasonably satisfactory to
2.
<PAGE>
Secured Party, and take all other action, as Secured Party may reasonably
request, to effect a transfer of a perfected first priority security interest in
and pledge of the Pledged Collateral to Secured Party pursuant to the UCC and to
continue perfected, maintain the priority of or provide notice of the security
interest of Secured Party in the Pledged Collat eral and to accomplish the
purposes of this Agreement.
(e) Pledgor agrees that this Agreement shall create a continuing
security interest in and pledge of the Pledged Collateral which shall remain in
effect until terminated in accordance with Section 16.
(f) Pledgor hereby consents to any assignment of the Pledged
Collateral and the security interests related thereto to TRW Inc. or any direct
or indirect wholly-owned subsidiary of TRW Inc. After any such assignment such
assignee shall be the Secured Party hereunder and shall possess all the rights
of Secured Party hereunder.
SECTION 3 Representations and Warranties. Pledgor represents and
------------------------------
warrants to Secured Party that:
(a) Pledgor is a corporation duly organized, validly existing and in
good standing under the law of the jurisdiction of its incorporation and has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) The execution, delivery and performance by Pledgor of this
Agreement have been duly authorized by all necessary corporate action of
Pledgor, and this Agreement constitutes the legal, valid and binding obligation
of Pledgor, enforceable against Pledgor in accordance with its terms.
(c) No authorization, consent, approval, license, exemption of, or
filing or registration with, any governmental authority or agency, or approval
or consent of any other Person, is required for the due execution, delivery or
performance by Pledgor of this Agreement.
(d) Pledgor is the legal and beneficial owner of the Pledged Notes
subject to no Lien except for the pledge and security interest created by this
Agreement.
(e) Pledgor's chief executive office and principal place of business
are located at its address set forth on the signature pages hereof.
SECTION 4 Covenants. So long as any of the Obligations remain
---------
unsatisfied, Pledgor agrees that:
(a) Pledgor will, at its own expense, appear in and defend any action,
suit or proceeding which purports to affect its title to, or right or interest
in, the Pledged Collat eral or the security interest of Secured Party therein
and the pledge to Secured Party thereof.
3.
<PAGE>
(b) Pledgor will not surrender or lose possession of (other than to
Secured Party), exchange, sell, convey, transfer, assign or otherwise dispose of
or transfer the Pledged Collateral or any right, title or interest therein.
(c) Pledgor will not create, incur or permit to exist any Liens upon
or with respect to the Pledged Collateral, other than the security interest of
and pledge to Secured Party created by this Agreement.
(d) Pledgor shall maintain and preserve its corporate existence, its
rights to transact business and all other rights, franchises and privileges
necessary or desirable in the normal course of its business and operations and
the ownership of the Pledged Collateral.
SECTION 5 Payments on the Pledged Collateral.
----------------------------------
(a) Unless an Event of Default shall have occurred, Pledgor shall be
entitled to receive and retain for its own account any interest and other
payments in respect of the Pledged Collateral; provided that Secured Party shall
--------
receive, and Pledgor shall not be entitled to receive, any cash paid, payable or
otherwise distributed, and any other property, instruments, securities or
obligations, in redemption of, or in exchange for or in substitution of, any
Pledged Collateral. Upon and after the occurrence and during the continuance of
any Event of Default, Secured Party shall be entitled to receive all distri
butions and payments of any nature with respect to the Pledged Collateral, to be
held by Secured Party as part of the Pledged Collateral.
(b) Distributions and other payments and property which are received
by Pledgor but which it is not entitled to retain as a result of the operation
of subsection (a) shall be held in trust for the benefit of Secured Party, be
segregated from the other property or funds of Pledgor, and be forthwith paid
over or delivered to Secured Party in the same form as so received.
SECTION 6 Events of Default. Any of the following events which shall
-----------------
occur and be continuing shall constitute an "Event of Default":
(a) Pledgor shall fail to pay when due any amount payable hereunder or
under the Note and such failure shall continue for 5 days.
(b) Any representation or warranty by Pledgor under or in connection
with this Agreement or the Note shall prove to have been incorrect in any
material respect when made or deemed made.
(c) Pledgor shall fail to perform or observe in any material respect
any other term, covenant or agreement contained in this Agreement or the Note on
its part to be performed or observed and any such failure shall remain
unremedied for a period of 15 days from the occurrence thereof; or any "Event of
Default" as defined in the Note shall have occurred.
4.
<PAGE>
(d) Any impairment in the priority of Secured Party's Lien hereunder.
(e) Any levy upon, seizure or attachment of any of the Pledged
Collateral.
SECTION 7 Remedies.
--------
(a) Upon the occurrence and during the continuance of any Event of
Default, Secured Party may declare any of the Obligations to be immediately due
and payable and shall have, in addition to all other rights and remedies granted
to it in this Agreement or the Note, all rights and remedies of a secured party
under the UCC and other applicable laws. Without limiting the generality of the
foregoing, Pledgor agrees that any item of the Pledged Collateral may be sold
for cash or on credit or for future delivery without assumption of any credit
risk, in any number of lots at the same or different times, at any exchange,
brokers' board or elsewhere, by public or private sale, and at such times and on
such terms, as Secured Party shall determine; provided, however, that Pledgor
-------- -------
shall be credited with the net proceeds of sale only when such proceeds are
finally collected by Secured Party in cash. Pledgor hereby agrees that the
sending of notice by ordinary mail, postage prepaid, to the address of Pledgor
set forth herein, of the place and time of any public sale or of the time after
which any private sale or other intended disposition is to be made, shall be
deemed reasonable notice thereof if such notice is sent ten days prior to the
date of such sale or other disposition or the date on or after which such sale
or other disposition may occur, provided that Secured Party may provide Pledgor
--------
shorter notice or no notice, to the extent permitted by the UCC or other
applicable law. The Pledgor and the Secured Party agree that such notice
constitutes "reasonable notification" within the meaning of Section 9504(3) of
the UCC. Pledgor recognizes that Secured Party may be unable to make a public
sale of any or all of the Pledged Collateral, by reason of prohibitions
contained in applicable securities laws or otherwise, and expressly agrees that
a private sale to a restricted group of purchasers for investment and not with a
view to any distribution thereof shall be considered a commercially reasonable
sale. Secured Party shall have the right upon any such public sale, and, to the
extent permitted by law, upon any such private sale, to purchase the whole or
any part of the Pledged Collateral so sold, free of any right or equity of
redemption, which right or equity of redemption Pledgor hereby releases to the
extent permitted by law.
(b) For the purpose of enabling Secured Party to exercise its rights
under this Section 7 or otherwise in connection with this Agreement, Pledgor
hereby constitutes and appoints Secured Party its true and lawful attorney, with
full power of substitution, in the name of the Pledgor, the Secured Party or
otherwise, for the sole use and benefit of the Secured Party, but at the expense
of the Pledgor, to the extent permitted by law to exercise, at any time and from
time to time while an Event of Default has occurred and is continuing, all or
any of the following powers with respect to all or any of the Pledged
Collateral: (i) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof, (ii) to
settle, compromise, compound, prosecute or defend any action or proceeding with
respect thereto, (iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and effectually as if the
Secured Party were the absolute owner thereof, and (iv) to extend the time of
5.
<PAGE>
payment of any or all thereof and to make any allowance and other adjustments
with reference thereto.
(c) The cash proceeds actually received from the sale or other
disposition or collection of Pledged Collateral, and any other amounts received
in respect of the Pledged Collateral the application of which is not otherwise
provided for herein, shall be applied first, to the payment of the reasonable
-----
costs and expenses of Secured Party in exercising or enforcing its rights
hereunder and in collecting or attempting to collect any of the Pledged
Collateral, and to the payment of all other amounts payable to Secured Party
pursuant to Section 10; and second, to the payment of the Obligations. Any
------
surplus thereof which exists after payment and performance in full of the
Obligations shall be promptly paid over to Pledgor or otherwise disposed of in
accordance with the UCC or other applicable law. Pledgor shall remain liable to
Secured Party for any deficiency which exists after any sale or other
disposition or collection of Pledged Collateral.
SECTION 8 Notices. All notices or other communications hereunder
-------
shall be in writing (including by facsimile transmission) and mailed, sent or
delivered to the respective parties hereto at or to their respective addresses
or facsimile numbers set forth below their names on the signature pages hereof,
or at or to such other address or facsimile number as shall be designated by any
party in a written notice to the other parties hereto. All such notices and
other communications shall be effective (i) if delivered by hand, when
delivered; (ii) if sent by mail, upon the earlier of the date of receipt or five
business days after deposit in the mail, first class; and (iii) if sent by
facsimile transmission, when sent.
SECTION 9 No Waiver; Cumulative Remedies. No failure on the part of
------------------------------
Secured Party to exercise, and no delay in exercising, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies under this Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to Secured Party.
SECTION 10 Costs and Expenses. Pledgor agrees to pay on demand all
------------------
costs and expenses of Secured Party, including reasonable attorneys' fees, in
connection with the enforcement of this agreement, and the sale or collection
of, or other realization upon, any of the Pledged Collateral.
SECTION 11 Binding Effect. Subject to the restrictions on assignment
--------------
contained in the Note, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by Pledgor, Secured Party and their respective
successors and assigns.
SECTION 12 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the law of the State of California, except as
required by mandatory provisions of law and to the extent the validity or
perfection of the security interests hereunder, or the remedies hereunder, in
respect of any Pledged Collateral are governed by the law of a jurisdiction
other than California.
6.
<PAGE>
SECTION 13 Entire Agreement; Amendment. This Agreement contains the
---------------------------
entire agreement of the parties with respect to the subject matter hereof and
shall not be amended except by the written agreement of the parties.
SECTION 14 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.
SECTION 15 Counterparts. This Agreement may be executed in any
------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement.
SECTION 16 Termination. Upon payment and performance in full of all
-----------
Obligations, this Agreement shall terminate and Secured Party shall promptly
redeliver to Pledgor any of the Pledged Collateral in Secured Party's possession
and shall execute and deliver to Pledgor such documents and instruments
reasonably requested by Pledgor as shall be necessary to evidence termination of
all security interests given by Pledgor to Secured Party hereunder; provided,
--------
however, that the obligations of Pledgor under Section 10 shall survive such
- -------
termination.
SECTION 17 Conflicts. In the event of any conflict or inconsistency
---------
between this Agreement and the Note, the terms of this Agreement shall control.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the date first above written.
PHONEPRINT, INC.
By ______________________________
Title:
207 E. Java Drive
Sunnyvale, CA 94088-3510
Attn: Kevin Compton
ESL INCORPORATED
By ______________________________
Title:
495 Java Drive
Sunnyvale, CA 94088-3510
Attn: TRW Legal Department
8.
<PAGE>
SCHEDULE 1
to the Pledge Agreement
Pledged Notes
<TABLE>
<CAPTION>
Promissory Date of
Name and Address Note Issuance
- ----------------------------- ---------- ----------
<S> <C> <C>
Kleiner Perkins Caufield & $885,224 12/10/94
Byers VII
2750 Sand Hill Road
Menlo, CA 94025
KPCB VII Founders Fund $ 98,358 12/10/94
2750 Sand Hill Road
Menlo, CA 94025
Sevin-Rosen IV $983,582 12/10/94
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
Norwest Equity Partners IV $786,940 12/10/94
2800 Piper Jaffray Tower
Minneapolis, MN 55402
Needham Capital SBIC, L.P. $122,948 12/10/94
400 Park Avenue
New York, NY 10022
Needham Emerging Growth $122,948 12/10/94
Partners
400 Park Avenue
New York, NY 10022
</TABLE>
S-1.
<PAGE>
EXHIBIT K
---------
Cooperation Agreement
---------------------
K-1
<PAGE>
COOPERATION AGREEMENT
This COOPERATION AGREEMENT is made and entered into as of this 14th day of
December, 1994 by and among PhonePrint Inc., a corporation organized and
existing under the laws of the Delaware ("PhonePrint"), TRW Inc., an Ohio
corporation, by and through its Avionics and Surveillance Group ("TRW"), and ESL
Incorporated, a California corporation and a wholly-owned subsidiary of TRW Inc.
("ESL"). (The forgoing parties are hereinafter sometimes collectively referred
to as the "Parties" and individually referred to as a "Party".)
PRELIMINARY STATEMENT:
A. The Parties are parties to that certain Asset Purchase Agreement
("Purchase Agreement") and License and Technical Assistance Agreement ("License
Agreement") of even date herewith, pursuant to which TRW and ESL sold and
licensed certain assets and technology to PhonePrint.
B. The parties desire to create a technical advisory council to
facilitate on-going communication and education between them concerning certain
technology.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
of the Parties herein contained, it is hereby agreed as follows:
ARTICLE 1
COOPERATION
-----------
In connection with the obligations of TRW and ESL, the TRW Representatives
(as defined below), TRW and ESL agree to use their respective commercially
reasonable efforts to assist PhonePrint, as needed, if and to the extent
necessary to receive, subject to appropriate Government approval, either: (1)
U.S. Government classified information; or (2) any otherwise restricted
information the receipt, disclosure, use or invention of which causes a
violation under any provision of the United Sates Code.
ARTICLE 2
TECHNICAL ADVISORY COUNCIL
--------------------------
2.1 ESTABLISHMENT. Upon the execution of this Agreement, a "Technical
Advisory Council," or the "Council," shall be formed and remain in existence for
the duration of this Agreement. The Council shall be composed of six (6)
members, in accordance with the following structure:
<PAGE>
(a) Three (3) representatives of TRW, who shall initially be Jon
Jenny, Dale Lindley and Ken Talbot (the "TRW Representatives").
(b) Three (3) representatives of PhonePrint (the "PhonePrint
Representatives") appropriately representing senior technical staff of
PhonePrint.
In the event that any TRW Representative ceases to be an employee of or a
consultant to TRW or any of its affiliated or sister companies, then TRW shall
appoint a successor of reasonably equivalent stature, experience, knowledge and
capability. PhonePrint shall be entitled to remove and replace its own members
when and as it deems appropriate.
2.2 MEMBERSHIP. The Chair of the Technical Advisory Council shall be
alternated between the Parties on a quarterly basis. The first chairman shall
be a TRW Representative. Meetings of the Technical Advisory Council shall be
held at least quarterly, or more frequently by mutual agreement of TRW and
PhonePrint. The time and location of each meeting shall be reasonably
determined by the Chair.
2.4 RESPONSIBILITIES OF TECHNICAL ADVISORY COUNCIL. In connection with
their membership on the Council, TRW and PhonePrint shall have the following
specific responsibilities, obligations and objectives pursuant to this
Agreement:
(a) Openly exchange information, ideas and insights regarding "Existing
Technologies," "TRW Improvements," "TRW Inventions" and "PhonePrint
Improvements," each as defined in Section 2.7 hereof, which
information shall be exchanged in the form reasonably requested by the
requesting party;
(b) Discuss openly, candidly and thoroughly questions and issues regarding
the background, development or application of the Existing
Technologies and TRW Improvements, TRW Inventions and PhonePrint
Improvements; and
(c) Assist the other Party in problem solving related to Existing
Technologies, TRW Improvements, and PhonePrint Improvements.
2
<PAGE>
2.5 RESPONSIBILITIES OF TRW REPRESENTATIVES. TRW shall cause each TRW
Representative to:
(a) Personally attend all meetings of the Council and;
(b) Outside of meetings of the Council, be available to PhonePrint in
person or by phone, as elected by PhonePrint, for the exchange of
information and discussion of issues described in subsection 2.4(a),
(b) and (c) hereof, for up to (i) 16 hours per quarter per person
during the first eighteen (18) months of this Agreement; and (ii)
eight (8) hours per quarter per person for the final forty-two (42)
months of this Agreement; provided, however, that actual meeting time
of the Technical Advisory Council shall be credited towards the
requirements of this subsection Section 2.5(b). Unused hours in any
quarter are credited to future quarters, provided, however, any unused
hours at the end of this Agreement are forfeited.
TRW agrees to be responsible for securing the full cooperation of the TRW
Representatives in fulfilling their responsibilities hereunder. TRW further
agrees that PhonePrint shall have no obligation to compensate TRW or the TRW
Representatives for the discharge of the TRW Representatives' responsibilities
and obligations pursuant to Sections 2.4 and 2.5 hereof.
2.6 RESPONSIBILITIES OF PHONEPRINT REPRESENTATIVES. PhonePrint shall
cause each PhonePrint Representative to personally attend all meetings of the
Technical Advisory Council. PhonePrint agrees to be responsible for securing
the full cooperation of the PhonePrint Representatives in fulfilling their
responsibilities hereunder. PhonePrint further agrees that TRW shall have no
obligation to compensate PhonePrint or the PhonePrint Representatives for the
discharge of the PhonePrint Representatives' responsibilities and obligations
pursuant to Sections 2.4 and 2.6 hereof.
2.7 DEFINITIONS. For the purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Existing Technology" shall mean the Trade Secrets, Copyrights,
Licensed Products and Licensed Services licensed to PhonePrint
pursuant to the License Agreement, as well as the patents and patent
applications assigned to PhonePrint pursuant to that certain Patent
Application Assignment of even date herewith.
(b) "TRW Improvements" shall mean the "Business Successor Improvements,"
as defined in the License Agreement.
(c) "TRW Inventions" shall mean the "New Inventions," as defined in the
License Agreement.
3
<PAGE>
(d) "PhonePrint Improvements," shall mean the "Licensee Improvements," as
defined in the License Agreement.
ARTICLE 3
EXPENSES
--------
Each Party shall bear the expenses incurred by it with respect to this
Agreement, including without limitation, travel to and from meetings of the
Technical Advisory Council.
ARTICLE 4
TERM AND TERMINATION
--------------------
This Agreement shall become effective upon execution by the Parties as of
the day and year first stated above (the "Effective Date") and shall terminate
five (5) years after the Effective Date, unless sooner terminated in a writing
signed by all of the Parties hereto.
ARTICLE 5
DISCLOSURE AND PROTECTION OF INFORMATION
----------------------------------------
5.1 PROPRIETARY INFORMATION. For the purpose of this Agreement.
(a) "Proprietary Information" shall mean all drawings, documents,
ideas, computer software, know-how and other information supplied
by one Party to another (whether disclosed written or verbally by
demonstration or otherwise) for the purposes of achieving the
objectives of this Agreement. Notwithstanding the foregoing,
"Proprietary Information" shall not include any of the foregoing
items that are licensed to either Party pursuant to the License
Agreement or sold or assigned to PhonePrint pursuant to the
Purchase Agreement.
(b) "Proper Use" shall mean any use of the Proprietary Information
solely by the recipient for the objectives of this Agreement.
5.2 NONDISCLOSURE. All Proprietary Information furnished shall remain the
property of the disclosing party and shall be treated by the recipient in strict
confidence, shall not be used except for Proper Use, shall be disclosed by the
recipient only to persons within the recipient's company (including companies
directly or indirectly more than fifty percent (50%) owned or controlled by the
recipient) that are directly concerned with the Proper Use, and shall not be
disclosed to consultants or by the recipient to any
4
<PAGE>
other party without the disclosing party's prior written consent, except for
Proprietary Information that was:
(a) In the public domain at the time it was disclosed; or
(b) Known to the recipient without restriction at the time of receipt
as evidenced by written records; or
(c) Published or becomes available to others without restriction
through no act or failure to act on the part of the recipient; or
(d) Known to the recipient from a source other than the disclosing
party without breach of this Agreement by the recipient; or
(e) Subsequently designated by the disclosing party in writing as no
longer proprietary; or
(f) Independently developed by the recipient; or
(g) Disclosed after four (4) years from the date of delivery by the
disclosing party to the recipient, which four (4) year period
shall survive the termination of this Agreement.
If any portion of Proprietary Information falls within any one of these
exceptions, the remainder shall continue to be subject to the foregoing
prohibitions and restrictions. The recipient of Proprietary Information shall
inform its employees of the confidential nature of the Proprietary Information
and shall prohibit them from making copies of any of it except where such copies
are necessary for the purposes of Proper Use, unless agreed upon by the
disclosing party.
5.3 MARKING. Proprietary Information made available in written form by
one Party to another Party shall be marked with the legend:
"PHONEPRINT PROPRIETARY INFORMATION"
"TRW PROPRIETARY INFORMATION,"
as the case may be, or an equivalent conspicuous legend. A recipient of
Proprietary Information hereunder shall have no obligation with respect to any
portion of any written material which is not so labeled or any information
received orally unless it is identified as proprietary and a written summary of
such oral communication, specifically identifying the items of Proprietary
Information, is furnished to the recipient within thirty (30) days of such
disclosure.
5.4 COMPENSATION. Except as provided for by the License Agreement, the
Parties agree that: (a) the parties shall not be obligated to compensate each
other for the transfer of any Proprietary Information under this Agreement; (b)
no warranties of any
5
<PAGE>
kind are given with respect to such Proprietary Information or any use thereof;
and (c) no license is hereby granted under any patent, trademark or copyrights
with respect to any Proprietary Information or other technical data at any time
owned by any other Party hereto.
5.5 SURVIVAL. Other provisions of this Agreement notwithstanding, the
obligations of the Parties concerning confidentiality set forth in this Article
5 shall survive termination or completion of this Agreement, subject to the
limits set forth in Section 5.2(g).
ARTICLE 6
MISCELLANEOUS
-------------
6.1 RELATIONSHIP. Nothing in this Agreement shall be deemed to
constitute, create, give effect to or otherwise recognize a joint venture,
partnership, or formal business entity or any kind, and the rights and
obligations of the Parties hereto shall be limited to those expressly set forth
herein.
6.2 GOVERNING LAW; JURISDICTION AND VENUE; SEVERABILITY. This Agreement
shall be governed by and construed in accordance with the laws of the State of
California, without regard to principles of conflicts of law. If any term,
covenant or condition of this Agreement is held to be to any extent invalid,
void, or otherwise unenforceable by any court or arbitrator, the remainder of
this Agreement shall not be affected thereby and each term, covenant and
condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
6.3 ENTIRE AGREEMENT; MODIFICATION AND WAIVER. This Agreement, together
with the agreements and documents referred to herein, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior and contemporaneous agreements and understandings. This
Agreement may be modified, amended or supplemented only by a written instrument
duly executed by all parties hereto. No covenant, term or condition or the
breach thereof shall be deemed waived, unless it is waived in writing and signed
by the party against whom the waiver is claimed. Any waiver of breach of any
covenant, term or condition shall not be deemed to be a waiver of any preceding
or succeeding breach of the same or any other covenant, term or condition. The
failure of any party to insist upon strict performance of any covenant, term or
condition hereunder shall not constitute a waiver of such party's right to
demand strict compliance therewith in the future. Time is of the essence for
purposes of each and every provision of this agreement.
6.4 NOTICES. All payments, notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
delivered personally (which shall include delivery by courier or overnight
delivery service) or sent by certified or registered mail postage prepaid,
certified or return receipt requested, or sent by telecopier or similar
facsimile transmission, to the parties at their respective address set forth
below or at such other address as shall be given in writing by a party
6
<PAGE>
to the other party. Items delivered personally or by telecopier or facsimile
shall be deemed delivered on the date of actual delivery; items sent by
certified or regular mail shall be deemed delivered three (3) days after
mailing.
If to ESL: ESL Incorporated
495 Java Dr.
Sunnyvale, CA 94088-3510
Attn: Dale Lindley
If to TRW: TRW Inc.
495 Java Dr.
Sunnyvale, CA 94088-3510
Attn: Kim Sainten or TRW Law Department
If to PhonePrint PhonePrint, Inc.
207 E. Java Drive
Sunnyvale, CA 94088
Attn: Kevin Compton
6.5 ASSIGNMENTS. TRW and ESL will have no right to assign or transfer any
of their respective rights or to delegate any of their duties under this
Agreement without the prior written consent of Licensee, except for assignment
or transfer to TRW or a subsidiary or affiliate of TRW or in connection with the
sale or transfer of all of the assets of the Successor Business. Licensee can
assign or sublicense any of its rights or licenses under this Agreement at its
sole option.
6.6 PUBLICITY. No Party shall make any announcement or communicate any
information to any third party concerning the purpose of this Agreement without
the prior written approval of the other Party.
6.7 PAYMENT OF FEES AND EXPENSES. Each party to this Agreement shall be
responsible for, and shall pay, all of its own legal, accounting and other
transactional fees and expenses incurred in the negotiation and preparation of
this Agreement and the other agreements and documents referred to herein and the
transactions contemplated herein and therein.
6.8 DRAFTING PARTY. The provisions of this Agreement, and the documents
and instruments referred to herein, have been examined, negotiated, drafted and
revised by counsel for each party hereto and no implication shall be drawn nor
made against any party hereto by virtue of the drafting of this Agreement.
6.9 ATTORNEYS FEES. If any action at law or equity is necessary to
enforce or interpret the terms of this Agreement or to protect the rights
obtained hereunder, the prevailing party shall be entitled to its reasonable
attorneys' fees, costs, and disbursements in addition to any other relief to
which it be entitled.
7
<PAGE>
6.10 COUNTERPARTS. This Agreement may be executed in multiple copies, each
of which shall be deemed an original and all of which shall constitute a single
agreement binding on all parties.
8
<PAGE>
IN WITNESS WHEREOF, the Parties' duly authorized representatives hereto
have executed this Cooperation Agreement as of the date first written above.
TRW INC. PHONEPRINT
_________________________ _________________________
Name Name
_________________________ _________________________
Print Name: Print Name:
Print Title: Print Title:
ESL INCORPORATED
_________________________
Name
_________________________
Print Name:
Print Title:
9
<PAGE>
EXHIBIT L
---------
Buyer Note
----------
L-1
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND THEREFORE THEY MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED
UNLESS REGISTERED UNDER THE APPLICABLE PROVISIONS OF
THE SECURITIES ACT OF 1933, OR UNLESS PURSUANT TO
RULE 144 UNDER SUCH ACT OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION FROM LEGAL COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
NON-NEGOTIABLE PROMISSORY NOTE
------------------------------
$3,000,000 December 14, 1994
Palo Alto, California
PhonePrint, Inc., a Delaware corporation ("Obligor"), for value received,
hereby promises to pay to the order of ESL Incorporated, a California
corporation ("Payee"), in lawful money of the United States at 495 Java Drive,
Sunnyvale, California 94088-3510 the principal sum of THREE MILLION DOLLARS
($3,000,000), on December 14, 1997.
Unpaid principal of this Note shall bear interest, from the date hereof
(the "Closing Date") until such principal is due and payable, at a rate per
annum equal at all times to 6.66% per annum, compounded annually. In the event
that any amount of principal or interest, or any other amount payable hereunder,
is not paid in full when due (whether at stated maturity, by acceleration or
otherwise), Obligor shall pay interest on such unpaid principal amount, from the
date such amount becomes due until the date such amount is paid in full, payable
on demand, at a rate per annum equal at all times to 7.66% per annum. All
computations of interest shall be made on the basis of a year of 365 or 366
days, as the case may be, for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
payable. All payments with respect to this Note shall be credited first to the
payment of accrued but unpaid interest and then to the repayment of principal.
Any payment shall be deemed made upon receipt by Payee.
Anything herein to the contrary notwithstanding, if during any period for
which interest is computed hereunder, the amount of interest computed on the
basis provided for in this Note, together with all fees, charges and other
payments which are treated as interest under applicable law, as provided for
herein or in any other document executed in connection herewith, would exceed
the amount of such interest computed on the basis of the Highest Lawful Rate,
Obligor shall not be obligated to pay, and Payee shall not be entitled to
charge, collect, receive, reserve or take, interest in excess of the Highest
Lawful Rate, and during any such period the interest payable hereunder shall be
computed on the basis of the Highest Lawful Rate. As used herein, "Highest
Lawful Rate" means the maximum non-usurious rate of interest, as in effect from
time to time, which may be charged, contracted
<PAGE>
for, reserved, received or collected by Payee in connection with this Note under
applicable law.
Obligor may, at any time, prepay the outstanding amount hereof in whole or
in part, without premium or penalty. In addition, Obligor shall be required to
prepay, without premium or penalty, the principal amount of this Note at the
following times:
i. Promptly after the end of each fiscal quarter of Obligor,
commencing with calendar quarter ending March 31, 1996, Obligor shall determine
the Inventory Sales for such fiscal quarter (and, with respect to the first
payment, the fiscal quarter shall be defined as the period from the date of this
Note to March 31, 1996) and shall, not later than 30 days after the end of such
quarter, prepay to Payee a percentage of the original principal amount of this
Note equal to (a) Inventory Sales for such quarter divided by (b) 200; provided,
--------
however, that any such prepayment shall not be required if such amount is less
- -------
than $50,000. As used herein, "Inventory Sales" means the number of units of
inventory sold or leased by Obligor to third parties. Notwithstanding any other
provision of this paragraph 1, Obligor shall not be required to pay to Payee
principal in excess of the original principal amount of this Note. If at any
time following the date of this Note but prior to December 15, 1995, Obligor has
received actual cash payments totaling $10,000,000 or more (not including credit
advanced by Obligor to third parties) with respect to Obligor's sale or lease to
third parties of inventory, then the March 31, 1996 date described above shall
automatically be changed to the last day of the calendar quarter during which
the total of such cash payments has exceeded $10,000,000.
ii. If on December 31, 1996, any portion of the principal of this
Note shall remain outstanding and such outstanding amount shall be less than
$1,000,000, Obligor shall prepay such outstanding principal amount in full.
Together with any prepayment under paragraphs 1 and 2 above, Obligor shall
pay all accrued interest to the date of such prepayment.
This Note may be not be modified, amended or terminated except by a writing
signed by Obligor and Payee.
The execution, delivery and performance by Obligor of this Note have been
duly authorized by all necessary corporate or partnership action of Obligor, no
consent or approval of any person or entity is required in connection herewith,
and this Note is the legal, valid and binding obligation of Obligor, enforceable
against Obligor in accordance with its terms.
So long as any amount hereof remains unpaid, Obligor shall use commercially
reasonable efforts to sell and lease its inventory and Obligor will not merge
with or into any entity or sell, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of its assets, unless the entity that survives any merger or acquires such
assets assumes in writing the obligations of Obligor hereunder and under the
Pledge Agreement (defined below).
-2-
<PAGE>
Any of the following events which shall occur shall constitute an "Event of
Default":
1. Obligor shall fail to pay when due any amount hereunder and such
failure shall continue for 5 business days.
2. Any representation or warranty by Obligor under or in connection
with this Note shall prove to have been incorrect in any material respect when
made or deemed made.
3. Obligor shall fail to perform or observe any term, covenant or
agreement contained in the immediately preceding paragraph above and such
failure shall continue for 15 business days.
4. Obligor shall admit in writing its inability to, or shall fail
generally or be generally unable to, pay its debts (including its payrolls) as
such debts become due, or shall make a general assignment for the benefit of
creditors; or Obligor shall file a voluntary petition in bankruptcy or a
petition or answer seeking reorganization, to effect a plan or other arrangement
with creditors or any other relief under the Bankruptcy Reform Act of 1978, as
amended or recodified from time to time (the "Bankruptcy Code") or under any
other state or federal law relating to bankruptcy or reorganization granting
relief to debtors, whether now or hereafter in effect, or shall file an answer
admitting the jurisdiction of the court and the material allegations of any
involuntary petition filed against Obligor pursuant to the Bankruptcy Code or
any such other state or federal law; or Obligor shall be adjudicated a
bankrupt, or shall make an assignment for the benefit of creditors, or shall
apply for or consent to the appointment of any custodian, receiver or trustee
for all or any substantial part of Obligor's property, or shall take any action
to authorize any of the actions or events set forth above in this paragraph; or
an involuntary petition seeking any of the relief specified in this paragraph
shall be filed against Obligor and shall not be dismissed within 30 days; or any
order for relief shall be entered against Obligor in any involuntary proceeding
under the Bankruptcy Code or any such other state or federal law referred to in
this paragraph 4.
5. Obligor shall liquidate, wind up or dissolve (or suffer any
liquidation, wind-up or dissolution), except in connection with a transaction
expressly permitted by this Note.
If any Event of Default shall occur and be continuing, Payee may (i), by
notice to Obligor, declare the entire unpaid principal amount of this Note, all
interest accrued and unpaid hereon and all other amounts payable hereunder to be
forthwith due and payable, whereupon all unpaid principal under this Note, all
such accrued interest and all such other amounts shall become and be forthwith
due and payable, without presentment, demand, pro test or further notice of any
kind, all of which are hereby expressly waived by Obligor; and (ii) whether or
not the actions referred to in clause (i) have been taken, exercise any or all
of Payee's rights and remedies under the Pledge Agreement and proceed to enforce
all other rights and remedies available to Payee under applicable law.
-3-
<PAGE>
Upon payment in full of all principal and interest payable hereunder, this
Note shall be surrendered to Obligor for cancellation.
This Note shall be binding upon, inure to the benefit of and be enforceable
by Obligor, Payee and their respective successors and assigns; provided that
without the written consent of Obligor, this Note may not be transferred or
assigned by Payee to any party other than TRW, Inc. or any direct or indirect
wholly-owned subsidiary of TRW, Inc. (after which assignment or transfer, such
transferee or assignee shall be deemed the Payee under this Note and shall have
all of the rights and responsibilities of the Payee hereunder).
No delay on the part of Payee in exercising any right hereunder shall
operate as a waiver of such right under this Note.
This Note is being delivered in and shall be construed in accordance with
the laws of the State of California.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including by facsimile) and mailed, sent
or delivered to the respective parties hereto at or to the following addresses
or facsimile numbers (or at or to such other address or facsimile number as
shall be designated by any party in a written notice to the other party hereto):
If to Payee: ESL Incorporated
495 Java Drive
Sunnyvale, CA 94088-3510
Attn: Morris Cohn
If to Obligor: Phoneprint, Inc.
207 E. Java Drive
Sunnyvale, CA 94088
Attn: Kevin Compton
All such notices and communications shall be effective (i) if delivered by hand,
upon delivery; (ii) if sent by mail, upon the earlier of the date of receipt or
five business days after deposit in the mail, first class, postage prepaid; and
(iii) if sent by facsimile, when sent.
Obligor agrees to pay on demand all costs and expenses of Payee in
connection with the enforcement and collection of this Note, including
reasonable attorneys' fees.
This Note is secured by certain collateral described in that certain Pledge
Agreement of even date herewith between Obligor and Payee.
[Remainder of This Page Intentionally Left Blank]
-4-
<PAGE>
IN WITNESS WHEREOF, Obligor has duly executed this Note, as of the date
first above written.
PHONEPRINT, INC.
By:__________________________________________
-5-
<PAGE>
EXHIBIT M
---------
Disclosure Schedule
-------------------
M-1
<PAGE>
EXHIBIT M
---------
DISCLOSURE SCHEDULE
The information set forth herein is, disclosed pursuant to Article 2 of the
Asset Purchase Agreement dated December 14, 1994 (the "Agreement") by and
--
between PhonePrint, Inc. ("PhonePrint"), ESL Incorporated ("Seller") and TRW
Inc. ("TRW").
Paragraph numbers contained herein correspond to section numbers in the
Agreement. Terms used in initial capital letters and not defined herein shall
have the same meaning asset forth in the Agreement.
PARAGRAPH 2.3
-------------
TITLE, CONDITION OF ASSETS
A. TITLE
-----
1. Cross reference to "Equipment Rentals and Leases" and "Software
Licenses," Schedules 1 and 2, respectively. To the extent that these rentals,
leases and licenses are transferable, Buyer will have a right and not title
thereto. Cross reference to Paragraph 2.9 for a list of documents that require
assignment.
2. Cross reference to Items A.1 (human capital) and A.3 (co-inventorship)
of Paragraph 2.7 and Items 1 (Magrill), 2 (other patents) and 4 (Other AirTouch
issues) to Paragraph 2.12. These issues may potentially affect title.
B. COMPLIANCE WITH LAWS. See Item A.2 above.
--------------------
C. CONDITION OF INVENTORY
----------------------
1. No Inspection/Acceptance Tests. Seller does not perform incoming
------------------------------
inspection and acceptance tests on its Raw Materials Inventory. Thus, the
condition of Raw Material Inventory is not known until Seller performs
PhonePrint product subsystem tests of which the Raw Materials Inventory is a
part. If problems arise, Inventory is isolated as "rejected" and submitted to
Seller's Material Review Board for consideration. See Item C.2 below.
2. Returned/Rejected Items. Certain items, components, or subassemblies
-----------------------
of the Raw Materials Inventory have been rejected during the manufacturing and
assembly process or constitute field returns. These items may be valued at a
range anywhere from full standard cost to scrap value. PhonePrint can return
defective material unless we have modified it or if it is obsolete and the
warranty period has not expired. As of the Closing, the warranty will not have
expired on any of the Raw Materials.
3. Product Development. The PhonePrint product is a developmental
-------------------
product, and is continually being developed as customers and the Seller work
together to define performance specifications, desired robustness and the like.
<PAGE>
4. No Product Representation. No representation is made that the
-------------------------
PhonePrint product that comprises part of the Inventory is salable in the
ordinary course of business, reliable, or acceptable to customers pursuant to
test plans that have yet to be determined.
5. Other Product Issues. There exist certain software and hardware
--------------------
issues that are being resolved as product development continues. See Schedule
3, "Product Issues."
PARAGRAPH 2.4
-------------
NO VIOLATION
A. CONSENTS TO ASSIGNMENT. Cross reference Schedules to Paragraph 2.9 of
-----------------------
this Exhibit M.
PARAGRAPH 2.5
-------------
GOVERNMENTAL AUTHORITIES
A. Buyer will need to acquire its own FCC license. Concurrent with the
Closing, Seller will release to Buyer test data required for that process.
B. Buyer may need to acquire export licenses and the international
equivalent(s) of an FCC license if and when it sells internationally. These
requirements vary country by country.
C. Seller requires a number of ordinary course licenses to conduct
Business such as fire permits and building permits and other similar permits.
None of these permits or licenses or their like will be transferred with the
sale of the product.
PARAGRAPH 2.6
-------------
LIABILITIES
A. Maintenance and support obligation for AirTouch Purchase Order, cross
reference to Item A.1(b) on Paragraph 2.9 expires December 31, 1994.
B. Product support obligations under the AirTouch Agreement, as amended
of the date herewith.
2
<PAGE>
PARAGRAPH 2.7
-------------
ASSETS, ACCOUNTS RECEIVABLE, PURCHASE ORDERS
A. THE ASSETS ARE ALL NECESSARY; SELLER HAS RIGHT, TITLE AND INTEREST
------------------------------------------------------------------
1. Human Capital. Certain of the Seller's assets reside in "human
-------------
capital," i.e., the know-how and experience of the engineers, managers, customer
service representatives and others who participated in developing the PhonePrint
Business, its product, and Seller's technology. Seller and TRW make no
representation that Buyer will acquire all of the employees and contract labor
that it may need -- this involves human resources issues over which Seller has
no control. See Item 5 below regarding product improvements.
2. Brochures. The following marketing material contains TRW copyright
---------
notices:
. Two print advertisements ("Click" and "Sparky"),
. Product brochure ("TRW PhonePrint: Network Access Control"),
. Product videotape ("TRW PhonePrint").
Seller understands that Buyer intends (and is granted a temporary license
under the License Agreement) to use this material only until the "CTIA" trade
show in February.
3. Co-Inventorship. The patent applications referenced in the License
---------------
Agreement, Exhibit B to the Asset Purchase Agreement, may require amendment to
grant co-inventorship credit to one ESL engineer, namely, Ken Talbot. If Ken
Talbot is determined to be a co-inventor of the patent applications referenced
in the License Agreement, his name may need to be included on the patent
applications. Seller will assist Buyer in determining inventorship of the
Patent Rights and execute all necessary documents at Seller's full expense not
to exceed $500 to reflect the determination.
4. Transition List. Certain items used by the Business are necessary for
---------------
the ordinary course of its Business (or substitutes therefor). These include
telephones, electricity, storage, forklifts, purchasing, accounting and payroll
systems and the like.
5. Product Issues. Cross reference to discussion of product issues in
--------------
Schedule 3 of this Exhibit M.
6. Product Improvements. No representation is made that the total range
--------------------
of conceivable product improvements can be made by the PhonePrint team as
presently constituted. For example, the PhonePrint team has limited capability
to add emitter tracking and location (i.e., direction finding) capabilities.
7. Use of Marketing Information. PhonePrint may continue to use the
----------------------------
text, images and design used in its marketing brochures in Item 2 above, videos
and other
3
<PAGE>
marketing materials provided, however, after the CTIA show, PhonePrint will
remove the TRW name and logo from these materials prior to use.
8. Purchase Orders. See Paragraph D below.
---------------
9. Non-transferable Equipment. Pooled capital equipment not being
--------------------------
transferred is listed in Schedule 4 of this Exhibit M.
B. NOTES OR ACCOUNTS RECEIVABLE
----------------------------
1. AirTouch Receivable. Certain moneys were owed to Seller under the
-------------------
AirTouch Agreement, however, this receivable will be eliminated as part of the
Second Amendment to this agreement being executed concurrently herewith.
2. Other Notes or Accounts Receivable. Except for the AirTouch
----------------------------------
receivable (Item 1 above), there are no other notes or accounts receivable.
C. WARRANTY
--------
PhonePrint has no formal warranty policy. It has, however, proposed
limited software and hardware warranties in draft agreements with NYNEX and LA
Cellular. Copies of these drafts have been provided to Buyer. Seller has a
one-year maintenance and support obligation under the original AirTouch purchase
order (Paragraph 2.9, Item A.lb (ten units, one year, shipped December 1993),
and Buyer will have a two-year maintenance and support obligation under the
second amendment to this agreement.
D. PURCHASE ORDERS. Cross reference to Paragraph 2.9.
---------------
E. SUPPLY CONTRACTS. See Schedule 6 to this Exhibit M, "Assumed
----------------
Obligations."
F. INVENTORY SCHEDULE. See Schedule 7 to this Exhibit M, "PhonePrint
------------------
Inventory."
G. CAPITAL EQUIPMENT SCHEDULE. See Schedule 8 to this Exhibit M,
--------------------------
"Capital Equipment."
PARAGRAPH 2.8
-------------
LITIGATION
A. Magrill or AirTouch matters referenced in response to patent and
contract issues, respectively, may ripen into claims. See Paragraphs 2.9 and
2.12 of this Exhibit M.
4
<PAGE>
PARAGRAPH 2.9
-------------
CONTRACTS
A. LIST OF CONTRACTS
-----------------
l.a AirTouch Agreement. Consent to Assignment obtained on even date
herewith.
b. AirTouch Purchase Order (AirTouch, formerly PacTel, as Buyer) dated
December 12, 1993 for ten PhonePrint products. Cross reference to Paragraph 2.7,
Warranty paragraph C.
2.a Memorandum of Understanding (for beta testing) between NYNEX Mobile
Communications Company ("NYNEX") and TRW Wireless Communications executed on
July 21, 1994.
b. NYNEX test exhibit for beta testing of PhonePrint dated August 26,
1994.
3.a NYNEX Purchase Order (NYNEX as buyer) for five PhonePrint products
dated June 27, 1993; contingent on agreement on performance specifications.
b. NYNEX Purchase Order (no-cost consignment only) dated December 14,
1993.
4. Letter of intent (for negotiations towards purchase order for 160
units) dated January 11, 1994 between ESL Incorporated and NYNEX Mobile
Communications.
5. Letter of intent (for negotiation towards purchase order for 150
units) dated December 21, 1993 between Seller and Cellular One (New York).
6. Non-Disclosure Agreements. See Schedule 5.
7. Licenses. See Exhibit B ("License Agreement") to the Asset Purchase
Agreement and Schedule 2, "Software Licenses," to this Exhibit M.
8. Purchase Orders (Seller as buyer). Cross reference to Schedule 6.
9. Equipment Rentals and Leases. See Schedule 1 of this Exhibit M.
10. Seller may have a beta test agreement (written or oral) with Cellular
One New York. A test plan is in place and units are in the field.
B. VALID AND BINDING/NO VIOLATION
------------------------------
1. AirTouch "breach" issue. Seller did not meet the delivery dates
-----------------------
specified in the AirTouch Agreement. However, the parties failed to agree upon
performance specifications that were a prerequisite for product delivery.
Accordingly, ESL does not believe it is in breach of the AirTouch Agreement.
Seller believes these issues are
5
<PAGE>
subsumed in the Second Amendment to the AirTouch Agreement being executed
concurrently herewith.
2. Other Delivery Date Problems. Seller has failed to meet delivery
----------------------------
dates on all of its existing memorandums of understanding and letters of intent.
Seller believes none of these delivery dates are binding contractual commitments
because no purchase orders were placed.
3. Postponement of Purchase Commitments. Seller is in the process of
------------------------------------
postponing delivery commitments of suppliers listed on Schedule 6 to this
Exhibit M.
PARAGRAPH 2.10
--------------
COMPLIANCE WITH LAW
Cross reference to Paragraph 2.9 (regarding potential breaches of contract)
and 2.12 (regarding potential patent infringement.)
PARAGRAPH 2.11
--------------
LIENS, PERMITS AND AUTHORIZATIONS
A. Non-transferable FCC license.
B. The Business Unit is not a separate business of Seller. No ordinary
course business permits will go with the Business.
C. Cross reference to Software Licenses, Schedule 2 to this Exhibit M.
D. California Public Utilities License. AirTouch obtained this on behalf
of Seller. Equivalent licenses may be required in any state where PhonePrint
products are tested or sold. State laws may vary.
E. Cross reference to responses to Paragraph 2.5.
PARAGRAPH 2.12
--------------
INTANGIBLE PROPERTY RIGHTS
A. MAGRILL PATENT. Documents and facts regarding this potential patent
--------------
infringement have been disclosed to Buyer's counsel.
B. OTHER PATENTS. Seller and TRW are unaware of the content of the
-------------
AirTouch patent, any patents pending, and any patents issued since July 11,
1994. There can be no
6
<PAGE>
assurance that the conduct of the Business, including the matters covered by
Seller's patent applications, does not violate any such patents issued since
July 11, 1994 or patents pending.
C. TRANSFERABILITY OF LICENSED SOFTWARE. Whenever a PhonePrint product
------------------------------------
is sold, it contains embedded software. Cross reference to Paragraph 2.9
regarding transferability.
D. OTHER AIRTOUCH ISSUES. There exist certain unresolved issues
---------------------
concerning whether, for purposes of determining intellectual property ownership
versus license rights, certain inventions peripheral to the core RF
fingerprinting technology were developed by ESL, AirTouch or jointly by both
parties. These issues are specifically identified in the License Agreement,
Exhibit B to the Asset Purchase Agreement, at Part B to Paragraph 4. These
inventions include: 1) use of dialed digits to identify fraud users, 2) always
allowed digits (e.g., 911), 3) use of single event to validate clusters, and 4)
spoofer terminator.
E. CHECKPRINT. The name and mark "CheckPrint" is being licensed to Bob
----------
Yee. Arguably, the name is similar to that of "PhonePrint." While both involve
fraud detection, different customers are involved and no technologies being
licensed to PhonePrint under the License Agreement are involved.
F. GRANT BACK. Grant-back to TRW in License Agreement of improvements to
----------
Licensed Products and Licensed Services.
G. TRADE SECRETS. Trade Secrets licensed to Buyer pursuant to the
-------------
License Agreement will not be owned by Buyer unless Buyer elects to file a
patent application incorporating the Trade Secrets.
H. USE OF RIGHTS. Full and proper use of the Rights require employment
-------------
of persons skilled in the art relating to the activities of the Business Unit.
I. PATENTABILITY OF INVENTIONS. No representation of the validity or
---------------------------
protectability is made for any invention which may be submitted as a patent
application by Buyer.
PARAGRAPH 2.13
--------------
TAX MATTERS
A. The balance of 1994 Property taxes due in December has been filed and
paid and will be pro-rated as the Seller is responsible only for that share due
through November 30, 1994.
7
<PAGE>
PARAGRAPH 2.14
--------------
ENVIRONMENTAL AND SAFETY MATTERS
A. Seller rents the building that houses the product team, and has made
no formal environmental inspection of the premises. Therefore, Seller makes no
representation as to the condition of the building with respect to the above
matters, except to note that the roof leaks.
B. Certain of the materials used by Seller, including solder, solder flux
and genesolve 2004, constitute hazardous materials. Currently, Seller does not
use these materials in such amounts as would necessitate any environmental
permits.
PARAGRAPH 2.15
--------------
CUSTOMERS AND SUPPLIERS
No exceptions.
PARAGRAPH 2.16
--------------
DISCLOSURE; NO MISSTATEMENTS
A. PRODUCT DEVELOPMENT. The PhonePrint product is a developmental
-------------------
product, and is continually being refined and improved as customers and the
Business Unit work together to define performance specifications, desired
robustness and the like. No representation is made as to the salability of the
PhonePrint products currently in inventory.
B. OTHER PRODUCT ISSUES. There exist certain software and hardware
--------------------
issues that are being resolved as product development continues. See Schedule
3, "Product Issues."
C. OBSOLESCENCE. Certain material has ceased being manufactured by
------------
Seller's suppliers, namely, the Radio Shack scanner and the OKI phone receiver.
There can be no assurance that reasonable alternatives will be available or that
significant product re-design effort will not be necessary.
PARAGRAPH 2.17
--------------
BUSINESS UNIT
No exceptions.
8
<PAGE>
SCHEDULES TO DISCLOSURE SCHEDULE
--------------------------------
Schedule 1 Equipment Rentals and Leases
Schedule 2 Software Licenses
Schedule 3 Product Issues
Schedule 4 Pooled Capital Equipment
Schedule 5 Non-Disclosure Agreements
Schedule 6 Assumed Obligations
Schedule 7 PhonePrint Inventory
Schedule 8 Capital Equipment
9
<PAGE>
SCHEDULE 1. EQUIPMENTAL RENTALS AND LEASES
- -------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
PHONEPRINT INC.
----------------------------------------------------------------------------------------------------------
EQUIPMENT RENTALS AND LEASES
----------------------------------------------------------------------------------------------------------
AS OF NOVEMBER 30,1994
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
OPEN PURCH.
----------------------------------------------------------------------------------------------------------
P.O. # VENDOR DESCRIPTION TOTAL
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
401067 Mobilecomm 16-pagers (and services) $ 1,200.00
----------------------------------------------------------------------------------------------------------
401504 AT&T Capital 1-HP8560E, & 1-HP8642B Spectrum Analyzer $ 2,078.00
----------------------------------------------------------------------------------------------------------
401541 AT&T Capital 1-Sparc 20 Model 50, 1-20" monitor, extra menory $ 1,515.00
----------------------------------------------------------------------------------------------------------
401558 AT&T Capital 2-Sparc 20 Model 50, 2-20" monitor, extra memory $ 2,332.00
----------------------------------------------------------------------------------------------------------
401647 AT&T Capital 2-com/DX100P/528 $ 596.00
----------------------------------------------------------------------------------------------------------
401709 AT&T Capital 2-486/66 12mb/120, 2-14" monitors $ 466.00
----------------------------------------------------------------------------------------------------------
401726 AT&T Capital 4-486/66 12mb/120, 2-14" monitors $ 892.00
----------------------------------------------------------------------------------------------------------
401734 AT&T Capital 2-Sparc 20 Model 50, 2-20" monitor, extra memory $ 2,332.00
----------------------------------------------------------------------------------------------------------
401237 Rent A Power Mac 7100 & Monitor, Quarda 650 $ 985.00
Computer
----------------------------------------------------------------------------------------------------------
401261 Rent A 1 - Mac 8100 32meg., 1-486/66 $ 1,405.00
Computer
----------------------------------------------------------------------------------------------------------
3-VGA Monitors, 1-16" monitor
----------------------------------------------------------------------------------------------------------
1 adaptec SCSI controller card
----------------------------------------------------------------------------------------------------------
401576 Rent A Quadra 650,14" monitor $ 340.00
Computer
----------------------------------------------------------------------------------------------------------
401253 Cal. Furniture 13 Work Tables, 8-chairs, 4-drafting chairs $ 808.00
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Total $14,949.00
=============
----------------------------------------------------------------------------------------------------------
NOTE: ABOVE ITEMS ARE ON MONTH-TO-MONTH LEASE.
----------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
SCHEDULE 2. SOFTWARE LICENSES
- -----------------------------
PHONEPRINT PRODUCT DEVELOPMENT SOFTWARE LICENSES:
1) Pharlap DOS Extender SW
2) IXI Premier Motif 1.2 - for the Sun Sparcstations (GUI)
3) Borland no-Nonsense
4) Digital License Pak Fortran for Open VMS, VAX C ***
5) Data Desk 4.2 analysis
6) 10 Watcom SW
7) X-Designer 3.0 (GUI) ***
8) SunPro Proof (GUI) ***
9) Burr Brown Spectrum DSP intelligent instrumentation
10) Adaptec SW SCSI for POS ***
11) Versaterm PRO (Analysis SW) ***
12) MatLab - DOS - MAC-SUN (Analysis SW) ***
13) TMS 32OC3x Emulator SW (Analysis)
14) Texas Instruments Microprocessor Development Systems ***
15) Sybase *
16) MS Visual Basic (for Windows)
17) MS Visual C++ (for Windows)
STANDARD SYSTEM/APPLICATION SOFTWARE:
1) FileMaker Pro, MacDraw Pro, Claris Draw, MacProject Pro (Claris)
2) Mac Schedule (Mainstay)
3) MS Office
4) DOS Mounter Plus (Mac, IBM)
5) Mac System Software 7.1, 7.5, System 7 Pro
6) DOS 6.2
7) Norton Anywhere, Symantec
8) Windows 3.1
9) Norton Utilities
10) TimbukTu (data network monitoring)
* The Sybase software license was given to us free from TRW Inc. and the issue
of transferring is being assessed. PhonePrint needs the latest version of this
software.
** The ESL site licenses for Word, Excel, PowerPoint, System 7 Pro, and Mac
System Software 7.1 and 7.5 will not be transferred to PhonePrint, Inc.
PhonePrint will have to purchase this software if it is deemed necessary.
*** Software license may require consent for assignment.
11
<PAGE>
SCHEDULE 3. PHONEPRINT PRODUCT ISSUES
- -------------------------------------
SYSTEM:
. COMMUNICATIONS NETWORK. The connection from SCC to RFU is unreliable making
routine upload and download of data problematic for customer satisfaction.
. DSP REBOOT. Some of the DSP processors in PhonePrint systems in the field
have problems that cause the processor to reboot. The system can not detect
any calls during this reboot process. The DSP reboots can occur every
couple of hours where the system will be down for around 10 seconds.
. INTEL MODEM. Some of the PhonePrint systems in the field occasionally have
communications problems due to the interaction of the Intel modems and PC-
Anywhere software package causing the communications system to hang up. The
system must be rebooted to recover from this problem.
. SIGNAL DETECTION. This is a system performance limitation. The Motorola
model ("Model M") units detect about 90% of the signals due to the lower
system sensitivity from the antenna combiner we use. The Ericsson model
("Model E") detects >98% of the signals because of the three receivers and
DSP boards.
. "BRAZIL STREET ALIEN." One of PhonePrint's systems in the field has a
problem with bit errors. This is caused by a piece of the cell site
equipment having signals couple into the PhonePrint system. These phone
companies do not experience these problems in their equipment. This problem
can cause problems in 40% of PhonePrint's call intercepts for 2 - 6 days at
a time. The problem can be gone for 2 - 20 days at a time.
HARDWARE:
. ARIEL DSP BOARD. Some of the Ariel DSP boards have a problem with memory
access. This is a manufacturing defect of a Cypress chip on some of the
boards. This problem has been corrected for all future boards.
. WATKINS JOHNSON RECEIVER. There are a number of system deficiencies caused
by poor receiver specifications. To meet cost and schedule goals, the
vendor was allowed to ignore certain specifications. The specific issues
are:
. no Noise Figure specification
. no specification on spurs or Spur Free Dynamic Range
. no soft limiter on signal amplitude
. no Group Delay specification
. no specifications on receiver to receiver consistency
. inadequate bandwidth specification; PhonePrint engineers are working on a
software fix.
. OBSOLETE COMPONENTS. The specific Radio Shack receiver and OKI cell phone
models used in PhonePrint's "spoofer" terminator have been discontinued by
these suppliers.
SOFTWARE:
PhonePrint engineers are currently working on the 0.8.5.x and 0.8.6.x software
releases that will address all of these problems.
. NEC PHONES. PhonePrint's current system, 0.8.4.4, does not always perform
properly with high level signals from NEC phones.
. AT&T PHONES. PhonePrint's current system does not always perform properly
with some AT&T phones.
12
<PAGE>
. WILD SHOTS. Some phones and some signal environments cause some of the
parameters to have erroneous values. This problem has been labeled "wild
shots". While the current software release (0.8.4.4) is orders of magnitude
better than the previous release (0.8.2.4), it still has wild shots from
time to time.
. CLUSTERING PROBLEMS. PhonePrint's algorithm for combining signal intercepts
from the same phone from the same and different cells is not as robust as it
should be. We experience situations where this lack of robustness can
desensitize our ability to see fraud against some MINs.
13
<PAGE>
SCHEDULE 4. POOLED CAPITAL EQUIPMENT
- ------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
PHONEPRINT INC.
- -----------------------------------------------------------
NON-TRANSFERABLE EQUIPMENT
- -----------------------------------------------------------
AS OF NOVEMBER 30, 1994
- -----------------------------------------------------------
- -----------------------------------------------------------
- -----------------------------------------------------------
- -----------------------------------------------------------
MAKE MODEL DESCRIPTION ASSET#
- -----------------------------------------------------------
- -----------------------------------------------------------
- -----------------------------------------------------------
<S> <C> <C> <C>
HP 8568B ANAL, SPECT C0014760
- -----------------------------------------------------------
HP 8901A Mod Analyzer 2134AOl C0015075
- -----------------------------------------------------------
HP 8903A ANAL, AUDIO C0015096
- -----------------------------------------------------------
HP 8642A GEN, SYNTHESIZER C0016036
- -----------------------------------------------------------
HP 4195A ANAL, NETWORK, SPECT C0016310
- -----------------------------------------------------------
HP 8753C ANAL, NETWORK C0017153
- -----------------------------------------------------------
HP 5371A ANAL, FREQ C0018150
- -----------------------------------------------------------
HP 346B SOURCE, NOISE C00l9046
- -----------------------------------------------------------
TEXASINSTR 32OC30 EMULATOR, BOARD C0019440
- -----------------------------------------------------------
HP 16500A ANAL, LOGIC C0020397
- -----------------------------------------------------------
HP 85046A TEST SET,S-PARAMTR C0020732
- -----------------------------------------------------------
HP 85032B KIT, CALIB, N C0020733
- -----------------------------------------------------------
PROTOCOL ANALYZER C0018314
- -----------------------------------------------------------
SPECTRUM ANALYZER C0019081
- -----------------------------------------------------------
</TABLE>
NOTE: THE POOLED CAPITAL EQUIPMENT THAT IS NOT PART OF THE TRANSFERRED ASSETS
WILL BE REMOVED FROM J7, THE PHONEPRINT FACILITY LOCATED AT 207 JAVA DRIVE IN
SUNNYVALE, CA, ON DECEMBER 31, 1994 OR SOONER IF PHONEPRINT, INC. REPLACES THIS
EQUIPMENT IN THE INTERIM.
14
<PAGE>
SCHEDULE 5. NON-DISCLOSURE AGREEMENTS
- -------------------------------------
<TABLE>
<CAPTION>
AGRMN'T EXPIRATION
COMPANY DATE DATE
----------------------------------------------------------------------------------------------------------------------------
AGRMN'T EXPIRATION
COMPANY DATE DATE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASPEN TECHNOLOGIES 9/15/94 9/15/95
Exploring potential investment opportunities with respect to the TRW PhonePrint network
access control system.
ASSOCIATED RT, INCORPORATED 4/28/94 4/28/95
TRWs wireless technology and business plans and Associated's radio location patent and
business plans in order to evaluate the viability of a potential business relationship.
BELL ATLANTIC MOBILE SYSTEMS, INC. 5/12/94 5/12/96
Contemplate discussions and analyses conserning TRW PhonePrint technology.
BERNARD HODES ADVERTISING - BEVERLY PRINCIPAL 9/30/93
BROBECK, PHLEGER & HARRISON 11/17/94 11/17/95
Law firm representing investors of PhonePrint
CBIS 9/15/94 9/15/95
Exploring potential investment opportunities with respect to the TRW PhonePrint network
access control system.
CELLTEST 6/19/94 6/9/95
Terminator Design
COMSAT MOBILE COMMUNICATIONS* 5/24/94 5/24/96
COMSAT has developed or is developing or owns certain operational, technical and
telecommunications services business information relating to its business of providing mobile
ESL has certain technical, operational market research and business information relating to its
business of Mobile Communications Network Access Control.
CORAL SYSTEM 10/23/94 10/23/95
Exploring potential investment opportunities with respect to the TRW PhonePrint network
access control system.
CORAL SYSTEM INCORPORATED 10/20/93 10/20/94
Information relating to telecommunications systems and services.
CUBIC COMMUNICATIONS INCORPORATED 6/21/93 1/1/94
Specifications for low cost receiver front end; Quantity and program schedules and market
potential Any system configuration of these receivers.
DIABLO RESEARCH 6/9/94 6/9/95
Terminator Design
E. CRAIG SANDERS 9/19/94 9/19/95
Employment
E2 INCORPORATED 7/22/93 7/22/94
Jay Evered
EDS 3/2/93 5/1/93
Discussing methods to detect and control fraudulent use of cellular communications through the
use of RF signatures.
</TABLE>
PAGE 15
<PAGE>
SCHEDULE 5. NON-DISCLOSURE AGREEMENTS
- -------------------------------------
<TABLE>
<CAPTION>
AGRMN'T EXPIRATION
COMPANY DATE DATE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EDS 5/19/94 5/19/95
Exploring potential investment opportunities with respect to the TRW PhonePrint network
access control system.
ERICSSON RADIO SYSTEMS INC. 8/17/94 8/17/95
Regarding information relating to ESL's wireless technology and business plans and Ericsson
products in order to evaluate the viability of a potential business relationship in wireless office
products.
FAILURE ANALYSIS ASSOCIATE 10/19/94 10/19/95
(PhonePrint) evaluating its MTBF and field performance.
FALCON COMMUNICATIONS 12/21/93 12/21/94
Evaluation of system
GLOBALLINK 5/3/93 7/8/93
Application: Direction Finding techniques for detecting mobile cellular emitters and wireless
technologies used with PBX telephone systems.
GLOBALLINK 4/12/93 8/12/93
Application "fingerprinting" techniques for detecting and controlling fraudulent use of cellular
telephony.
GOLDBERG, STEPHEN 4/27/94 4/27/95
Employment purposes
GRAHAM MORLAND 8/16/94 8/16/95
Employment (was hired)
GTE MOBILNET 2/1/94 2/1/95
Joint review of technical aspects of TRW
PhonePrint
GTE TSI 4/26/94 Indefinite
Discussions re: CloneDetector System, TransAction Manager System, TRW PhonePrint
Network Access Control System.
HALL SOFTWARE TECHNOLOGIES 4/27/94 4/27/95
Work on PhonePrint
HANISON, GREG 12/29/93 12/29/94
Company business operations assessment
HARTSTIELD COMPANY 5/30/94 5/30/95
Evaluation of company operations, specifically Customer Service and Sales
HILL & KNOWLTON 9/20/93
Clone Terminator and related products.
IFR SYSTEMS INCORPORATED 6/21/93 1/1/94
Specifications for low cost receiver front end; Quantity and program schedules and market
potential. Any system configuration of these receivers.
INFO PLUS INTERNATIONAL 5/2/94 5/1/95
ESL's wireless technology and business plans for the purpose of determining the suitability of
engaging Info Plus as a consultant
J. EDWARDS 7/23/93 10/23/93
ARUBA business plan and details of ESL's telecommunications business venture(s).
</TABLE>
PAGE 16
<PAGE>
SCHEDULE 5. NON-DISCLOSURE AGREEMENTS
- -------------------------------------
<TABLE>
<CAPTION>
AGRMN'T EXPIRATION
COMPANY DATE DATE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JAMES HEALY 9/20/94 9/20/95
Employment
JAMIE DAVISON DESIGN, INC. 11/7/94 11/7/95
Information for the purpose of developing a corporate identity.
K.M.T.C. 6/1/94 6/1/95
Technical information regarding TRW PhonePrint
LOS ANGELES CELLULAR 4/8/93 7/8/93
Data on RF "fingerprint" techniques for detecting and controlling fraudulent use of cellular
telephony and signal enhancement for cellular telephony.
LOS ANGELES CELLULAR TELEPHONE COMPANY 10/10/94 10/10/95
(PhonePrint) TRWs wireless technoloy and business plans, and L.A. Cellular's business
strategies, plans, policies and procedures regarding cellular or wireless fraud management in
order to evaluate the viability of a potential business relationship
MCCAW 11/2/93 8/2/94
Joint review of the technical aspects of ARUBA project (TRW PhonePrint)
MCCAW CELLULAR COMMUNICATIONS 7/13/94 7/13/95
Determining the viability of a potential business relationship.
MOTOROLA 7/22/94 7/22/95
MOTOROLA, INC. 5/9/94 5/9/97
TRW PhonePrint network access control sustem as it relates to the problem of clone phones.
N. MARSHALL & ASSOCIATES INCORPORATED 1/4/93 11/4/94
NARROWBAND 6/9/94 6/9/95
Terminator Design/possible design work for TRW
NARROWBAND TELECOM. RESEARCH INC. 9/8/93 12/31/93
ARUBA product specific details.
NEEDHAM & COMPANY 5/12/94 5/12/95
Exploring potential investment opportunities with respect to the TRW PhonePrint network
access control system.
NYNEX MOBILE COMMUNICATION COMPANY 12/16/93 7/1/94
Exchange proprietary information relating to TRW "PhonePrint".
MOBILE COMMUNICATION COMPANY 7/20/94 7/1/95
Mutually conduct tests on the TRW PhonePrint network access control system.
OMNI CELLULAR 1/1/94
ESL: Information regarding business opportunity (ARUBA) in the cellular phone industry.
Omni: Technical informtion relating to cellular phone technologies/software.
PACTEL 4/22/93 10 yrs
Evaluate and understand potential involvement in a project of mutual interest.
PACTEL 3/26/93 Indefinite
Evaluate and understand potential involvement in a project of mutual interest
</TABLE>
PAGE 17
<PAGE>
SCHEDULE 5. NON-DISCLOSURE AGREEMENTS
- -------------------------------------
<TABLE>
<CAPTION>
AGRMN'T EXPIRATION
COMPANY DATE DATE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PHILIPINO TELEPHONE CORPORATION 9/26/94 9/26/95
For the purpose of determining the viability of a potential business relationship.
RIACS (RESEARCH INSTITUTE FOR ADVANCED COMPUTER SCIENCE) 3/27/94 3/27/95
Product evaluation
SF TELECOM 6/9/94 6/9/95
Terminator Design
SNET CELLULAR INC. 3/17/94 3/17/95
SPRINT CELLULAR 11/11/93 11/11/94
Product evaluation
STEINBRECHER CORPORATION 6/22/93 1/1/94
Specifications for low cost receiver front end; Quantity and program schedules and market
potential. Any system configuration of these receivers.
SUN MICROSYSTEMS 10/7/93 12/31/94
ARUBA Product
SUBSCRIBER COMPUTING, INC. 7/11/94 7/11/95
For the purpose of determining the viability of a potential business relationship.
SYSTEMS LINK 12/2/94 12/2/95
Product evaluation and interface
TANDEM COMPUTERS INCORPORATED 10/18/94 10/18/95
For the purpose of determing the viability of a potential business relationship.
TELME KRON 8/24/93 8/24/94
Cellular Fraud Detection.
WATKINS-JOHNSON COMPANY 6/21/93 1/1/94
Specifications for low cost receiver front end; Quantity and program schedules and market
potential. Any system configuration of these receivers.
WIDEBAND COMPUTER, INC. 3/17/94 3/17/95
RF FingerPrint algorithms
US WEST* 6/21/94 6/21/97
Mutual evaluation of cellular PBX and wireless communications capabilities and marketing plan
VENTURE FIRST 11/18/94 11/18/95
Exploring potential investment opportunities with respect to the TRW PhonePrint network
access control system.
</TABLE>
Note: These non-disclosure agreements require consent to assignment.
PAGE 18
<PAGE>
SCHEDULE 6. ASSUMED OBLIGATIONS
- --------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
PHONEPRINT INC.
- -------------------------------------------------------------------------------------
OUTSTANDING COMMITMENTS
- -------------------------------------------------------------------------------------
AS OF NOVEMBER 30, 1994
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
PART TOTAL PURCHASE PURCHASE
- -------------------------------------------------------------------------------------
P.O. # VENDOR NUMBER QTY PRICE EXTENSION
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
401254 Amco Engineering 120-1095-001 41 475.60 19,500
- -------------------------------------------------------------------------------------
400012 Ariel Corp 125-0098-001 750 969.92 727,440
- -------------------------------------------------------------------------------------
401623 Arow Components 615-0504-001 7000 0.01 84
- -------------------------------------------------------------------------------------
401623 Arow Components 630-0501-001 2000 0.13 260
- -------------------------------------------------------------------------------------
400686 Custom Computer Service 125-0215-001 120 260.00 31,200
- -------------------------------------------------------------------------------------
401231 E Squared 125-0250-001 70 700.00 49,000
- -------------------------------------------------------------------------------------
401724 Isis Surface Mounting 590-0234-001 59 36 2,124
- -------------------------------------------------------------------------------------
401639 Kent Electronics 460-0271-001 375 3.97 1,489
- -------------------------------------------------------------------------------------
401389 Lambda Electronics 180-0114-001 100 23.50 2,350
- -------------------------------------------------------------------------------------
401226 Maxpeed Corp 125-1279-001 50 347.00 17,350
- -------------------------------------------------------------------------------------
400053 Rugged Computer Systems 190-0151-001 631 3,518.00 2,219,858
- -------------------------------------------------------------------------------------
401719 Rugged Computer Systems, In 190-0151-001 10 505 5,050
- -------------------------------------------------------------------------------------
401262 Vanderbend 510-1041-001 100 30.93 3,093
- -------------------------------------------------------------------------------------
401272 Vanderbend 510-1004-001 200 7.22 1,444
- -------------------------------------------------------------------------------------
401275 Vanderbend 510-1024-001 250 8.19 2,048
- -------------------------------------------------------------------------------------
401277 Vanderbend 510-1027-001 100 2.25 225
- -------------------------------------------------------------------------------------
401278 Vanderbend 510-1031-001 200 10.51 2,102
- -------------------------------------------------------------------------------------
401279 Vanderbend 510-1032-001 200 10.12 2,024
- -------------------------------------------------------------------------------------
401279 Vanderbend 510-1032-001 200 1.40 280
- -------------------------------------------------------------------------------------
401282 Vanderbend 510-1037-001 100 11.57 1,157
- -------------------------------------------------------------------------------------
401283 Vanderbend 510-1038-001 200 16.95 3,390
- -------------------------------------------------------------------------------------
401284 Vanderbend 510-1040-001 200 32.47 6,494
- -------------------------------------------------------------------------------------
401285 Vanderbend 510-1042-001 300 7.63 2,289
- -------------------------------------------------------------------------------------
401287 Vanderbend 510-1054-001 100 9.46 946
- -------------------------------------------------------------------------------------
401288 Vanderbend 510-1055-001 40 109.11 4,364
- -------------------------------------------------------------------------------------
401296 Vanderbend 520-1020-001 150 3.23 485
- -------------------------------------------------------------------------------------
400067 Voctron Labs 461-0109-001 180 335.00 60,300
- -------------------------------------------------------------------------------------
401306 Ward Bagby 676-0100-001 385 5.15 1,983
- -------------------------------------------------------------------------------------
401307 Ward Bagby 676-0101-001 385 4.00 1,540
- -------------------------------------------------------------------------------------
401308 Ward Bagby 680-0563-001 380 14.00 5,320
- -------------------------------------------------------------------------------------
401309 Ward Bagby 680-0565-001 120 42.40 5,088
- -------------------------------------------------------------------------------------
401310 Ward Bagby 676-0102-001 300 16.35 4,905
- -------------------------------------------------------------------------------------
401311 Ward Bagby 680-0564-001 200 1.45 290
- -------------------------------------------------------------------------------------
401584 DC Electronics 150-1452-001 100 19.14 1,914
- -------------------------------------------------------------------------------------
401559 DC Electronics 150-1450-001 140 26.89 3,765
- -------------------------------------------------------------------------------------
401589 DC Electronics 150-0426-001 325 15.11 4,911
- -------------------------------------------------------------------------------------
401512 DC Electronics 150-0409-008 200 6.49 1,298
- -------------------------------------------------------------------------------------
401735 DC Electronics 150-1456-001 25 3.50 88
- -------------------------------------------------------------------------------------
401699 Arow Components 630-0522-001 1500 0.213 320
- -------------------------------------------------------------------------------------
401699 Arow Components 607-0506-001 1000 0.15 150
- -------------------------------------------------------------------------------------
400799 DC Electronics 1 2,000.00 2,000
- -------------------------------------------------------------------------------------
401631 Applied Specialties 1 211.2 211
- -------------------------------------------------------------------------------------
401312 Ward Bagby 90 23.25 2,093
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Watkins Johnson 262,350
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
PAGE 19
<PAGE>
SCHEDULE 6. ASSUMED OBLIGATIONS
- --------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PHONEPRINT INC.
- ----------------------------------------------------------------------------------------------------------------------
OUTSTANDING COMMITMENTS
- ----------------------------------------------------------------------------------------------------------------------
AS OF NOVEMBER 30, 1994
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
PART TOTAL PURCHASE PURCHASE
- ----------------------------------------------------------------------------------------------------------------------
P.O. # VENDOR NUMBER QTY PRICE EXTENSION
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
401076 Ask Group 4 2,756.00 11,024
- ----------------------------------------------------------------------------------------------------------------------
401077 Ask Group 48 310.00 14,880
- ----------------------------------------------------------------------------------------------------------------------
401077 Ask Group 1 1,450.00 1,450
- ----------------------------------------------------------------------------------------------------------------------
401075 Hewlett Packard 1 2,193.00 2,193
- ----------------------------------------------------------------------------------------------------------------------
401075 Hewlett Packard 1 355.30 355
- ----------------------------------------------------------------------------------------------------------------------
401075 Hewlett Packard 1 224.40 224
- ----------------------------------------------------------------------------------------------------------------------
401075 Hewlett Packard 1 635.80 636
- ----------------------------------------------------------------------------------------------------------------------
401075 Hewlett Packard 1 469.20 469
- ----------------------------------------------------------------------------------------------------------------------
401067 Mobilecomm* 1 1,200.00 1,200
- ----------------------------------------------------------------------------------------------------------------------
401696 Sealed Air Corp. 1 2650 2,650
- ----------------------------------------------------------------------------------------------------------------------
401696 Sealed Air Corp. 1 950 950
- ----------------------------------------------------------------------------------------------------------------------
401736 Sun Microsystems 5 2640 13,200
- ----------------------------------------------------------------------------------------------------------------------
401722 Vanstar 2 120.88 242
- ----------------------------------------------------------------------------------------------------------------------
401729 Vanstar 1 2362 2,362
- ----------------------------------------------------------------------------------------------------------------------
401729 Vanstar 1 369 369
- ----------------------------------------------------------------------------------------------------------------------
401729 Vanstar 1 120 120
- ----------------------------------------------------------------------------------------------------------------------
401804 Vanstar 1 5 5
- ----------------------------------------------------------------------------------------------------------------------
401801 Ward Bagby 285 2.95 841
- ----------------------------------------------------------------------------------------------------------------------
401801 Ward Bagby 1 186.12 186
- ----------------------------------------------------------------------------------------------------------------------
401504 AT&T Capital* 1 2,078.00 2,078
- ----------------------------------------------------------------------------------------------------------------------
401558 AT&T Capital* 1 2,332.00 2,332
- ----------------------------------------------------------------------------------------------------------------------
401541 AT&T Capital* 1 1,515.00 1,515
- ----------------------------------------------------------------------------------------------------------------------
401647 AT&T Capital* 1 596.00 596
- ----------------------------------------------------------------------------------------------------------------------
401709 AT&T Capital* 1 466.00 466
- ----------------------------------------------------------------------------------------------------------------------
401726 AT&T Capital* 1 892.00 892
- ----------------------------------------------------------------------------------------------------------------------
401734 AT&T Capital* 1 2,332.00 2,332
- ----------------------------------------------------------------------------------------------------------------------
401253 California Furniture* 1 312.00 312
- ----------------------------------------------------------------------------------------------------------------------
401253 California Furniture* 1 336.00 336
- ----------------------------------------------------------------------------------------------------------------------
401253 California Furniture* 1 160.00 160
- ----------------------------------------------------------------------------------------------------------------------
401805 Frame Technology Corp 2 550.00 1,100
- ----------------------------------------------------------------------------------------------------------------------
401805 Frame Technology Corp 1 49.00 49
- ----------------------------------------------------------------------------------------------------------------------
401805 Frame Technology Corp 1 260.00 260
- ----------------------------------------------------------------------------------------------------------------------
401733 JMW Consultants Inc. 1 14650 14,650
- ----------------------------------------------------------------------------------------------------------------------
401733 JMW Consultants Inc. 1 6208.65 6,209
- ----------------------------------------------------------------------------------------------------------------------
401237 Rent A Computer* 1 985.00 985
- ----------------------------------------------------------------------------------------------------------------------
401261 Rent A Computer* 1 1,405.00 1,405
- ----------------------------------------------------------------------------------------------------------------------
401576 Rent A Computer* 1 340.00 340
- ----------------------------------------------------------------------------------------------------------------------
401667 Vanstar 2 3520.28 7,041
- ----------------------------------------------------------------------------------------------------------------------
401700 Tel-Lan Communications 12 12 144
- ----------------------------------------------------------------------------------------------------------------------
Consultant Mal Gurian-December Retainer & Expenses 30,500
- ----------------------------------------------------------------------------------------------------------------------
Consultant Gary Odegard-December Retainer & Expenses 5,500
- ----------------------------------------------------------------------------------------------------------------------
Consultant Jack Hsu-December Retainer & Expenses 9,000
- ----------------------------------------------------------------------------------------------------------------------
Consultant Robert Lux-Billed at straight hourly rate as used
- ----------------------------------------------------------------------------------------------------------------------
Consultant Hill & Knowlton 28,824
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL COMMITMENTS 3,634,950
============
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
* Indicates month-to-month rental
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 20
<PAGE>
SCHEDULE 7. PHONEPRINT INVENTORY
- -----------------------------------
INVENTORY AS OF 11/30/94
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
PHONEPRINT Inventory MODEL M MODEL A MODEL E TOTAL
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
1) Consigned Units 56 15 20 91
----------------------------------------------------------------------------
2) Finished Goods 61 31 84 176
----------------------------------------------------------------------------
3) Work In Progress N/A N/A N/A N/A
----------------------------------------------------------------------------
4) Material Unit Equivalents 0 0 61 61
----------------------------------------------------------------------------
5) Engineering Test Units 6 0 1 7
----------------------------------------------------------------------------
6) Raw Materials N/A N/A N/A $ 979,124
----------------------------------------------------------------------------
</TABLE>
1) Units shipped to customers on consignment at 11/30/94.
2) Finished Goods Inventory as of 11/30/94. Does not include the cost of
installation kits noted below in (b) below.
3) Work In Process (WIP) value is included in Material Unit Equivalents
calculation.
4) Material Unit Equivalents is calculated by adding material stock and WIP on
hand plus additional future purchases of $153,000 (see note (a) below). The
model E unit has the highest material content of the three Phone Print
models. Using this material in different product mixes would result in
different equivalent unit combinations.
5) Units that are in the field and in-house for purposes of Engineering test.
6) Remaining stock balance of $979,124 at 1995 standards. Included in this
number is material at vendors valued at $167,009 (see note (c) below) and
spares valued at $260,699 described in note (c) and (d).
NOTES:
(a) ESL's current estimate is approximately $153,000 to make up material
shortages required to build the 61 equivalent units shown above as item 4,
excluding labor and testing.
(b) Installation kit material nominally valued at $34,000 Is required to
complete 176 units of Finished Goods.
(c) The $167,009 of material under evaluation at vendors could potentially be
written-off based on final evaluation and recommended disposition
(d) Inventory has been re-valued based on latest material cost experience and
time standards.
Page 21
<PAGE>
SCHEDULE 8. CAPITAL EQUIPMENT
- -----------------------------
PhonePrint Inc.
Fixed Assets
As of November 30, 1994
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ASSET#
<S> <C> <C> <C>
HP 7550A CMPTR,PLOTTER,GRPH C0012235
APPLE MACPLUS COMPUTER,PERSONAL C0014120
APPLE MACPLUS COMPUTER,PERSONAL C0014342
APPLE MACPLUS COMPUTER,PERSONAL C0014542
APPLE MACPLUS COMPUTER,PERSONAL C0016103
AST PREMIUM 286 COMPUTER,PERSONAL C0017172
APPLE MAC II COMPUTER,PERSONAL C0017215
APPLE MAC II COMPUTER,PERSONAL C0019273
APPLE M0402 CMPTR,MONITOR,MONO C0019285
APPLE M0402 CMPTR,MONITOR,MONO C0019290
APPLE MAC II COMPUTER,PERSONAL C0019291
APPLE MAC II COMPUTER,PERSONAL C0019589
RADIUS 218 CMPTR,MONITOR C0019590
APPLE MACII Mac IIC1 w/Ext Kybd C0019941
RADIUS TPD/19 CMPTR,MONITOR C0020185
APPLE MAC II COMPUTER,PERSONAL C0020195
RADIUS TPD/19 CMPTR,MONITOR C0021173
APPLE CENTRIS COMPUTER,PERSONAL C0021600
DELL COMPUTERS466/ M COMPUTER,PERSONAL C0021988
DELL COMPUTERS466/ M COMPUTER,PERSONAL C0021989
APPLE CENTRIS COMPUTER,PERSONAL C0021990
APPLE CENTRIS COMPUTER,PERSONAL C0021991
RADIUS 350 CMPTR,MONITOR,COLOR C0021992
RADIUS 350 CMTR,MONITOR,COLOR C0021993
T1 2559821 CMPTR,PRINTER,LASER C0021994
APPLE QUADRA CENTRIS 650 C0022026
APPLE CENTRIS COMPUTER,PERSONAL C0022035
APPLE CENTRIS COMPUTER,PERSONAL C0022037
APPLE CENTRIS COMPUTER,PERSONAL C0022137
APPLE CENTRIS COMPUTER,PERSONAL C0022138
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022139
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022140
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022141
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022142
APPLE CENTRIS (610) COMPUTER,PERSONAL C0022143
APPLE CENTRIS COMPUTER,PERSONAL C0022144
RADIUS 348 CMPTR,MONITOR,COLOR C0022145
RADIUS 348 21" Color Monitor C0022146
APPLE PRO 630 CMPTR,PRINTER,LASER C0022147
NCA 4542NT CMPTR,DRIVE,DISK C0022151
NCA MXT1240S CMPTR,DRIVE,DISK C0022196
APPLE QUADRA (610) COMPUTER,PERSONAL C0022479
APPLE QUADRA (610) COMPUTER,PERSONAL C0022480
APPLE QUADRA (610) COMPUTER,PERSONAL C0022481
APPLE QUADRA (610) COMPUTER,PERSONAL C0022482
APPLE QUADRA (610) COMPUTER,PERSONAL/21" Clr Monitor C0022483
APPLE QUADRA (610) COMPUTER,PERSONAL/21" CLr Monitor C0022484
RADIUS 381 CMPTR,MONITOR,COLOR C0022485
</TABLE>
Page 22
<PAGE>
SCHEDULE 8. CAPITAL EQUIPMENT
- -----------------------------
PhonePrint Inc.
Fixed Assets
As of November 30, 1994
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ASSET #
<S> <C> <C> <C>
RADIUS 381 CMPTR,MONITOR,COLOR C0022486
DELL COMPUTERS466/M-66 COMPUTER,PERSONAL C0022528
DELL COMPUTERS466/M-66 COMPUTER,PERSONAL C0022529
CHAPLET SYS NBD486T COMPUTER,PERSONAL,LPTP C0022619
SUN S10GXN-40 WORKSTATION C0023073
SUN S10GXN-40 WORKSTATION C0023074
SUN 4/15EC-32 WORKSTATION C0023075
SUN 4/15EC-32 WORKSTATION C0023076
SUN 4/10EC-8 WORKSTATION C0023077
SUN X547A-ST CMPTR,DRIVE,DISK C0023078
SUN X547A-ST CMPTR,DRIVE,DISK C0023079
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023101
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023102
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023103
APPLE QUADRA COMPUTER,PERSONAL C0023104
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023105
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023106
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023107
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023108
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023109
APPLE POWERBOOK(QUADRA 61 COMPUTER,PERSONAL C0023110
APPLE QUADRA (610) COMPUTER,PERSONAL C0023111
MICRONET SS-Dl6OOO COMPUTER,DRIVE,TAPE,DAT C0023115
486 COMPUTER C0023197
HP 7550A CMPTR,PLOTTER,GRPH C0023308
DELL COMPUTERS486DX2-66 COMPUTER,PERSONAL C0023309
DELL COMPUTERS486DX2-66 COMPUTER,PERSONAL C0023310
DELL COMPUTERS486DX2-66 COMPUTER,PERSONAL C0023311
IFR SYSTEMS COM-120A CMPTR,MONITOR C0023404
IBM 425SX/SI COMPUTER,PERSONAL C0023529
IBM 425SX/SI COMPUTER,PERSONAL C0023530
APPLE QUADRA COMPUTER,PERSONAL C0023531
APPLE QUADRA COMPUTER,PERSONAL C0023532
APPLE QUADRA COMPUTER,PERSONAL C0023533
APPLE QUADRA COMPUTER,PERSONAL C0023534
APPLE QUADRA COMPUTER,PERSONAL C0023535
APPLE QUADRA COMPUTER,PERSONAL C0023536
APPLE POWER MAC COMPUTER,PERSONAL C0023537
APPLE POWER MAC COMPUTER,PERSONAL C0023538
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023605
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023606
APPLE POWERMAC COMPUTER,PERSONAL C0023621
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023634
APPLE POWERBOOK COMPUTER,PERSONAL,LPTP C0023635
APPLE QUADRA COMPUTER,PERSONAL C0023647
APPLE QUADRA COMPUTER,PERSONAL C0023648
APPLE QUADRA COMPUTER,PERSONAL C0023649
APPLE QUADRA610 COMPUTER,PERSON C0023782
PERSONAL COMPUTER C0023783
</TABLE>
Page 23
<PAGE>
SCHEDULE 8. CAPITAL EQUIPMENT
- -----------------------------
PhonePrint Inc.
Fixed Assets
As of November 30, 1994
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ASSET#
<S> <C> <C> <C>
APPLE PB DUO 280/280C Power Book Duo 280c w/17" Disp C0023903
Power Book Duo 280c w/17" Disp C0023904
APPLE M3077 (POWERMAC) CMPTR,PERSONAL C0023906
17 COLOR MONITOR C0023907
APPLE M2017 CMPTR,PERSONAL C0023908
APPLE M2612 CMPTR,MONITOR,COLOR 20" C0023909
Powerbook 180 C0023924
Powerbook 180 C0023925
APPLE 6100 (POWERMAC) CMPTER,PERSONAL C0023926
APPLE 6100 (POWERMAC) CMPTER,PERSONAL C0023927
APPLE M2464 (POWER PC) MONITOR,CMPTR C0023935
APPLE C-0890 MONITOR,COLOR (20") C0023936
APPLE M2464 (POWER PC 7100) MONITOR,CMPTR C0023937
APPLE C-0890 MONITOR,COLOR C0023938
APPLE 8100 CMPTR,PERSONAL C0023939
SPARC STAT C0023964
5 GB TAPE C0023965
SUN 4/10FC2- WORKSTATION C0023969
SUN 4/15FC2- WORKSTATION,CLASSIC C0023970
RADIUS C0507 MONITOR,COLOR 17" C0023971
APPLE QUADRA 605 CMPTR,PERSONAL C0023972
APPLE QUADRA 605 COMPUTER,PERSONAL C0023973
SPORTSTER N/A CMPTR,PERSONAL C0023974
APPLE M2332 POWERBOOK C0023991
APPLE M2332 POWERBOOK C0023992
INTEL 486 DXL 486 COMPUTER C0023995
APPLE 7100 PERSONALCOMPUTER C0023996
APPLE 7100 PERSONALCOMPUTER C0023997
COMPAQ PROLINEA FOR PAYROLL C0024046
APPLE POWERBOOK 520 FOR FINANCE C0024047
APPLE POWERBOOK 520 FOR FINANCE C0024048
APPLE 7100 PERSONALCOMPUTER C0024049
APPLE 7100 PERSONALCOMPUTER C0024050
Pentium 90 MHZ for Stoddard C0024111
Pentium 90 MHZ for Stoddard C0024112
TEKTRONIX 7Al8N SCOPE,PN,DUAL C0004026
TEKTRONIX 7Al8N SCOPE,PN,DUAL,CH C0004028
TEKTRONIX 7704 SCOPE,GP,MF C0004208
HP 6267B PWR SUPP, DC C0004227
TEKTRONIX 475DM43 SCOPE,PORTABLE C0004280
POWER DESIGN TP325 POWER SUPPLY, TRIPLE C0004357
TEKTRONIX 7A26 SCOPE,PN,DUAL CH C0004400
TEKTRONIX 7B80 SCOPE,PN,TIME BASE C0004649
TEKTRONIX 7B53A SCOPE,PN,DUAL C0004879
HP 6002A PWR SUPP, DC C0005290
TEKTRONIX 7B53A SCOP,PN,TIME BASE C0005319
KROHN-HITE 3202R FILTER,TUNABLE C0005370
HP 3964A RCRDR,INSTRUMENT C0005438
TEKTRONIX 7A26 SCOPE,PN,DUAL CH C0005452
</TABLE>
Page 24
<PAGE>
SCHEDULE 8. CAPITAL EQUIPMENT
- -----------------------------
PhonePrint Inc.
Fixed Assets
As of November 30, 1994
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ASSET #
<S> <C> <C> <C>
TEKTRONIX 7B85 SCOPE,PN,TIME BASE C0005598
SD TIMECODE READER 8132 C0005825
HP 436A METER,POWER,MW C0006519
HP 8656A GEN,SIGNAL C0007157
HP 197B CAMERA,SCOPE C0007573
HP 8970A METER,NOISE C0007647
TEKTRONIX 485 SCOPE,PORTABLE C0007725
HP 5335A COUNTER,ELEC C0007925
ESL PROJ 5110 MODULE, AMPL, BIAS C0011605
TEKTRONIX 2445 SCOPE,PORTABLE C0011887
TEKTRONIX 2465CTS O'SCOPE SNBO52750 C0012315
HP 16OG LOGIC ANALYZER C0012426
HP 6024A POWER SUPPLY C0012969
IBM 6180-002 CMPTR,PLOTTER,CLR C0013809
HP 3335A GEN,SYNTHESIZER C0014059
HP 5385A COUNTER,ELEC C0017628
HP HP 6632A PWR,SUPP,DC C0019030
FLUKE MFG 6080A GEN,SIGNAL C0019122
HP 6632A PWR,SUPP,DC C0019126
HP 6632A PWR,SUPP,DC C0019128
HP 5087A AMPL,DISTR C0021441
IFR SYSTEMS COM120A MONITOR, COMMUNICATION C0021580
IFR SYSTEMS 120A RECEIVER,COMM C0021984
NCA PERIPHERAL CMPTR,DRIVE,DISK C0021985
MXT1240S
NCA PERIPHERAL CMPTR,DRIVE,DISK C0021986
MXT1240S
II INC ZPB34A-006 CCA,DSP C0022048
BURR-BROWN ZPBI007001 CONVERTER, A/D C0022049
NCA 4542NT CMPTR,DRIVE,DISK C0022150
DIGITAL EQ 4000/90 SYSTEM,VAC C0022191
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022197
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022198
STANFORD RES SR620 COUNTER,UNIVERSAL C0023118
STANFORD RES FS700 FREQ STD,LORAN C0023119
LOW PHASE NOISE OSCIL C0023196
PANASONIC KX-B520 PRINTBOARD,ELECTRONIC C0023375
COMBINET CB-400 BRIDGE,ETHERNET C0023433
NOISE COM UFX7109 GEN,NOISE,PROGRAMMABLE C0023434
4MM TAPE DRIVE C0023551
HP 8560E ANAL, SPECTRUM C0023814
AUTOCAD SYSTEM C0023823
17 MONITOR C0023824
LASER PRINTER C0023825
2 GB HD, SCSI-II, Cable C0023963
4.2 GB MUL C0023966
4.2 GB MUL C0023967
4.2 GB MUL C0023968
CSC 1924EXT DRIVE,DISK,SCSI C0023975
CSC 1924EXT DRIVE,DISK,SCSI C0023976
RADIUS C0507 DRIVE,DISK,SCSI C0023977
</TABLE>
Page 25
<PAGE>
SCHEDULE 8. CAPITAL EQUIPMENT
- ------------------------------
PhonePrint Inc.
Fixed Assets
As of November 30, 1994
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ASSET#
<S> <C> <C> <C>
2 GB SCSI C0023978
2 GB SCSI C0023979
2 GB SCSI C0023980
2 GB SCSI C0023981
2 GB SCSI C0023982
2 GB SCSI C0023983
CSC 1924EXT DRIVE,DISK,SCSI C0023985
2 GB SCSI C0023986
19-2 GB HD & 13 TERMINATORS C0023987
2 GB SCSI C0023988
Xyplex Server C0023999
Sun Workstation C0024096
Self-Const Equip PHONEMAID, SIG GENERATORS(2) Self-Const
POWER 36100RF PWR SUPPLY, DC C0001464
DESIGN
TEKTRONIX 2335 SCOPE,PORTABLE C0007583
TEKTRONIX 496P ANAL,SPECT C0007792
HP 6653A POWER SUPPLY C0022979
HP 6653A POWER SUPPLY C0022980
HP 6653A POWER SUPPLY C0022981
HP 6673A POWER SUPPLY C0022982
HP 6543A POWER SUPPLY C0022983
HP 6543A POWER SUPPLY C0022984
HP 6543A POWER SUPPLY C0022985
HP 6543A POWER SUPPLY C0022986
TEKTRONIX TAS475 SCOPE,PORTABLE C0023312
TEKTRONIX 2232 SCOPE,PORTABLE C0023314
HP 8568B ANAL,SPECT C0023405
HP 8482B SENSOR,POWER C0023406
HP 8657B GEN,SIGNAL C0023407
HP 437B METER,POWER,MW C0023408
HP 5385A COUNTER,ELEC C0023473
POWER SUPPLY C0023574
HP 5385A COUNTER,ELEC C0023704
DRIVE CONTROL C0023784
DSP32C Board C0023874
CSC 1924EXT DRIVE,DISK,SCSI C0023984
Marconi Signal Generator C0024035
Rugged Computers C0024109
Rugged Computers C0024110
IBM SEL III TYPEWRITER C0006472
APPLE PRO 630 Laserwriter Pro 630 C0022148
HP FAX 950 FAX-EXPENSED C0023902
HP 451MX LASERJET PRINTER C0024045
HP 8591E ANAL,SPECT,PORTABLE C0023831
SUN X822A STORAGE PACK,5GB C0023954
SUN X569A DRIVE,DISK 4.2GB C0023955
SUN X569A DRIVE,DISK 4.2GB C0023956
SUN X569A DRIVE,DISK 4.2GB C0023957
Xyplex Server C0023998
</TABLE>
Page 26
<PAGE>
SCHEDULE 8. CAPITAL EQUIPMENT
- -----------------------------
PhonePrint Inc.
Fixed Assets
As of November 30, 1994
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ASSET #
<S> <C> <C> <C>
Xyplex Server C0024127
Xyplex Server C0024128
LEE ENG XB024-10 PLATFORM LIFTER C0023120
LEE ENG XB024-10 PLATFORM LIFTER C0023121
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023160
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023161
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023162
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023163
LEE ENG XB024-10 PLATFORM TRUCK/LIFT C0023164
WORK BENCHES C0023539
WIRE SHELF CARTS C0023540
Floor Scale C0024036
Instapak Model 750 Packaging C0024129
Stockroom Security Enclosure C0022850
HP HP3100 C0023841
</TABLE>
Page 27
<PAGE>
EXHIBIT 10.3
PHONEPRINT, INC.
STOCK PURCHASE AGREEMENT
_____________________
December 14, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Stock........................................... 1
1.1 Sale and Issuance of Series A Preferred Stock.................. 1
1.2 Closing........................................................ 1
2. Representations and Warranties of the Company........................ 1
2.1 Organization, Good Standing and Qualification.................. 1
2.2 Capitalization and Voting Rights............................... 2
2.3 Subsidiaries................................................... 2
2.4 Authorization.................................................. 2
2.5 Valid Issuance of Preferred and Common Stock................... 3
2.6 Governmental Consents.......................................... 3
2.7 Litigation..................................................... 3
2.8 Compliance with Other Instruments.............................. 3
2.9 Agreements; Action............................................. 4
2.10 Related-Party Transactions..................................... 4
2.11 Disclosure..................................................... 4
3. Representations and Warranties of ESL................................ 4
3.1 Authorization.................................................. 4
3.2 Purchase Entirely for Own Account.............................. 4
3.3 Disclosure of Information...................................... 5
3.4 Investment Experience.......................................... 5
3.5 Accredited Investor............................................ 5
3.6 Restricted Securities.......................................... 5
3.7 Further Limitations on Disposition............................. 5
3.8 Legends........................................................ 6
4. California Commissioner of Corporations.............................. 6
4.1 Corporate Securities Law....................................... 6
5. Conditions of ESL's Obligations at Closing........................... 6
5.1 Representations and Warranties................................. 6
5.2 Performance.................................................... 7
5.3 Compliance Certificate......................................... 7
5.4 Qualifications................................................. 7
5.5 Proceedings and Documents...................................... 7
5.6 Stock Purchase Agreement....................................... 7
5.7 Amendment No. 1 to the Investors' Rights Agreement............. 7
5.8 First Refusal Agreement........................................ 7
5.9 Voting Agreement............................................... 7
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
6. Conditions of the Company's Obligations at Closing.................... 7
6.1 Representations and Warranties.................................. 7
6.2 Payment of Purchase Price....................................... 7
6.3 California Qualification........................................ 8
6.4 Stock Purchase Agreement........................................ 8
6.5 Amendment No. 1 to the Investors' Rights Agreement.............. 8
6.6 First Refusal Agreement......................................... 8
6.7 Voting Agreement................................................ 8
7. Miscellaneous......................................................... 8
7.1 Survival of Warranties.......................................... 8
7.2 Successors and Assigns.......................................... 8
7.3 Governing Law................................................... 8
7.4 Counterparts.................................................... 8
7.5 Titles and Subtitles............................................ 9
7.6 Notices......................................................... 9
7.7 Finder's Fee.................................................... 9
7.8 Expenses........................................................ 9
7.9 Amendments and Waivers.......................................... 9
7.10 Severability.................................................... 9
7.11 Entire Agreement................................................ 10
</TABLE>
EXHIBIT A - Certificate of Incorporation
EXHIBIT B - Amendment No. 1 to the Investors' Rights Agreement
EXHIBIT C - First Refusal Agreement
EXHIBIT D - Voting Agreement
(ii)
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT is made as of December 14, 1994, by and
between PhonePrint, Inc., a Delaware corporation (the "Company") and ESL
Incorporated, a California corporation ("ESL").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Issuance of Series A Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) the Certificate of
Incorporation in the form attached hereto as Exhibit A.
---------
(b) Subject to the terms and conditions of this Agreement, ESL
agrees to purchase at the Closing and the Company agrees to sell and issue to
ESL at the Closing, 2,019,850 shares of the Company's Series A Preferred Stock
at a purchase price of $4,039,700. Such purchase shall be payable by ESL by
delivery to Company by ESL of a check in the amount of $4,039,700 payable to the
Company's order or by wire transfer of funds in such amount to the Company's
designated bank account.
1.2 Closing. The purchase and sale of the Series A Preferred Stock
-------
shall take place at the offices of Brobeck, Phleger & Harrison, Two Embarcadero
Place, 2200 Geng Road, Palo Alto, California at 11:00 A.M. on December 14, 1994,
or at such other time and place as the Company and ESL mutually agree upon
orally or in writing (which time and place are designated as the "Closing"). At
the Closing the Company shall deliver to ESL a certificate representing the
Series A Preferred Stock which ESL is purchasing against delivery to the Company
by ESL of the purchase price in the form as set forth above in Section 1.1(b).
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to ESL that, except as set forth on a Schedule of
Exceptions furnished ESL specifically identifying the relevant subparagraph
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.
<PAGE>
2.2 Capitalization and Voting Rights. The authorized capital of the
--------------------------------
Company consists, or will consist prior to the Closing, of:
(a) Preferred Stock. 8,120,000 shares of Preferred Stock (the
---------------
"Preferred Stock"), of which 8,120,000 shares have been designated Series A
Preferred Stock, and of which 6,100,150 have been issued and are outstanding and
of which 2,019,850 will be sold pursuant to this Agreement. The rights,
privileges and preferences of the Series A Preferred Stock will be as stated in
the Company's Certificate of Incorporation attached hereto as Exhibit A.
---------
(b) Common Stock. 18,270,000 shares of common stock ("Common
------------
Stock"), none of which are currently issued and outstanding.
(c) Except for the conversion privileges of the Series A
Preferred Stock outstanding and the Series A Preferred Stock to be issued under
this Agreement, and the rights provided in paragraph 2.4 of the Investors'
Rights Agreement, there are not outstanding any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. The Company is
not a party or subject to any agreement or understanding, and, to the Company's
knowledge, (except for the Voting Agreement) there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company.
2.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, and any other agreement to which the
Company is a party, the execution and delivery of which is contemplated hereby
(the "Ancillary Agreements"), the performance of all obligations of the Company
hereunder and thereunder and the authorization, issuance (or reservation for
issuance) and delivery of the Series A Preferred Stock being sold hereunder and
the Common Stock issuable upon conversion of the Series A Preferred Stock has
been taken or will be taken prior to the Closing, and this Agreement, and any
Ancillary Agreements constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
-2-
<PAGE>
2.5 Valid Issuance of Preferred and Common Stock. The Series A
--------------------------------------------
Preferred Stock which is being purchased by ESL hereunder, when issued, sold and
delivered in accordance with the terms hereof for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable and, based
in part upon the representations of ESL in this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The Common
Stock issuable upon conversion of the Series A Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Certificate of Incorporation, shall
be duly and validly issued, fully paid and nonassessable, and issued in
compliance with all applicable securities laws, as presently in effect, of the
United States and each of the states whose securities laws govern the issuance
of any of the Series A Preferred Stock hereunder.
2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, which filing will be effected within 15 days of the
sale of the Series A Preferred Stock hereunder.
2.7 Litigation. There is no action, suit, proceeding or
----------
investigation pending or currently threatened against the Company or which
questions the validity of this Agreement, or any Ancillary Agreements, or the
right of the Company to enter into any of them, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for the foregoing. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any provisions
of its Certificate of Incorporation or Bylaws or of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound
or, to its knowledge, of any provision of federal or state statute, rule or
regulation applicable to the Company. The execution, delivery and performance of
this Agreement or any Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the
-3-
<PAGE>
suspension, revocation, impairment, forfeiture, or nonrenewal of any material
permit, license, authorization, or approval applicable to the Company, its
business or operations or any of its assets or properties.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement.
2.9 Agreements; Action. Except for agreements explicitly
------------------
contemplated hereby and by the Investors' Rights Agreement, the First Refusal
Agreement and any Ancillary Agreements, there are no agreements, understandings
or proposed transactions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof.
2.10 Related-Party Transactions. No employee, officer, or director
--------------------------
of the Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the best of the Company's knowledge, none
of such persons has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company, except that employees, officers, or directors of the Company and
members of their immediate families may own stock in publicly traded companies
that may compete with the Company. No member of the immediate family of any
officer or director of the Company is directly or indirectly interested in any
material contract with the Company.
2.11 Disclosure. The Company has fully provided ESL with all the
----------
information which ESL has requested for deciding whether to purchase the Series
A Preferred Stock. Neither this Agreement, the Amendment No. 1 to the
Investors' Rights Agreement, the First Refusal Agreement, Ancillary Agreements,
nor any other statements or certificates made or delivered in connection
herewith or therewith contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements herein or therein not
misleading.
3. Representations and Warranties of ESL. ESL hereby represents and
-------------------------------------
warrants that:
3.1 Authorization. This Agreement constitutes its valid and legally
-------------
binding obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
ESL in reliance upon ESL's representation to the Company, which by ESL's
execution of this Agreement ESL hereby confirms, that, except to the extent set
forth herein, the Series A Preferred Stock to be received by ESL and the Common
Stock issuable upon conversion thereof (collectively, the "Securities") will be
acquired for investment for ESL's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that ESL
has no present intention of selling,
-4-
<PAGE>
granting any participation in, or otherwise distributing the same. By executing
this Agreement, ESL further represents that, except to the extent set forth
herein, ESL does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to any of the Securities. ESL does, however,
state its intention to transfer the Securities to TRW or a direct or indirect
wholly-owned subsidiary of TRW and the Company hereby acknowledges such proposed
assignment(s) and agrees that any assignments of the Securities among ESL, TRW
and direct and indirect wholly-owned subsidiaries of TRW do not breach this
Section 3.2. ESL represents that it has full power and authority to enter into
this Agreement.
3.3 Disclosure of Information. It believes it has received all the
-------------------------
information it considers necessary or appropriate for deciding whether to
purchase the Series A Preferred Stock. ESL further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Series A Preferred Stock. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of ESL to rely
thereon.
3.4 Investment Experience. ESL is an investor in securities of
---------------------
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series A Preferred Stock. ESL also
represents it has not been organized for the purpose of acquiring the Series A
Preferred Stock.
3.5 Accredited Investor. ESL is an "accredited investor" within the
-------------------
meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 Restricted Securities. It understands that the shares of Series
---------------------
A Preferred Stock it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act, only in certain limited circumstances. In this
connection, ESL represents that it is familiar with SEC Rule 144, as presently
in effect, and understands the resale limitations imposed thereby and by the
Act.
3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, ESL further agrees not to make any
disposition of all or any portion of the Series A Preferred Stock (or the Common
Stock issuable upon the conversion thereof) unless and until the transferee has
agreed in writing for the benefit of the Company to be bound by this Section
3.7, provided and to the extent such section is then applicable and any
applicable Ancillary Agreement and:
-5-
<PAGE>
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) ESL shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, ESL shall have furnished the Company with an opinion
of counsel, reasonably satisfactory to the Company, that such disposition will
not require registration of such shares under the Act. It is agreed that the
Company will not require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances. In addition, the Company hereby
agrees that any transfers among ESL, TRW and direct and indirect wholly-owned
subsidiaries of TRW may be effected without the delivery of the aforementioned
opinion of counsel.
3.8 Legends. It is understood that the certificates evidencing the
-------
Series A Preferred Stock (and the Common Stock issuable upon conversion thereof)
may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the Code.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. Conditions of ESL's Obligations at Closing. The obligations of ESL
------------------------------------------
under subsection 1.1(b) of this Agreement are subject to the fulfillment on or
before the Closing of each of the following conditions:
-6-
<PAGE>
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The President of the Company shall
----------------------
deliver to ESL at the Closing a certificate certifying that the conditions
specified in Sections 5.1 and 5.2 have been fulfilled and stating that there
shall have been no adverse change in the business, affairs, prospects,
operations, properties, assets or condition of the Company since the date of
this Agreement.
5.4 Qualifications. The Commissioner of Corporations of the State of
--------------
California shall have issued a permit qualifying the offer and sale of the
Series A Preferred Stock and the underlying Common Stock to ESL pursuant to this
Agreement, or such offer and sale shall be exempt from such qualification.
5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 Stock Purchase Agreement. The Stock Purchase Agreement between
------------------------
the Company and the investors set forth therein shall have closed.
5.7 Amendment No. 1 to the Investors' Rights Agreement. The Company
--------------------------------------------------
and each Investor shall have entered into the Amendment No. 1 to the Investors'
Rights Agreement in the form attached as Exhibit D.
---------
5.8 First Refusal Agreement. ESL and the Investors shall each have
-----------------------
entered into a First Refusal Agreement in the form attached hereto as Exhibit E.
---------
5.9 Voting Agreement. ESL, the Investors and the Company shall have
----------------
entered into a Voting Agreement in the form attached hereto as Exhibit F.
---------
6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to ESL under this Agreement are subject to the fulfillment on or
before the Closing of each of the following conditions by ESL:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of ESL contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
-7-
<PAGE>
6.2 Payment of Purchase Price. ESL shall have delivered the purchase
-------------------------
price specified in Section 1.2.
6.3 California Qualification. The Commissioner of Corporations of
------------------------
the State of California shall have issued a permit qualifying the offer and sale
to ESL of the Series A Preferred Stock and the Common Stock issuable upon the
conversion thereof or such offer and sale shall be exempt from such
qualification.
6.4 Stock Purchase Agreement. The Stock Purchase Agreement between
------------------------
the Company and the investors set forth therein shall have closed.
6.5 Amendment No. 1 to the Investors' Rights Agreement. The Company
--------------------------------------------------
and ESL shall have entered into the Amendment no. 1 to the Investors' Rights
Agreement in the form attached as Exhibit D.
---------
6.6 First Refusal Agreement. ESL and the Investors shall each have
-----------------------
entered into a First Refusal Agreement in the form attached hereto as Exhibit E.
---------
6.7 Voting Agreement. ESL, the Investors and the Company shall have
----------------
entered into a Voting Agreement in the form attached hereto as Exhibit F.
---------
7. Miscellaneous.
-------------
7.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and ESL contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of the Investors or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Series A Preferred Stock sold hereunder or any
Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-8-
<PAGE>
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finders' fee or commission in connection with this
transaction (except for the Company's and ESL's obligation to Needham &
Company). ESL agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which ESL or any of its officers, partners, employees, or
representatives is responsible, including, without limitation, ESL's payment
obligation to Needham & Company or any of its affiliates. The Company agrees to
indemnify and hold harmless ESL from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible, including,
without limitation, the Company's payment obligation to Needham & Company or any
of its affiliates.
7.8 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement or the Certificate of
Incorporation, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and ESL. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of all such securities, and the Company.
7.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
-9-
<PAGE>
7.11 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[Remainder of This Page Intentionally Left Blank]
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PHONEPRINT, INC., a Delaware corporation
By: /s/ Kevin Compton
-----------------------------------------
Kevin Compton, Chairman of the Board
Address: 207 E. Java Drive
Sunnyvale, CA 94088-3510
ESL INCORPORATED, a California corporation
By: /s/ James Sandstom
-----------------------------------------
Its: Senior Vice President
----------------------------------------
Address: 495 Java Drive
Sunnyvale, CA 94088-3510
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
CERTIFICATE OF INCORPORATION
----------------------------
A-1
<PAGE>
CERTIFICATE OF INCORPORATION
OF PHONEPRINT, INC.,
a Delaware corporation
ARTICLE I
The name of this corporation is PhonePrint, Inc..
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Series A Preferred
Stock." The total number of shares which the corporation is authorized to issue
is Eighteen Million Two Hundred Seventy Thousand (18,270,000) shares. Ten
Million One Hundred Fifty Thousand (10,150,000) shares shall be Common Stock,
$.001 par value per share, and Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock, $.001 par value per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Series A Preferred
Stock are as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this
<PAGE>
corporation) on the Common Stock of this corporation, at the rate of $0.10 per
share (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) per annum payable when, as and if
declared by the Board of Directors. Such dividends shall not be cumulative.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
A Preferred Stock were the holders of the number of shares of Common Stock of
this corporation into which their respective shares of Series A Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of this corporation entitled to receive such distribution.
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $2.00 for each outstanding share of Series A Preferred Stock (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series A Issue
Price") and (ii) an amount equal to declared but unpaid dividends on such share.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Series A Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then, the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to shareholders shall be distributed among the holders of Series A
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A Preferred
Stock).
c. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement), shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2.
-2-
<PAGE>
3. Redemption.
----------
a. On or at any time after November 30, 2001, this corporation
may at any time it may lawfully do so, at the option of the Board of Directors,
redeem in whole or in part the Series A Preferred Stock by paying in cash
therefor a sum per share equal to the Original Series A Issue Price together
with all dividends declared, but unpaid, with respect to such share to the
Redemption Date (such total amount is hereinafter referred to as the "Series A
Redemption Price").
b. Within thirty (30) days after the receipt by this
corporation of the written request of the holders of not less than sixty-six and
two-thirds percent (662/3%) of the then outstanding Series A Preferred Stock,
this corporation shall redeem the percentage of the Series A Preferred Stock
specified in such request (or, if less, the maximum amount it may lawfully
redeem) by paying in cash therefor a sum per share equal to the Series A
Redemption Price.
c. i) In the event of any redemption of only a part of the
then outstanding Series A Preferred Stock, this corporation shall effect such
redemption pro rata according to the number of shares held by each holder
thereof.
ii) At least 30 (or, in the case of a redemption pursuant
to subsection 3(b), 20) but no more than 60 days prior to the date fixed for any
redemption of Series A Preferred Stock (the "Redemption Date"), written notice
shall be mailed, first class postage prepaid, to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of the Series A Preferred Stock to be redeemed, at the address last shown
on the records of this corporation for such holder or given by the holder to
this corporation for the purpose of notice or, if no such address appears or is
given, at the place where the principal executive office of this corporation is
located, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and the date on
which such holder's Conversion Rights (as hereinafter defined) as to such shares
terminate and calling upon such holder to surrender to this corporation, in the
manner and at the place designated, his certificate or certificates representing
the shares to be redeemed (the "Redemption Notice"). Except as provided in
subsection 3(c)(iii), on or after the Redemption Date, each holder of Series A
Preferred Stock to be redeemed shall surrender to this corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
iii) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of such
-3-
<PAGE>
shares as holders of Series A Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the corporation legally
available for redemption of shares of Series A Preferred Stock on any Redemption
Date are insufficient to redeem the total number of shares of Series A Preferred
Stock to be redeemed on such date, those funds which are legally available will
be used to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed. The shares of Series A Preferred Stock
not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of
the Company are legally available for the redemption of shares of Series A
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Company has become obligated to redeem on any Redemption
Date but which it has not redeemed.
4. Conversion. The holders of the Series A Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
a. Right to Convert.
----------------
i) Subject to subsection (c), each share of Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share and prior to the close of
business on any Redemption Date as may have been fixed in any Redemption Notice
with respect to such share, at the office of this corporation or any transfer
agent for the Series A Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Series A Issue Price plus all declared but unpaid dividends thereon for each
share of Series A Preferred Stock, by the Conversion Price at the time in effect
for such share. The initial Conversion Price per share for shares of Series A
Preferred Stock shall be the Original Series A Issue Price; provided, however,
that the Conversion Price for the Series A Preferred Stock shall be subject to
adjustment as set forth in subsection 4(c).
ii) In the event of a call for redemption of any shares of
Series A Preferred Stock pursuant to Section 3 hereof, the Conversion Rights
shall terminate as to the shares designated for redemption at the close of
business on the Redemption Date, unless default is made in payment of the
Redemption Price in which case the Conversion Rights shall terminate on the date
such Redemption Price is paid.
iii) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such Series A Preferred Stock immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than
-4-
<PAGE>
$10.00 per share (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations) and $7,500,000 in the
aggregate or (B) the date upon which the corporation obtains the consent of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice by mail, postage
prepaid, to this corporation at its principal corporate office, of the election
to convert the same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. This
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offer of securities registered
pursuant to the Securities Act, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock, shall not be
deemed to have converted such Series A Preferred Stock until immediately prior
to the closing of such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Price of the Series A Preferred Stock shall be subject to adjustment
from time to time as follows:
i) A. If the corporation shall issue any Additional Stock
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for the Series A Preferred Stock in effect immediately
prior to the issuance of such Additional Stock, the Conversion Price for the
Series A Preferred Stock in effect immediately prior to each such issuance shall
forthwith (except as otherwise provided in this clause (i)) be adjusted to a
price equal to the quotient obtained by dividing the total computed under clause
(x) below by the total computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock sold pursuant to the agreements
-5-
<PAGE>
pursuant to which shares of Series A Preferred Stock are first issued
(the "Stock Purchase Agreement"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the date of the Stock Purchase Agreement (the "Purchase Date")
other than shares of Common Stock issued or issuable with respect to
the Series A Preferred Stock issued pursuant to the Stock Purchase
Agreement;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock sold pursuant to the Stock Purchase
Agreement divided by the Conversion Price for such shares in effect at
the Purchase Date (or such higher or lower Conversion Price for such
series as results from the application of subsections 4(c)(iii) and
(iv) and assuming that this Certificate was in effect as of the
Purchase Date) plus
(2) the number of shares of Additional Stock
issued since the Purchase Date (increased or decreased to the extent
that the number of such shares of Additional Stock shall have been
increased or decreased as the result of the application of subsections
4(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the
Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections (E)(3)
and (E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(c)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
-6-
<PAGE>
E. In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(c)(i) and subsection 4(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subsections 4(c)(i)(C) and (c)(i)(D)), if any, received by
the corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 4(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series A
Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such consideration
upon the exercise of any such options or rights or the conversion or
exchange of such securities.
-7-
<PAGE>
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A
Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related
to such securities, shall be recomputed to reflect the issuance of
only the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon
the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or
rights related to such securities.
5. The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections
4(c)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either
subsection 4(c)(i)(E)(3) or (4).
ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 4(c)(i)(E)) by this
corporation before, on or after the Purchase Date other than
A. shares of Common Stock issued pursuant to a transaction
described in subsection 4(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of the
Series A Preferred Stock,
C. shares of Common Stock issuable or issued to employees,
consultants, or directors of this corporation directly or pursuant to
a stock option plan or agreement or restricted stock plan or agreement
approved by the Board of Directors of this corporation at any time
when the total number of shares of Common Stock so issuable or issued
(and not repurchased at cost by the corporation in connection with the
termination of employment or service) does not exceed 2,030,000
(subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) since the date of
incorporation, or
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock will be converted to Common Stock
or (II) upon exercise of warrants or rights granted to underwriters in
connection with such a public offering.
iii) In the event the corporation should at any time or from time
to time after the Purchase Date fix a record date for the effectuation of a
split or
-8-
<PAGE>
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock then in effect shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents.
iv) If the number of shares of Common Stock outstanding at any
time after the Purchase Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price for the Series A Preferred Stock then in effect shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
d. Other Distributions. In the event this corporation shall declare
-------------------
a distribution payable in securities of other persons, evidences of indebtedness
issued by this corporation or other persons, assets (excluding cash dividends)
or options or rights not referred to in subsection 4(c)(iii), then, in each such
case for the purpose of this subsection 4(d), the holders of the Series A
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4) provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series A Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A Preferred Stock after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Conversion Price then
in effect and the number of shares purchasable upon conversion of the Series A
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
-9-
<PAGE>
f. No Impairment. This corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
i) No fractional shares shall be issued upon conversion of
the Series A Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock pursuant to this Section 4,
this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares
-10-
<PAGE>
of the Series A Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series A Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Preferred Stock,
this corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
5. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Series A Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the by-laws of
this corporation, and shall be entitled to vote, together as a single class with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be Five (5). Notwithstanding 5(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock and Common Stock, voting together on an as converted basis,
shall be entitled to elect one (1) director of the corporation. At any meeting
held for the purpose of electing directors, the presence in person or by proxy
of the holders of a majority of the Series A Preferred Stock then outstanding
shall constitute a quorum of the Series A Preferred Stock for the election of
directors to be elected solely by the holders of Series A Preferred Stock. At
any meeting held for the purpose of electing directors, the presence in person
or by proxy of the holders of a majority of the Series A Preferred Stock and
Common Stock then outstanding, on an as converted basis, shall constitute a
quorum of the Series A Preferred Stock and Common Stock for the election of
directors to be elected solely by the holders of the Series A Preferred Stock
and Common Stock, voting together on an as converted basis. A vacancy in any
directorship elected by the holders of Series A Preferred Stock shall be filled
only by vote of the holders of Series A Preferred Stock; and a vacancy in any
directorship elected by the holders of Series A Preferred Stock and Common Stock
voting together shall be filled only by the vote of the holders of Series A
Preferred Stock and Common Stock voting together as provided above.
-11-
<PAGE>
6. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock are outstanding, this corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of a
majority of the then outstanding shares of Series A Preferred Stock:
a. sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares;
c. increase the authorized number of shares of Series A
Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock with
respect to voting, dividends or upon liquidation, or (ii) having rights similar
to any of the rights of the Series A Preferred Stock under this Section 6; or
e. change authorized number of directors from five (5).
7. Status of Converted or Redeemed Stock. In the event any shares of
-------------------------------------
Series A Preferred Stock shall be redeemed or converted pursuant to Section 3 or
Section 4 hereof, the shares so converted or redeemed shall be cancelled and
shall not be issuable by the corporation. The Certificate of Incorporation of
this corporation shall be appropriately amended to effect the corresponding
reduction in the corporation's authorized capital stock.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
-12-
<PAGE>
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the By-laws of this corporation, and shall be
entitled to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The name and mailing address of the incorporator is Kevin Compton, 2750
Sand Hill Road, Menlo Park, CA 94025.
-13-
<PAGE>
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the corporation.
ARTICLE IX
The corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-14-
<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation as of this 22nd day of November, 1994.
_____________________________________________________
Kevin Compton, Incorporator
[SIGNATURE PAGE TO CERTIFICATE OF INCORPORATION]
<PAGE>
EXHIBIT B
AMENDMENT NO. 1 TO THE INVESTORS' RIGHTS AGREEMENT
--------------------------------------------------
B-1
<PAGE>
PHONEPRINT, INC.
AMENDMENT NO. 1 TO THE INVESTORS' RIGHTS AGREEMENT
This Amendment No. 1 ("Amendment") to the Investors' Rights Agreement (the
"Agreement") is made as of this 14th day of December, 1994 by and among
PhonePrint, Inc., a Delaware corporation (the "Company"), each of the
individuals and entities listed on Schedule A to the Agreement (the "Existing
----------
Investors") and ESL Incorporated, a California corporation ("ESL"). Capitalized
terms used herein which are not defined herein shall have the definition
ascribed to them in the Agreement.
RECITALS
--------
The Company desires to sell and issue to ESL and ESL desires to
purchase from the Company, 2,019,850 shares of the Company's Series A Preferred
Stock pursuant to that certain Series A Preferred Stock Purchase Agreement dated
of even date herewith (the "Series A Agreement").
The Existing Investors desire for ESL to invest in the Company and, as
a condition thereof and to induce such investment, the Existing Investors are
willing to enter into this Amendment to permit ESL to become a party to the
Agreement, as amended.
In consideration of the foregoing and the promises and covenants contained
herein and other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. ADDITIONAL PARTIES TO THE AGREEMENT.
-----------------------------------
ESL hereby enters into and becomes a party to the Agreement. Schedule
--------
A to the Agreement is amended to include ESL.
- -
2. AMENDMENTS TO AGREEMENT.
-----------------------
2.1 ESL and the Existing Investors are collectively referred to as
"Investors" for the purposes of the Agreement, as amended.
2.2 The second sentence of Section 1.13 of the Agreement is amended in
its entirety to read as follows:
"For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings
of TRW Inc. and any direct or indirect wholly-owned subsidiary of TRW
Inc., including ESL Incorporated, shall be
<PAGE>
aggregated together and the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership
(including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with
the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall
have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Section 1."
2.3 The second sentence of Section 2.4 of the Agreement is amended in
its entirety to read as follows:
"For purposes of this Section 2.4, a Major Investor shall mean
(i) ESL, so long as ESL holds at least 10% of the original investment
of the Series A Preferred Stock that ESL made in the Company, (ii) any
Investor who holds at least 10% of the original investment such
Investor makes in the Company pursuant to the Series A Agreement and
(iii) any person who acquires at least 10% of the Series A Preferred
Stock (or the common stock issues upon conversion thereof) issued
pursuant to the Series A Agreement."
3. WAIVER AND CONSENT.
------------------
Each Existing Investor, pursuant to any rights such Existing Investor
may have under the Agreement, hereby, on behalf of himself and the other
Investors under the Agreement, (a) waives all rights under, and any notice
required by, Section 2.4 of the Agreement relating to any rights to purchase or
rights of first offer with respect to the sale of the shares of Series A
Preferred Stock, (b) consents to adding ESL as a party to the Agreement, and (c)
consents to the registration rights hereby provided ESL, which consent is given
pursuant to Section 1.14 of the Agreement.
4. EFFECT OF AMENDMENT.
-------------------
Except as amended and set forth above, the Agreement shall continue in full
force and effect.
5. COUNTERPARTS.
------------
This Amendment may be executed in any number of counterparts, each which
will be deemed an original, and all of which together shall constitute one
instrument.
-2-
<PAGE>
6. SEVERABILITY.
------------
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from this
Amendment and the balance of the Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7. ENTIRE AGREEMENT.
----------------
This Amendment, together with the Agreement, constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
8. GOVERNING LAW.
-------------
This Amendment shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
-3-
<PAGE>
This Amendment is hereby executed as of the date first above written.
PHONEPRINT, INC., a Delaware corporation
By: _________________________________________
Kevin Compton,
Chairman of the Board
Address: 495 Java Drive
Sunnyvale, California 94088
INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII
By: __________________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
KPCB VII FOUNDERS FUND
By: __________________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
SEVIN-ROSEN IV
By: __________________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SEVIN-ROSEN-BAYLESS MANAGEMENT COMPANY
By: __________________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
NORWEST EQUITY PARTNERS IV, a Minnesota Limited
Partnership
By: Itasca Partners
Its: General Partner
By: __________________________________________
Address: 2800 Piper Jaffray Tower
Minneapolis, Minnesota 55402
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
By: __________________________________________
Address: 400 Park Avenue
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By: __________________________________________
Address: 400 Park Avenue
New York, NY 10022
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ESL INCORPORATED
By: __________________________________________
Address: 495 Java Drive
Sunnyvale, California 94088
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT C
FIRST REFUSAL AGREEMENT
-----------------------
C-1
<PAGE>
FIRST REFUSAL AGREEMENT
-----------------------
THIS FIRST REFUSAL AGREEMENT is made as of the 14th day of December, 1994
by and between PhonePrint, Inc., a Delaware corporation (the "Company"), the
investors listed on Schedule A attached hereto, (the "Investors") and the holder
of Series A Preferred Stock of the Company listed on Schedule B attached hereto,
----------
(the "Holder").
WHEREAS, the Company and Investors are parties to the Series A Preferred
Stock Purchase Agreement of even date herewith (the "Series A Agreement").
WHEREAS, the Holder is a beneficial owner of the number of shares of Series
A Preferred Stock of the Company set forth opposite such stockholder's name on
Schedule B hereto (the "Stock," which term shall also include the shares of
- ----------
Common Stock issued or issuable upon conversion of the Series A Preferred Stock
and any additional shares of Preferred stock or Common Stock of the Company now
owned or hereafter acquired by Holder.
WHEREAS, Holder wishes to provide a further inducement to the Investors to
purchase shares of the Company's Series A Preferred Stock pursuant to the terms
of the Series A Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
I. RIGHT OF FIRST REFUSAL
----------------------
1.1 Grant.
-----
a. The Company and the Investors are hereby each granted a right of
first refusal with respect to any proposed disposition of Stock by Holder (or
any permitted transferee of the Stock under paragraph 2.1 hereof, hereafter
collectively included in all references to "Holder"), in the following order of
priority. The Investors shall have the first right to purchase any Stock
proposed to be transferred to a third party by the Holder. In the event the
Investors elect not to exercise their first refusal rights with respect to all
or any portion of such proposed transfer, the Company shall then have a right of
first refusal with respect to such unexercised portion pursuant to the terms of
this Agreement.
b. For purposes of this Agreement, Investor includes any general
partners and affiliates of an Investor. An Investor shall be entitled to
apportion the right of first refusal hereby granted it among itself and its
partners and affiliates in such proportions as it deems appropriate.
<PAGE>
1.2 Notice of Intended Disposition. In the event Holder desires to accept
------------------------------
a bona fide third-party offer for the transfer of any or all of the Stock
whether such proposed transfer is voluntary or involuntary (the shares subject
to such offer to be hereafter called the "Target Shares"), the Holder shall
promptly deliver to the Company and each of the Investors written notice of the
intended disposition ("Disposition Notice") and the basic terms and conditions
thereof, including the identity of the proposed purchaser.
1.3 Exercise of Right by Investors.
------------------------------
a. The Investors shall, for a period of thirty (30) days following
receipt of the Disposition Notice, have the right to purchase any or all of the
Target Shares upon substantially the same terms and conditions specified in the
Disposition Notice, subject to the following conditions. Such right shall be
exercisable by written notice (the "Exercise Notice") delivered to Holder and
the Company prior to the expiration of the thirty (30) day exercise period. If
such right is exercised with respect to only a portion of the Target Shares
specified in the Disposition Notice, then such Investor shall notify the Company
of its intent to purchase only a portion of the Target Shares within the thirty
(30) day exercise period above defined. The Holder shall promptly, in writing,
inform each Investor which purchases all of the shares available to it ("Fully-
Exercising Investor") of any other Investor's failure to do likewise. During
the 10-day period commencing after such information is given, each Fully-
Exercising Investor shall be entitled to obtain that portion of the Target
Shares not subscribed for by the Investors which is equal to the proportion that
the number of shares of Common Stock of the Company issued and held, and the
shares of Common Stock issuable upon conversion of the Company's Series A
Preferred Stock then held, by such Fully-Exercising Investor bears to the total
number of shares of Common Stock of the Company issued and held, and the shares
of Common Stock issuable upon conversion of the Company's Series A Preferred
Stock then held, by all Fully-Exercising Investors who wish to purchase some of
the unsubscribed shares. The Investors shall effect the purchase of those
Target Shares for which the right to purchase is exercised, including payment of
the purchase price, not more than five (5) business days after the delivery of
the Exercise Notice; and at such time Holder shall deliver to the Investors the
certificates representing the Target Shares to be purchased, each certificate to
be properly endorsed for transfer.
b. Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the Investors
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If the Holder and the Investors cannot
agree on such cash value within ten (10) days after the Investors' receipt of
the Disposition Notice, the valuation shall be made by an appraiser of
recognized standing selected by the Holder and the Investors or, if they cannot
agree on an appraiser within twenty (20) days after the Investors' receipt of
the Disposition Notice, each shall select an appraiser of recognized standing
and the two appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by the Holder and the Investors. The closing
shall then be held on the later of (i) the
-----
-2-
<PAGE>
fifth business day following the delivery of the Exercise Notice, or (ii) the
fifth business day after such cash valuation shall have been made.
1.4 Non-Exercise of Right. In the event all of the Target Shares are not
---------------------
purchased by the Investors pursuant to paragraph 1.3, the Investors shall be
deemed to have waived their right of first refusal with respect to such
unpurchased Target Shares with respect to such Disposition Notice only.
1.5 Exercise of Right by the Company. Subject to the rights of the
--------------------------------
Investors, the Company shall, for a period of fifteen (15) days from receipt of
written notice from the Holder that the Investors' either waived their right of
first refusal or purchased only a portion of the Target Shares, have the right
to repurchase all, or any portion of the remaining balance after the Investors'
purchase, of the Target Shares, upon substantially the same terms and conditions
specified in the Disposition Notice. In the event the Investors and the Company
do not exercise their and its right of first refusal with respect to all of the
Target Shares, the Company shall have the right to assign its right of first
refusal with respect to the remaining Target Shares provided the assignee
delivers an Exercise Notice within five (5) days after the end of the Company's
fifteen (15) day exercise period. The Company (or the Company's assignee) shall
exercise this right of first refusal in the same manner and subject to the same
rights and conditions as the Investors, as more specifically set forth in
paragraph 1.3 above.
1.6 Non-Exercise of Right. In the event the Investors and/or the Company
---------------------
do not elect to purchase all of the Target Shares pursuant to this Article I,
Holder shall have a period of sixty (60) days after the expiration of the five
(5) day period described in the second to last sentence of paragraph 1.5 in
which to consummate the sale of the Target Shares to the third-party transferee
identified in the Disposition Notice upon terms and conditions (including the
purchase price) no more favorable to the third-party transferee than those
specified in the Disposition Notice. The third-party transferee shall acquire
the Target Shares subject to the rights of first refusal and the market stand-
off obligations. In the event Holder does not consummate the sale or
disposition of the Target Shares within the sixty (60) day period described
above, Investors' and the Company's first refusal rights shall continue to be
applicable to any subsequent disposition of the Target Shares by Holder until
such right lapses in accordance with paragraph 5.1 herein.
1.7 Allocation Among Investors. The right of first refusal granted
--------------------------
hereunder to the Investors shall be allocated among such parties pro rata based
on their respective aggregate holdings of the Common Stock of the Company issued
and held, and the Common Stock issuable upon conversion of the Company's Series
A Preferred Stock.
1.8 Partial Exercise of Right. The Company and/or the Investors may
-------------------------
exercise the right of first refusal pursuant to this Article I with respect to
all or any portion of the Target Shares described in a particular Disposition
Notice.
-3-
<PAGE>
II. EXEMPT TRANSFERS
2.1 Permitted Transactions. Notwithstanding the foregoing, the first
----------------------
refusal rights of the Company and the Investors shall not apply to any transfer
by gift to the ancestors, descendants, siblings or spouse of Holder or to trusts
for the benefit of such persons or to TRW Inc. ("TRW") or any directly or
indirectly wholly owned affiliate of TRW; provided that the transferee shall
furnish the Company and the Investors with a written agreement to be bound by
and comply with all provisions of this Agreement. Such transferred Stock shall
remain "Stock" hereunder, and such transferee shall be treated as a "Holder" for
the purposes of this Agreement.
2.2 Public Offering. The provisions of Articles I of this Agreement shall
---------------
not apply to the sale of any Stock to the public pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act").
III. LEGEND REQUIREMENTS.
-------------------
3.1 Legend. Each certificate representing the Stock owned by the Holder
------
shall be endorsed with the following legend:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN FIRST REFUSAL AGREEMENT BY AND BETWEEN THE
REGISTERED HOLDER (OR HIS PREDECESSOR IN INTEREST) AND
CERTAIN PROSPECTIVE INVESTORS IN THE CAPITAL STOCK OF THE
COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY."
3.2 Removal. The paragraph 3.1 legend shall be removed upon termination
-------
of this Agreement in accordance with the provisions of paragraph 5.1.
IV. MARKET STAND-OFF AGREEMENT.
--------------------------
Holder hereby agrees that, during the period of duration specified by the
Company and an underwriter of common stock or other securities of the Company,
following the effective date of a registration statement of the Company filed
under the Securities Act, it shall not, to the extent requested by the Company
and such underwriter, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any securities of the Company
-4-
<PAGE>
held by it at any time during such period except common stock included in such
registration; provided, however, that:
a. such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
b. all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements; and
c. such market stand-off time period shall not exceed 180 days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to such securities of Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
V. TERMINATION.
-----------
5.1 Termination.
-----------
a. This Agreement shall terminate upon the occurrence of any one of
the following events:
(i) the liquidation, dissolution or indefinite cessation of the
business operations of the Company;
(ii) the execution by the Company of a general assignment for
the benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company;
(iii) immediately prior to the closing of a bona fide firm
commitment underwritten public offering of the Company's Common Stock registered
under the Securities Act of 1933 on Form S-1 (or any successor form designated
by the Securities and Exchange Commission), resulting in aggregate gross
proceeds to the Company of at least $7,500,000 at an offering price to the
public of not less than $6.00 per share (appropriately adjusted to reflect any
stock splits, stock dividends or similar events).
VI. MISCELLANEOUS PROVISIONS.
------------------------
6.1 Notice. Any notice required or permitted to be given to a party
------
pursuant to the provisions of this Agreement shall be in writing and shall be
effective upon
-5-
<PAGE>
personal delivery or upon deposit in the U.S. mail (or equivalent independent
service), postage prepaid and properly addressed to the party to be notified as
set forth below such party's signature or at such other address as such party
may designate by ten (10) days' advance written notice to the other parties
hereto.
6.2 Severability. In the event one or more of the provisions of this
------------
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed and interpreted in such manner as to be effective and valid
under applicable law.
6.3 Waiver or Modification. Any amendment or modification of this
----------------------
Agreement shall be effective only if evidenced by a written instrument executed
by (i) the Holders of a majority of the Common Stock subject to this Agreement,
(ii) the Company, and (iii) all Investors, or their assignees, holding not less
than a majority of the Common Stock issued or issuable upon conversion of the
Series A Preferred Stock then held by the Investors.
6.4 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California as applied in contracts
among California residents entered into and performed entirely within
California.
6.5 Attorneys' Fees. In the event of any dispute involving the terms
---------------
hereof, the prevailing parties shall be entitled to collect legal fees and
expenses from the other party to the dispute.
6.6 Further Assurances. Each party agrees to act in accordance herewith
------------------
and not to take any action which is designed to avoid the intention hereof.
6.7 Ownership. Holder represents and warrants that he is the sole legal
---------
and beneficial owner of the shares of stock subject to this First Refusal
Agreement and that no other person has any interest (other than a community
property interest) in such shares.
6.8 Successors and Assigns. This Agreement and the rights and obligations
----------------------
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives.
-6-
<PAGE>
6.9 Aggregation of Stock. For the purposes of determining the
--------------------
availability of any rights under this Agreement, the holdings of transferees and
assignees of an individual or a partnership who are spouses, ancestors, lineal
descendants or siblings of such individual or partners or retired partners of
such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Common Stock by gift, will or
intestate succession) shall be aggregated together with the individual or
partnership, as the case may be, for the purpose of exercising any rights or
taking any action under this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year indicated above.
PHONEPRINT, INC., a Delaware corporation
By: ________________________________________
Kevin Compton, Chairman of the Board
Address: 207 E. Java Drive
Sunnyvale, CA 94088-3510
INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII
By: ________________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
KPCB VII FOUNDERS FUND
By:__________________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
SEVIN-ROSEN IV
By: ________________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
[SIGNATURE PAGE TO FIRST REFUSAL AGREEMENT]
<PAGE>
SEVIN-ROSEN-BAYLESS MANAGEMENT COMPANY
By: ________________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
NORWEST EQUITY PARTNERS IV, a Minnesota Limited
Partnership
By: Itasca Partners
Its: General Partner
By: ________________________________________
Address: 2800 Piper Jaffray Tower
Minneapolis, Minnesota 55402
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
By: ________________________________________
Address: 400 Park Avenue
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By: ________________________________________
Address: 400 Park Avenue
New York, NY 10022
[SIGNATURE PAGE TO FIRST REFUSAL AGREEMENT]
-9-
<PAGE>
HOLDER:
ESL INCORPORATED, a California corporation
By: ________________________________________
Title: ______________________________________
Address: 495 Java Drive
Sunnyvale, CA 94088-3510
[SIGNATURE PAGE TO FIRST REFUSAL AGREEMENT]
-10-
<PAGE>
Phoneprint, Inc.
Schedule A
----------
INVESTORS
---------
KLEINER, PERKINS, CAUFIELD & BYERS VII
KPCB VII FOUNDERS FUND
SEVIN-ROSEN IV
SEVIN-ROSEN-BAYLESS MANAGEMENT
NORWEST EQUITY PARTNERS IV
NEEDHAM CAPITAL SBIC, L.P.
NEEDHAM EMERGING GROWTH PARTNERS
-11-
<PAGE>
Schedule B
----------
HOLDER
------
ESL INCORPORATED 2,019,850 Shares of Series A Preferred
Stock
-12-
<PAGE>
EXHIBIT D
VOTING AGREEMENT
----------------
D-1
<PAGE>
VOTING AGREEMENT
----------------
THIS AGREEMENT is made as of the 14th day of December, 1994, by and among
PhonePrint, Inc., a Delaware corporation (the "Company"), ESL Incorporated, a
California corporation ("ESL"), and the persons listed on the Schedule of
Investors attached hereto as Schedule A (the "Investors").
WHEREAS, the Investors desire to purchase Series A Preferred Stock of the
Company pursuant to that certain Series A Preferred Stock Purchase Agreement of
even date herewith (the "Purchase Agreement");
WHEREAS, the Investors desire to designate two representatives to sit as
directors of Company; ESL desires to designate one representative to sit as a
director of the Company; and ESL and the Investors desire to designate the then-
current Chief Executive Officer of the Company to sit as a director of the
Company; and ESL agrees to vote its shares for the fifth director as directed by
the Investors, and
WHEREAS, ESL, the Company and the Investors acknowledge that they are
entering into this Agreement as an inducement to and in consideration of the
purchase of Series A Preferred Stock by the Investors pursuant to the Purchase
Agreement:
IT IS HEREBY AGREED AS FOLLOWS:
a. Investors' Agreement to Vote. During the term of this Agreement, the
----------------------------
Investors agree to vote all of the shares of the Company's voting securities now
or hereafter owned by them, whether beneficially or otherwise (the "Investors
Shares"), as follows:
(i) Investors' Representatives. The Investors shall vote or act
--------------------------
with respect to the Investors Shares so as always to elect two (2) designees of
the Investors as directors of the Company, such designees to be named in
accordance with Section 3.
(ii) ESL Representative. The Investors shall vote or act with
------------------
respect to the Investors Shares so as always to elect one (1) designee of ESL
as a director of the Company, such designee to be named in accordance with
Section 3.
(iii) Chief Executive Officer. The Investors shall vote or act with
-----------------------
respect to the Investors Shares so as always to elect the then-current Chief
Executive Officer of the Company as a director of the Company.
b. ESL's Agreement to Vote. During the term of this Agreement, ESL
-----------------------
agrees to vote all of the shares of the Company's voting securities now or
hereafter owned by it, whether beneficially or otherwise (the "ESL Shares"), as
follows:
<PAGE>
(i) Investors' Representatives. ESL shall vote or act with respect
--------------------------
to the ESL Shares so as always to elect two (2) designees of the Investors as
directors of the Company, such designees to be named in accordance with Section
3.
(ii) ESL Representative. ESL shall vote or act with respect to the
------------------
ESL Shares so as always to elect one (1) designee of ESL as a director of the
Company, such designee to be named in accordance with Section 3.
(iii) Chief Executive Officer. ESL shall vote or act with respect to
-----------------------
the ESL Shares so as always to elect the then-current Chief Executive Officer of
the Company as a director of the Company.
(iv) Fifth Director. ESL shall vote or act with respect to the ESL
--------------
Shares so as to always vote those shares for the fifth director as directed by
the Investors.
c. Selection of Designees. The Company shall provide notice to each of
----------------------
the Investors and ESL at least 30 days prior to its distribution of notice and
proxy materials for any meetings at which directors will be elected. The
Investors shall deliver to the Company at least 20 days prior to the date
scheduled for such meeting, its list of two designees, with such list of
designees to have been approved by a majority in interest of the Investors
Shares. ESL shall deliver to the Company at least 20 days prior to the date
scheduled for such meeting its one designee. The Company shall include the list
of designees for the Investors and ESL in the notice and proxy material for such
selection of directors. In the event no list of designees is given by either
the Investors or ESL, the list of designees for that group shall be the
directors on the board at that time representing such group.
d. Successors in Interest.
----------------------
(i) The provisions of this Agreement shall be binding upon the
successors in interest of ESL or the Investors to any of the ESL Shares or
Investors Shares. The Company shall not permit the transfer of any ESL Shares
or Investors Shares on its books or issue a new certificate representing any ESL
Shares or Investors Shares unless and until the person to whom such security is
to be transferred shall have executed a written agreement, satisfactory in form
and substance to the other shareholders, pursuant to which such person becomes a
party to this Agreement and agrees to be bound by all the provisions hereof as
if such person was ESL or an Investor hereunder.
(ii) Each certificate representing any ESL Shares or Investors
Shares shall be endorsed by the Company with a legend reading as follows:
The Shares evidenced hereby are subject to a Voting
Agreement dated as of December 14, 1994 as may be amended
from time to time (a copy of which may be obtained from the
issuer), and by accepting any interest in
-2-
<PAGE>
such shares the person accepting such interest shall be
deemed to agree to and shall become bound by all the
provisions of said Voting Agreement.
e. Covenants of the Company. The Company agrees to take all actions
------------------------
required to ensure that the rights given to the Investors and ESL hereunder are
effective and that the Investors and ESL enjoy the benefits thereof. Such
actions include, without limitation, the use of the Company's best efforts to
cause the nomination of the designees of the Investors and ESL and the then-
current Chief Executive Officer of the Company for election as directors of the
Company. The Company will not, by any voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be performed hereunder by
the Company, but will at all times in good faith assist in the carrying out of
all of the provisions of this Agreement and in the taking of all such actions as
may be necessary or appropriate in order to protect the rights of the Investors
and ESL hereunder against impairment.
f. Mutual Covenants. Both ESL and the Investors agree to take all
----------------
actions required to maintain the authorized number of directors of the Company
at five.
g. Termination. This Agreement shall terminate upon the earlier of (i)
-----------
the consummation of the Company's initial public offering on a firm underwriting
basis, or (ii) the written consent of at least a majority in interest of the
Investors Shares and the written consent of at least a majority in interest of
the ESL Shares.
h. Amendments and Waivers. Any term hereof may be amended and the
----------------------
observance of any term hereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company, and holders of a majority in interest of the Investors
Shares or their successors and assigns and holders of a majority in interest of
the ESL Shares or their successors and assigns. Any amendment or waiver so
effected shall be binding upon the Company, any holder of Investors Shares,
their successors and assigns, and any holder of ESL Shares, their successors and
assigns.
i. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
j. Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Delaware, without regard to the conflict of laws
provisions thereof.
-3-
<PAGE>
k. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
l. Successors and Assigns. Except as otherwise expressly provided in
----------------------
this Agreement, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and assigns of the parties hereto.
m. Equitable Remedies. The Company, the Investors and ESL acknowledge
------------------
and agree that the legal remedies available to the Investors and ESL in the
event any party violates the covenants and agreements made in this Agreement
would be inadequate and that the Investors or ESL, as the case may be, shall be
entitled, without posting any bond or other security, to temporary, preliminary,
and permanent injunctive relief, specific performance and other equitable
remedies in the event of such a violation, in addition to any other remedies
which the Investors or ESL, as the case may be, may have at law or in equity.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year hereinabove first written.
PHONEPRINT, INC., a Delaware corporation
By: _____________________________________
Title:_____________________________________
Address: 207 E. Java Drive
Sunnyvale, CA 94088-3510
ESL INCORPORATED, a California corporation
By: _______________________________________
Its:_______________________________________
Address: 495 Java Drive
Sunnyvale, CA 94088-3510
INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII
By: _______________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
KPCB VII FOUNDERS FUND
By: _______________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
[SIGNATURE PAGE TO VOTING AGREEMENT]
<PAGE>
SEVIN-ROSEN IV
By: _______________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
SEVIN-ROSEN-BAYLESS MANAGEMENT COMPANY
By: _______________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
NORWEST EQUITY PARTNERS IV, a Minnesota Limited
Partnership
By: Itasca Partners
Its: General Partner
By: _________________________________
Address: 2800 Piper Jaffray Tower
Minneapolis, Minnesota 55402
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
By: _________________________________
Address: 400 Park Avenue
New York, NY 10022
[SIGNATURE PAGE TO VOTING AGREEMENT]
-6-
<PAGE>
NEEDHAM EMERGING GROWTH PARTNERS
By: _______________________________________
Address: 400 Park Avenue
New York, NY 10022
[SIGNATURE PAGE TO VOTING AGREEMENT]
-7-
<PAGE>
SCHEDULE A
----------
Schedule of Investors
---------------------
KLEINER, PERKINS, CAUFIELD & BYERS VII
KPCB VII FOUNDERS FUND
SEVIN-ROSEN IV
SEVIN-ROSEN-BAYLESS MANAGEMENT
NORWEST EQUITY PARTNERS IV
NEEDHAM CAPITAL SBIC, L.P.
NEEDHAM EMERGING GROWTH PARTNERS
A-1
<PAGE>
EXHIBIT 10.4
LICENSE AND TECHNICAL ASSISTANCE AGREEMENT
This LICENSE AND TECHNICAL ASSISTANCE AGREEMENT, ("Agreement") is made
and entered into as of the 14th day of December, 1994, ("Effective Date")
between TRW INC., an Ohio corporation ("TRW"), ESL INCORPORATED, a California
corporation and wholly owned subsidiary of TRW INC. ("ESL") (TRW and ESL are
together referred to as "Licensor"), and PHONEPRINT, INC., a Delaware
corporation ("Licensee").
WHEREAS, Licensor has * * * a *** that * * *
and * * * a * * * based on * * * or * * *
and is able to * * * activities in the "Wireless
Communications Field," as defined below; and
WHEREAS, Licensee desires to avail itself of this * * *
, and Licensor desires to license the technology to Licensee;
NOW THEREFORE, in consideration of the mutual promises contained
herein and the mutual benefits to be derived therefrom, Licensor and Licensee
agree as follows:
ARTICLE 1
DEFINITIONS
-----------
The following words and phrases will have the meanings set forth
below:
1.1 AGREEMENT. This Agreement and the following Schedules attached
---------
hereto:
Schedule 1 Trade Secrets
----------
Schedule 2 Licensed Products
----------
Schedule 3 Licensed Services
----------
Schedule 4 Patent Rights
----------
1.2 *** . Those particular Trade Secrets identified as
----------
*** in Schedule 1 and which consist of mechanical, technological or
----------
computational procedures for solving a problem or achieving a particular result.
1.3 ASSET PURCHASE AGREEMENT. The Asset Purchase Agreement of even
------------------------
date herewith between the parties.
1.4 BUSINESS SUCCESSOR. For purposes of Section 1 of this Agreement,
------------------
"Business Successor" is defined as the Tactical and National Lines of Business
of TRW's
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
Avionics and Surveillance Group and any successor unit or subunit (whether or
not separately incorporated), of TRW conducting some or all of those businesses
currently carried on by ESL.
1.5 * * * . Any * * * technology
-------------------------------
* * * Business Successor that consists of * * *
intended for or that have application with respect to * * *
and that * * * major system * * * . * * *
shall not include any * * * ; the parties intend that * * *
will consist only of * * * described in Schedule 1.
----------
1.6 COOPERATION AGREEMENT. The Cooperation Agreement of even date
---------------------
herewith between Licensee and TRW.
1.7 COPYRIGHTS. All existing copyrights that have been used in or
----------
for manufacture of the Licensed Products, the provision of Licensed Services or
in connection with Trade Secrets (and all * * *
related thereto) in connection with which Licensor owns and has the right to
grant licenses to Licensee, and future copyrights used or created by Business
Successor that have use in, for or with respect to products, services or trade
secrets (including, without limitation, the Licensed Products, Licensed
Services, Trade Secrets, and * * * ) relating to fraud
detection or mitigation in the Wireless Communications Field.
1.8 GOVERNMENTAL ENTITY. Any department, agency, organization,
-------------------
activity, office or the like ("agency") of the United States Government or in
which the United States is a participant; and any agency of the government of
another sovereign state or country throughout the world or in which such
government participates; any contractor or vendor to any such agency or
government proposing to purchase with funds derived from or reimbursable by any
such agency or state, or any other customer under circumstances such that
Licensee knows or has reason to know or believe that the customer intends to use
the product or service in any activity funded by any such agency or state.
1.9 INVESTORS. Kleiner Perkins Caufield & Byers VII, KPCB VII
---------
Founders Fund, Sevin-Rosen IV, Sevin-Rosen-Bayless Management Company, Norwest
Equity Partners IV, Needham Capital SBIC, L.P., and Needham Emerging Growth
Partners.
1.10 LICENSED PRODUCT(S). Each of * * * products that recognizes
-------------------
and identifies a transmitter based on * * * or * * *
for the purpose of detecting fraudulent activities, listed on Schedule 2 or
----------
* * * by Business Successor, whether or not Licensee hereafter
makes any changes, including, without limitation, * * * or other
modifications thereto.
1.11 LICENSED SERVICES. Each of * * * that relates to
-----------------
the * * * of a transmitter based on * * * or
* * * for the purpose of detecting fraudulent
activities, listed on Schedule 3 or * * *
----------
2
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
by Business Successor, whether or not Licensee hereafter makes any changes
or modifications thereof. * * * (a) will include, by way of example
but not of limitation, services for * * * ,
such as * * * for * * * and * * * and the
development of * * * for * * * or * * * and
(b) will not include work in the * * * that involves a
Licensed Product in the * * * .
1.12 LICENSEE IMPROVEMENTS. Any new technology used or developed by
---------------------
Licensee that consists of improvements to the * * * intended for or that
have application with respect to * * *
and that do not require major system redesign. Licensee Improvements shall not
include any * * * ; the parties intend that Licensee Improvements will
consist only of modification to the * * * described in Schedule 1.
----------
1.13 LICENSEE NOTE. The certain promissory note of even date herewith
-------------
made by Licensee in favor of TRW, in the principal amount of $ * * * .
1.14 LICENSOR. TRW and ESL.
--------
1.15 MILITARY/INTELLIGENCE FIELD. Uses or applications of Trade
---------------------------
Secrets and Copyrights under contract or in collaboration with a Governmental
Entity for the purpose of * * *
and other similar applications.
1.16 NEW INVENTIONS. Any technology, trade secrets, copyrights,
--------------
patents, patent applications, products or services in the * * *
developed by * * * other than * * * .
1.17 PATENT RIGHTS. All rights, benefits and privileges under: (i)
-------------
United States Letters Patent and pending United States patent applications owned
by Licensor that are identified in Schedule 4, Part A; (ii) any future United
--------
States patent applications or patents that relate to the inventions listed on
Schedule 4, Part B; and (iii) all patents now or subsequently issuing throughout
- ----------
the world based on the subject matter described in such patents and
applications, including, without limitation, any continuation, division, reissue
or foreign country counterpart thereof.
1.18 TRADE SECRETS. All of Licensor's existing technical expertise,
-------------
and all proprietary information, data or confidential know-how pertaining to the
design, manufacture, installation, use, repair, maintenance, and operation of
Licensed Products or Licensed Services (and all * * *
) which were developed or acquired by Licensor and are owned by Licensor and
which have been applied to or used or tested for the purpose of fraud detection
or mitigation in the * * * , including, but not limited
to, the methods, processes, * * * , computer programs, databases, formulae,
devices, specifications, drawings and items listed in Schedule 1, and all of the
----------
foregoing that may in the future be developed or created by Business Successor
that which have use in, for, or with respect to products, services or trade
secrets (including, without limitation, the Licensed Products, Licensed Services
and * * * ) relating to fraud detection or mitigation
in the * * * .
3
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<PAGE>
1.19 * * * . The conduct of business pertaining to
--------------------
products or services for use in connection with * * * .
1.20 * * * . The business of * * *
-------------------------
based on combining or * * * products or services (including without
limitation, the Licensed Products and Licensed Services) * * * other products
and services.
1.21 * * * . The process of transmitting and
-----------------------
receiving signals used for communications purposes that can be accomplished
without * * * .
1.22 * * * . The conduct of business
-----------------------------
pertaining to * * * .
ARTICLE 2
LICENSE, PATENT ASSIGNMENT AND GRANT-BACK
-----------------------------------------
2.1 LICENSE. Subject to the provisions of Section 2.2, Licensor
-------
hereby grants to Licensee:
(a) an * * *
right and license under the Trade Secrets and the Copyrights (i) to
* * * products, including without limitation, the Licensed
Products and components of the Licensed Products, in the * * *
; and (ii) to * * * , including without limitation,
the Licensed Services to customers, in the * * * ; and
(b) a * * *
right and license under the Trade Secrets and the Copyrights to * * *
products (including, without limitation, the Licensed Products), or * * *
* * * services (including, without limitation, the Licensed Services) in the
* * * .
2.2 RESERVATION OF RIGHT. * * * reserves * * * to * * *
--------------------
the Trade Secrets or the Copyrights for * * * or * * *
and in the * * * , and * * * is granted to * * * to
practice or use the Trade Secrets or the Copyrights in the * * * .
2.3 PATENT ASSIGNMENT AND GRANT BACK. Pursuant to the Assignment of
--------------------------------
Patents by TRW Inc. dated as of even date herewith, Licensor will assign to
Licensee its Patent Rights in those inventions (including without limitation all
foreign counterpart applications) identified in Schedule 4, Part A. Licensor
----------
will execute such additional documents provided by Licensee as are necessary to
record the Assignment of Patents and for the assignment of the foreign
counterpart applications and to assign and record the assignment to Licensee of
the Patent Rights to any inventions from Schedule 4, Part B that are filed as
----------
patent applications. In consideration thereof, Licensee shall and
4
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<PAGE>
hereby does grant back to Licensor an * * *
right and license to the Patent Rights * * * in the
* * * , and for * * * ,
except that the foregoing license shall be * * * in the
* * * .
ARTICLE 3
TERM
----
3.1 TERM. This Agreement commences as of the Effective Date and will
----
* * * of the parties or in
accordance with Section 11.3.
3.2 * * * TERMINATION. Except as otherwise expressly provided in
------------------
Sections 3.1 and 11.3, this Agreement * * * to * * * during
its term.
ARTICLE 4
DELIVERY AND TECHNICAL ASSISTANCE
---------------------------------
4.1 DELIVERY.
--------
4.1(a) Delivery Upon Closing. Licensor has furnished Licensee copies
---------------------
of such documents, information and other materials in possession of Licensor,
including without limitation, materials relating to the Trade Secrets and the
Copyrights, as Licensor believes are reasonably necessary for Licensee to
understand, implement and use the Trade Secrets, Copyrights, Patent Rights,
Licensed Products and Licensed Services and to be able to manufacture Licensed
Products and provide Licensed Services.
4.1(b) Future Deliveries. Upon Licensee's reasonable written request
-----------------
from time to time and without charge (other than photocopy expense), Licensor
will furnish to Licensee copies of such additional documents, information and
other materials, in possession of Licensor, which have not previously been
provided to Licensee, including without limitation all materials relating to the
* * * , the Trade Secrets and the Copyrights as are reasonably
necessary for Licensee to understand, implement and use the Trade Secrets,
Copyrights, Patent Rights, Licensed Products and Licensed Services and to be
able to manufacture Licensed Products and provide Licensed Services.
4.2 TECHNICAL ASSISTANCE. Upon Licensee's reasonable written request
--------------------
* * * , Licensor shall, * * * and subject to mutual
agreement in good faith between the parties as to scheduling, scope of work and
the * * * , provide technical assistance to
Licensee in connection with the Trade Secrets, Copyrights and Patent Rights, and
in connection with the manufacture, use, delivery or sale of Licensed Products
and the provision, delivery or sale of Licensed Services. At Licensee's
request, such technical assistance shall include, without limitation:
5
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<PAGE>
(a) Advice and assistance by qualified engineers and other
personnel who have knowledge of the Copyrights or the Trade Secrets, or
experience in the manufacture and use of Licensed Products or the delivery of
Licensed Services; and
(b) Such other technical services and technical information that
Licensee may reasonably request in connection with this Agreement.
4.3 COMPENSATION. For any services rendered upon Licensee's request
------------
pursuant to Section 4.2, * * * customarily
charged to third parties consisting of * * * (including,
without limitation, * * *
, and will reimburse * * * for * * * incurred in connection
with the performance of such services (including but not limited to
* * * ).
ARTICLE 5
PROTECTION OF TRADE SECRETS
---------------------------
5.1 USE AND NON-DISCLOSURE. Licensee and Licensor will not use or
----------------------
permit the use of any Trade Secrets for any purpose not authorized by this
Agreement. Subject to the provisions of Section 5.2 and 5.3, Licensee and
Licensor will hold in confidence, and will not disclose or communicate to any
third person, any * * * . Licensee and Licensor will take or cause to be
taken all reasonably necessary precautions to prevent the disclosure or
communications of such * * * to third persons.
5.2 EXCEPTIONS. Licensee and Licensor may disclose * * * to its
----------
employees or to any person or entity in connection with bona fide business or
financing transactions to the extent that each such disclosure is reasonably
necessary for the purpose of manufacturing, selling, delivering, providing,
installing, repairing or servicing any product (including, without limitation
Licensed Products) or providing any services (including, without limitation
Licensed Services) or procuring goods and services required in connection
therewith or discussing or conducting such business or financing transaction;
provided that: (a) Licensee or Licensor clearly marks any document or other
material containing any * * * so disclosed to indicate that such documents
or materials contain the * * * , (b) Licensee or Licensor requires each
entity to whom such documents or materials are disclosed to sign a written
agreement limiting use thereof to the purpose stated in such agreement,
prohibiting the reproduction thereof and the disclosure thereof to any other
person and requiring the prompt return thereof when no longer needed or such
agreement is terminated, and (c) any reproduction, note or summary of such
documents or materials immediately upon the making thereof will become the
property of * * * . The foregoing restrictions on the use and disclosure of
the * * * shall not apply with respect to any * * * (i) that is in or
(through no improper action or inaction by the disclosing party or any agent or
employee) enters the public domain (and is readily available without substantial
effort), or (ii) in the case of Licensee only, that was rightfully in its
possession or known by Licensee prior to receipt from Licensor, or (iii) in the
case of Licensee only, that was rightfully disclosed to
6
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<PAGE>
Licensee by another person without restriction, or (iv) * * * after the
Effective Date.
5.3 ACCESSIONS. Each modification, improvement and revision of any
----------
of the Trade Secrets (except for direct reproductions thereof) that is made by
or for Licensee will become the property of Licensee.
ARTICLE 6
IMPROVEMENTS; FIRST RIGHT OF OFFER
----------------------------------
6.1 * * * . * * * shall promptly
---------------------------------
disclose to Licensee in writing all * * * .
6.2 FIRST RIGHT OF OFFER FOR NEW INVENTIONS. Licensee will have a
---------------------------------------
right of first offer to license New Inventions in the * * *
. Licensor shall not license or sell any New Inventions to any third party,
* * * , without first offering such New
Inventions to Licensee. Upon receipt of written notification from Licensor as
to the details of the New Invention and the specific terms of an offer ("Offer")
by Licensor to sell or license such New Inventions to Licensee, Licensee shall
have * * * to accept the Offer. In the event that Licensee
* * * , and no other
terms shall apply. If Licensee does * * * , then for a period of
* * * thereafter, Licensor may license such New Inventions to a third
party, but * * * .
6.3 LICENSEE IMPROVEMENT(S). Licensee shall * * *
-----------------------
all Licensee Improvements.
6.4 * * * RIGHT OF FIRST OFFER AND OBLIGATION TO DISCLOSE
-------------------------------------------------------------
* * * AND LICENSEE IMPROVEMENTS. Notwithstanding anything to
- -------------------------------------------------
the contrary in this Agreement, the * * * shall
* * * after the Effective Date, and any * * * or
Licensee Improvements developed or created at any time after * * *
after the Effective Date * * * be included as part of the licenses granted
hereunder.
ARTICLE 7
TRADEMARKS
----------
7.1 PHONEPRINT TRADEMARK. Pursuant to the terms of an Assignment of
--------------------
U.S. Intent-To-Use Trademark Application executed by TRW as of even date
herewith, TRW will assign to Licensee its entire right, title and interest in
and to the application for the trademark "PhonePrint" and any and all trademarks
and service marks related thereto throughout the world. As of the Effective
Date, TRW and ESL will abandon and cease all use of the PhonePrint name and
mark.
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<PAGE>
7.2 TRW TRADEMARK. Licensee may use printed material bearing the
-------------
name and mark "TRW PhonePrint" for a period from the Effective Date through
* * * specifically in support of the * * * ; provided it
disclaims its affiliation with TRW Inc. when and as appropriate. Thereafter,
Licensee will cease use of the TRW name, mark or logo either by itself or in
connection with the PhonePrint name and mark. Notwithstanding anything in this
Agreement to the contrary, TRW reserves all right, title and interest to the TRW
name, mark and logo and Licensee may not use the TRW name, mark or logo in any
way except as provided in this Section 7.2. Licensor shall abandon and shall
not use the "TRW PhonePrint" name and mark, and will execute all documents and
take all action reasonably requested by Licensee to permit Licensee to use the
"PhonePrint" name and mark.
ARTICLE 8
PRODUCT LIABILITY * * *
--------------------------------
8.1 PRODUCT DEFECTS. With respect to Licensed Products sold, leased
---------------
or manufactured after the Effective Date, * * * will have * * *
for determining that the designs of the Licensed Products and components
* * * are manufactured in accordance with customary commercial
standards.
8.2 GENERAL * * * . Except as provided in Section 8.3,
-----------------------
* * * in respect of any and all * * *
resulting from a claim that * * * use of any Patent Rights, the Trade
Secrets, the Copyright, PhonePrint trademark and/or * * * manufacture, use
and/or sale of Licensed Products, components of such Licensed Products, or
Licensed Services causes injury or damage to persons or property; provided that
(i) * * * reasonably promptly notifies * * * in writing of any claims in
this regard, (ii) * * * provides * * * information, assistance and
authority to enable * * * to defend such claim, and (iii) * * * assumes
control of the defense and settlement of the claim.
8.3 INTELLECTUAL PROPERTY * * * .
-------------------------------------
a. * * *
and its officers, directors, agents, employees, consignees and customers * * *
from any and * * *
resulting from: (i) the * * * of any Trade Secrets, or (ii) * * *
of any United States or foreign copyright or United States patent issued on or
before * * * , by the Patent Rights listed in Schedule 4 (Part A), Trade
----------
Secrets, Copyrights, or PhonePrint trademark in connection with Licensee's
manufacture, use and/or sale of products (including, without limitation, the
Licensed Products), components of any such products, or * * * provision of
services (including, without limitation, the Licensed Services); * * *
.
The foregoing obligation of Licensor * * * with respect to
* * * (i) * * * of the Patent Rights,
Trade Secrets, Copyright, or PhonePrint trademark, (ii) not relating to the
Patent Rights, Trade Secrets, Copyright, or PhonePrint
8
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<PAGE>
trademark or portions or components thereof, or * * * the * * *
relates to * * * of the license granted under this
Agreement, (iii) to the extent the Licensed Products * * *
Trade Secrets and Copyrights licensed to Licensee hereunder and
* * * (and
* * * ), (iv) where
* * * activity after being * * * thereof or after being
* * * that would have avoided the * * * , (v) to the
extent * * * to * * * ,
except to the extent that the * * *
working in connection with * * * (and who had knowledge of the
* * * ) * * * of such * * * at the time * * * was
required to notify * * * of such * * * pursuant to
* * * , or (vi) of a * * * to the extent that the * * *
relates to * * * to a Licensed Product or Licensed Service,
* * * (and the * * *
would not have occurred but for * * * ).
b. * * *
from any and all * * *
from * * * of any * * * issued on or after * * *
(including, without limitation, of the rights of * * * and/or
* * * in * * *
), in connection with Licensee's manufacture, use and/or sale of products
(including, without limitation, the Licensed Products or components of such
Licensed Products or Licensed Services).
ARTICLE 9
GOVERNMENT APPROVAL
-------------------
9.1 COOPERATION. Licensor and Licensee promptly will seek all
-----------
necessary governmental approvals and licenses that may be required in connection
herewith and will cooperate with each other in every reasonable way to obtain
such approval. Nothing in this Agreement will be deemed to require either party
to agree to any revision or modification of this Agreement that may be required
to obtain any governmental approval.
ARTICLE 10
DEFAULT; REMEDY; TERMINATION
----------------------------
10.1 DEFAULT. A "default" shall exist under this Agreement if either
-------
party fails to perform any written obligation to be performed by it hereunder
within * * * after written notice from the other party that time for
such performance has passed or, if no such time is prescribed, within * * *
after written notice from the other party.
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<PAGE>
10.2 REMEDY. If a party is in default hereunder, the party not in
------
default may pursue any remedy available to it at law or in equity if the noticed
default is not cured within the notice period. * * *
; this Agreement may be * * * only pursuant to * * * .
10.3 TERMINATION BY * * * . * * * may terminate this Agreement
-----------------------
only in the event that (i) * * * has not * * * under the
* * * ; and (ii) * * * has provided * * * to the * * * and
* * * of such * * * ; and (iii) * * * has * * * ,
within * * * after the receipt by * * * and the * * * of the
* * * described in (ii) above, of the * * * under the * * *
; and (iv) * * * to * * * and the * * * a * * *
following such * * * period and before * * * by * * *.
10.4 PERFORMANCE AFTER TERMINATION. Upon termination of this
-----------------------------
Agreement pursuant to Section 11.3, * * *
, and (b)
* * *, that (i) is not contained in a * * *
, or (ii) has not become available to the public or generally known in the trade
other than as a result of the improper action of * * *
, or its * * * , who have knowledge thereof.
10.5 LIMITATION OF LIABILITY. Subject to the exceptions noted below,
-----------------------
no party shall have liability exceeding $ * * * in the aggregate under this
Agreement, that certain Cooperation Agreement of even date herewith and that
certain Non-Competition Agreement of even date herewith ("Non-Competition
Agreement"). The foregoing limitation of liability shall not apply with respect
to: (i) a willful or intentional breach of this Agreement or the Non-
Competition Agreement; or (ii) matters relating to or arising in connection with
* * * of this Agreement. In the event any party to this
Agreement becomes aware of a breach hereunder by any other party to this
Agreement, the non-breaching party shall provide the breaching party with
written notice of the breach and a * * * period in which to cure such
breach.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 NOTICES. All notices and communications required or permitted to
-------
be given under this Agreement shall be sufficient only if written in English and
personally delivered, delivered by a major commercial rapid delivery courier
service with tracking capabilities or mailed by certified or registered mail,
return receipt requested, with postage or delivery charges prepaid and addressed
to a party at its address set forth below (unless by such notice a different
person or address will have been designated by notice pursuant to this Section).
If not received sooner, notice by mail will be deemed received five (5) days
after deposit in the U.S. mails.
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<PAGE>
Licensee: PhonePrint Inc.
207 E. Java Drive
Sunnyvale, CA 94088-3510
Attention: Kevin Compton
Licensor: TRW Avionics & Surveillance Group
495 Java Drive
Sunnyvale, CA 94088-3510
Attention: TRW Law Department
11.2 ASSIGNMENTS. TRW and ESL will have no right to assign or
-----------
transfer any of their respective rights or to delegate any of their duties under
this Agreement without the prior written consent of Licensee,
* * * .
Licensee can assign or sublicense any of its rights or licenses under this
Agreement at its sole option.
11.3 HEADINGS. The headings and titles to the Articles and Sections
--------
of this Agreement are inserted for convenience only and will not be deemed a
part hereof or affect the construction or interpretation of any provision
hereof.
11.4 REMEDIES. Unless otherwise expressly provided herein, the rights
--------
and remedies hereunder are in addition to, and not in limitation of, other
rights and remedies under this Agreement, and exercise of one right or remedy
will not be deemed a waiver of any other right or remedy.
11.5 MODIFICATION - WAIVER. No cancellation, modification, amendment,
---------------------
deletion, addition or other change in this Agreement or any provision hereof, or
waiver of any right or remedy herein provided, will be effective for any purpose
unless specifically set forth in a writing signed by the party to be bound
thereby. No waiver of any right or remedy in respect of any occurrence or event
on one occasion will be deemed a waiver of such right or remedy in respect of
such occurrence or event on any other occasion.
11.6 ENTIRE AGREEMENT. This Agreement supersedes all other
----------------
agreements, oral or written, heretofore made with respect to the subject hereof
and the transactions contemplated hereby and, with the Schedules hereto and in
conjunction with the Cooperation Agreement and Asset Purchase Agreement,
contains the entire agreement of the parties.
11.7 CONTROLLING LAW. All questions concerning the validity and
---------------
operation of this Agreement and performance of the obligations imposed upon the
parties hereunder will be governed by the substantive laws of the State of
California.
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<PAGE>
11.8 SUCCESSORS AND ASSIGNS. The provisions of this Agreement will be
----------------------
binding upon and inure to the benefit of Licensor and Licensee and their
respective successors and authorized assigns. This provision will not be deemed
to expand or otherwise affect the limitations on assignment and delegation set
forth in Section 12.2.
11.9 PRODUCT MARKING. Licensed Products and/or Licensed Services
---------------
manufactured, delivered or sold by Licensee will be marked by Licensee in
conformance with the patent and copyright laws of the countries of manufacture,
use and sale.
11.10 PUBLICITY. Except as the other party gives its prior written
---------
consent, neither Licensor nor Licensee will use the name of the other party in
any publicity, product announcement, brochure, advertising, product labeling,
promotion or otherwise for any purpose.
11.11 COUNTERPARTS. This Agreement has been executed in several
------------
counterparts, each of which will be deemed to be an original copy hereof.
11.12 ATTORNEY'S FEES. In the event of any dispute or litigation
---------------
relating to this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees and court costs from the other party(ies).
[Remainder of This Page Intentionally Left Blank]
12.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
PHONEPRINT INC.
/s/ Kevin Compton
--------------------------
Name
Chairman
--------------------------
Title
12/14/94
--------------------------
Date
TRW INC.
/s/ illegible
--------------------------
Name
Vice President Finance
--------------------------
Title
12/14/94
--------------------------
Date
ESL INCORPORATED
/s/ James Sandstrom
--------------------------
Name
Senior Vice President
--------------------------
Title
12/14/94
--------------------------
Date
13.
<PAGE>
ESL PROPRIETARY INFORMATION
SCHEDULE 1
TRADE SECRETS
-------------
1. Proprietary * * * processing * * * that perform the
following functions on the * * * :
. Reduces the effects of * * * with * * * .
. * * * the call information in the * * *
including the * * * .
. * * * various * * * that are useful in * * *
* * *.
. Calculate * * * of each * * * and the * * *
as a whole. Use these * * * the use of each * * *
based on * * *.
2. Proprietary * * * that perform the following
functions:
. * * * the * * * into a * * * of the phone
emitter.
. * * * from the * * * from * * *
, * * * and * * * .
. * * * from new * * * with * * * to determine if
the * * * comes from the original phone or a different (fraud)
phone.
. Use * * * techniques to determine if the * * * is
similar or dissimilar to the existing * * *.
. Compares new * * * against * * * that were * * *
by phones that were * * * to be either * * *.
. Determine if the * * * or * * * are on * * * the call
to be * * * if fraud is * * * .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
ESL PROPRIETARY INFORMATION SCHEDULE 1 TRADE SECRETS (cont.)
. Compare new * * * against * * * that were produced by
the * * * that the * * * claims to be.
. Compare new * * * against * * * that were produced by
the * * * (from * * *) the * * * claims to be.
. Use of * * * to * * * which were recently used by
* * * or * * * by PhonePrint.
. Issue a * * * to * * * the call when Fraud is
detected.
. * * * the Good/Fraud * * * on * * * matching based on
the * * * , * * * , * * * and * * * with
that * * * and other * * * information.
. Use of * * * and * * *.
. * * * that will * * * calls for
a period of time that are from the same * * * that has
* * * * * * .
3. Proprietary * * * that perform the following
functions:
. * * * retrieve information, via * * * or network, on call
* * * from the real time PhonePrint systems. This information
includes the * * * , measured * * *
* * * .
. Combine * * * information from * * *
to * * * of all phones observed by all systems.
. Combine new * * * information with * * * to
* * * * * * .
. Transmit the * * * information to the * * *
PhonePrint Systems.
. Generate reports on various system functions from the * * *
information.
2
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<PAGE>
ESL PROPRIETARY INFORMATION SCHEDULE 1 TRADE SECRETS (cont.)
4. * * * and technologies involving methods of * * *
* * * . Use this information
to * * * the * * * that was * * *
. The * * * can come from a variety of means
including:
. Call was * * * that is known only to * * * of
the * *.
. Call was * * * on the * * * for the * * *
that * * * the call was * * * user.
. * * * with the * * * that he did ( * * * ) or did not
( * * * ) * * *.
. Combination of information from * * * that * * * in
good user's * * *.
. Calls flagged by * * * as from * * * or * * *
users.
5. * * * technology that perform the following functions to
* * * calls:
. Receive * * * and information from real time processes
indicating that a call is * * * .
. * * * to * * * containing information on the
call's * * * .
. * * * the * * * information in the * * *.
. * * * a * * * on the * * *.
. * * * both * * * and * * * .
6. Only the following portions of * * * software:
. All libraries and included modules necessary to link and compile
the * * * program, which only includes the * * *
directory and * * * .
3
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<PAGE>
ESL PROPRIETARY INFORMATION SCHEDULE 1 TRADE SECRETS (cont.)
. The executables and help files in the * * * directory.
. One * * * of how to interface to the * * * program, the
* * * program to be * * * .
7. All * * * and software developed on the * * * not
listed above including:
. * * * software to process * * * to evaluate
* * * with * * * .
. * * * and software to evaluate performance of
each * * * and * * * .
8. Other * * * techniques including:
. * * * . * * * the call via * * * the
* * * .
. * * * . Interface with the * * * to * * *
by the same * * * occurring at the * * * .
. * * * . * * * to * * * the * * * (as in
the * * * in item 5 above) and to the * * * the
signal.
. * * * . * * * network to * * * the
call * * * the carrier's * * *.
4
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<PAGE>
SCHEDULE 2
LICENSED PRODUCTS
-----------------
.
. * * *
.
.
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<PAGE>
SCHEDULE 3
LICENSED SERVICES
-----------------
.
.
. * * *
.
.
.
.
.
*** Portions of this page have been omitted pursuant to a request for
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<PAGE>
SCHEDULE 4
PATENT RIGHTS
-------------
PART A
------
1. Patent Applications.
-------------------
* * * Patent Application, * * * Serial No. * * * , by
* * * . Corresponding * * *
are listed below.
<TABLE>
<CAPTION>
Country Serial No. Filing Date
- ------- ---------- -----------
<S> <C> <C>
* * *
</TABLE>
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<PAGE>
TRADE SECRETS
SCHEDULE 4
PATENT RIGHTS
-------------
PART B
------
* * * INVENTIONS
---------------------
This is a list of the inventions that apply to * * * of
* * * calls, and are believed to have been * * *
and * * * . Where noted, * * * may
be the sole or joint inventor. These * * * subject to the usual
considerations of determining * * * and * * * sale, offer sale and
delivery dates. * * * may or * * * for
the inventions. If * * * are not * * *, these items remain ***.
1. * * * that perform the following functions
on the * * * of the phone signal:
. * * * the * * * of * * * with * * *
.
. * * *
. * * *
. * * *
2. Proprietary * * * that perform the following functions:
. * * *
. * * * from the signal * * * from * * * .
. Use * * * to determine if the * * * is * * * or
* * * to the * * *.
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<PAGE>
TRADE SECRETS
SCHEDULE 4 PART B INVENTIONS (cont.)
. Determine if the * * * or * * * are on * * * the
call to be * * * if fraud is suspected.
. Compare * * * against * * * that were produced by the
* * * and * * * the * * * to be.
. Use of * * * to * * * which were recently used
by * * * or * * * by * * * . This is for the
* * * , where a * * * switches to a
* * * after * * * gets * * * . ( * * * may be a
* * * or * * *.)
. Vary the * * * on * * * based on the * * *
* * * and * * *
with that * * * and other * * * .
. Use of * * * and * * * .
(* * * may be a * * * or * * *.)
. * * * that will * * * for a * * *
that are from the * * * that has been
* * * over a * * * .
3. Proprietary * * * that perform the following functions:
. Combine * * * from * * * to * * *
of * * * observed by * * * using
* * * and * * * .
4. * * * and technologies involving methods of * * *
.
. * * * a signature as the * * * or a * * * by
identifying at least * * * or * * *
. Use this information to * * * that was
* * * by that * * *. ( * * * may be a * * * or
* * *.)
. Call was made to * * * that is known only to * * *
of the * * *.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
TRADE SECRETS
SCHEDULE 4 PART B INVENTIONS (cont.)
. Call was to * * * on the * * * list for the
* * * that indicates the call was by the * * *.
. Conversation with the * * * that he * * * or
* * * make a * * *.
. Calls * * * by * * * as from * * * or
* * * .
5. * * * technology that perform the following functions to
* * * calls (* * * may be a joint inventor or owner.):
. * * * to * * *
on the * * * .
. * * * the * * * in the * * *.
. * * * on the * * *.
. * * * both * * * and * * *.
6. Other * * * techniques that have been studied but have not been
implemented such as:
. * * * . * * * the call * * *
the * * * * * *.
. * * * . * * * with the * * * to
block * * * by the * * * occurring at the * * *.
. * * * . * * * to both the * * *
and to the * * * .
. * * * . * * * into the * * *
to * * * within the * * *.
7. The * * * initially drafted but not filed by * * *
for an * * *
including without limitation any and all inventions described in the * * *
.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT 10.5
AIRTOUCH ASSIGNMENT AGREEMENT
-----------------------------
This Assignment Agreement (the "Agreement") is entered into as of December
14, 1994, by and between ESL Incorporated, a California corporation ("ESL"), and
PhonePrint, Inc., a Delaware corporation ("PhonePrint"), with reference to the
following facts:
WHEREAS, ESL is a party to that certain Development and License Agreement
by and between AirTouch Communications Incorporated, formerly known as PacTel
Corporation ("AirTouch") and ESL dated as of October 4, 1993, as amended by
First Amendment to the Development and License Agreement dated October 23, 1993
(collectively, the "AirTouch Agreement"), a copy of which is attached hereto as
Exhibit A.
- ---------
WHEREAS, ESL is willing to grant to PhonePrint and PhonePrint desires to
acquire from ESL, all of ESL's rights and obligations under the AirTouch
Agreement.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions set forth below, the parties hereto agree as follows:
1. ASSIGNMENT OF RIGHTS AND OBLIGATIONS. ESL hereby assigns to
------------------------------------
PhonePrint, and PhonePrint hereby accepts, all of ESL's rights and obligations
under the AirTouch Agreement. The parties agree that this instrument
constitutes a present assignment of the AirTouch Agreement, but is subject to
the continuing indemnification and other obligations contained in that certain
Asset Purchase Agreement between the parties of even date herewith.
2. OWNERSHIP. ESL represents and warrants that ESL is the sole and
---------
exclusive owner of all of such rights.
3. COVENANTS. ESL covenants that ESL has full right to convey the rights
---------
herein assigned, and that ESL has not executed and will not execute any
agreement in conflict herewith.
4. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one in the same instrument.
5. GOVERNING LAW. This Agreement shall be governed by and construed under
-------------
the internal laws of the State of California, without regard to any rules of
conflicts of law applicable to agreements made and to be performed in such state
by and among residents of such state.
<PAGE>
6. FURTHER ASSURANCES. Each of the parties hereto shall execute and
------------------
deliver all additional documents and shall do any and all acts and things
reasonably required in connection with the performance of the obligations
undertaken in the Agreement and to effectuate in good faith the intent of the
parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PHONEPRINT, INC., ESL INCORPORATED,
a Delaware corporation a California corporation
By: /s/ illegible By: /s/ illegible
------------- -------------------------
Title: Chairman Title: Senior Vice President
---------- --------------------
[COUNTERPART SIGNATURE PAGE TO
ASSIGNMENT AND ASSUMPTION AGREEMENT]
<PAGE>
EXHIBIT A
AGREEMENT WITH AIRTOUCH
-----------------------
A-1
<PAGE>
DEVELOPMENT AND LICENSE AGREEMENT
This Development and License Agreement (the "Agreement") is made and
effective as of the later date signed below (the "Effective Date") by and
between ESL Incorporated, a California corporation and a TRW Company with
offices located at 495 Java Drive, Sunnyvale, California 94088-3510 ("ESL"), and
PacTel Corporation, a California corporation with offices located at 2999 Oak
Road, Walnut Creek, California 94596 ("PacTel")
WITNESSETH:
WHEREAS, ESL wishes to develop, and PacTel wishes to have developed, the
"Licensed Products," as that term is defined below; and
WHEREAS, PacTel has expertise in cellular telephony, including ***
*** , alpha and beta testing, field test facilities, and
FCC and regulatory requirements, such as experimental licenses; and
WHEREAS, ESL has expertise in emitter recognition and identification
technology including, but not limited to, *** , developing
and maintaining a database of authorized and unauthorized emitter security
patterns, emitter recognition, and enabling cellular systems to determine
whether to deliver services depending on certain ***
levels; and
WHEREAS, ESL intends to manufacture, have manufactured, use, market, sell
and distribute the Licensed Products in accordance with the terms hereof; and
WHEREAS, PacTel intends to provide business and technical development
support to ESL in accordance with the terms hereof including, but not limited
to, *** ***
; and
WHEREAS, each party intends to bear the costs associated with it own
efforts in the development of the Licensed Products;
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the parties hereby agree as follows:
ARTICLE 1
Definitions and Priority
----------- --- --------
1.1 Definitions. The following words and phrases will have the meanings
------------
set forth below:
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
1.1.1 Agreement. The term the "Agreement" means this Development and
----------
License Agreement between ESL and PacTel, including the following Exhibits
attached hereto, and any amendments thereto:
Exhibit A: The ***
*** . As of the Effective Date, this exhibit is in *** and
the parties *** .
Exhibit B: Statement of Work, Milestones and Functional and Interface
Specifications. As of the Effective Date, this
*** .
Exhibit C: Nondisclosure Agreement, dated *** .
1.1.2 Develop or Development. The term "develop" or "development,"
------- -- ------------
as used herein, means engineering, design, layout, hardware and Licensed
Software generation, prototyping, characterization, qualification, fabrication,
testing, and preparation of data sheets and application notes.
1.1.3 Licensed Products. The term "Licensed Products" means the
-------- ---------
*** , and any *** , developed in accordance
with the functional and interface specifications set forth in Exhibit B hereto,
and made under the *** and the ***
therein or by the use of *** .
1.1.4 *** . The term " *** " means the
------------------
*** and *** and their *** and
*** relating to the Licensed Products, together with any
*** *** .
1.1.5 *** . The term " ***
-----------------------------
" means PacTel's *** containing ***
, as described in Exhibit A, that is used in the Licensed Products for the
*** telephone usage, together with any ***
and other intellectual property rights thereto. The term " ***
" does not include any subscriber information.
1.1.6 *** . The term " *** " means the
-----------------
*** *** and *** for the
scheduling and *** operations within the Licensed Products, as
described in Exhibit A, together with any *** and other
intellectual property rights thereto.
1.1.7 *** . The term " ***
------------------------------
" means the information, as described in Exhibit A, that is directly related to
the *** *** and the production, manufacture, use,
operation, repair, maintenance, modification or reconstruction thereof, together
with any *** and other
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
intellectual property rights thereto. This includes, but is not limited to,
information in the form of blueprints, drawings, plans, photographs,
instructions, masks, Licensed Software and documentation.
1.1.8 Gross Sales Price. The term "Gross Sales Price" means the
----- ----- ------
amount that is the price at which each Licensed Product is sold or delivered to
the customer or user. In the event that the Gross Sales Price is less than the
*** , as a result of *** or *** under arrangements
with the customer or user, or in the event Licensed Products are *** or
otherwise *** , then for purposes of this Agreement, the Gross Sales
Price shall be the sales price ***
*** .
1.1.9 Net Sales Price. The term "Net Sales Price" means the Gross
--- ----- ------
Sales Price, net of expenses for transportation, shipping, insurance, boxing,
handling or similar charges, taxes and duties, if any, and other costs
incidental to shipment.
1.1.10 Affiliate. The term "Affiliate" means any corporation,
----------
partnership or other business entity in which either party hereto owns or
controls more than fifty percent (50%) of the voting stock or otherwise has more
than fifty percent (50%) of the right to control the entity.
1.1.11 Equity Partner. The term "Equity Partner" means any
------ --------
corporation, partnership or other business entity in which either party hereto
owns or controls between five percent (5%) and fifty percent (50%) of the voting
stock or otherwise has between five percent (5%) and fifty percent (50%) of the
right to control the entity.
1.2 Priority. In the event of any inconsistency between the text of the
---------
Agreement and the provisions of any of the Exhibits, the text of the Agreement
shall prevail.
ARTICLE 2
Scope of Work, Cost Sharing and Payment
----- -- ----- ---- ------- --- -------
2.1 Development by PacTel. PacTel will enhance its ***
----------- -- -------
and *** and will perform such other tasks as are set forth
in Exhibit B. PacTel agrees to provide ESL with access to its spectrum and
network to facilitate ESL's work on the Licensed Products. PacTel will be
responsible for *** including, but not limited to,
*** and *** , in *** , for *** of
the Licensed Products, and in *** localities only, for ***
release of the Licensed Products. PacTel will provide functional system
specifications including operating and support requirements.
2.2 Development by ESL. ESL will develop an *** for
----------- -- ----
wireless subscriber systems and perform such other tasks to develop the Licensed
Products as are set forth in Exhibit B.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
2.3 Commercialization by ESL. ESL will commercialize the Licensed
----------------- -- ----
Products to meet the functional and interface specifications in Exhibit B, i.e.,
ESL will *** *** so that the Licensed
Products will be in manufacturable form for worldwide marketing, sales,
distribution and support by ESL to end user customers.
2.4 Cost Sharing. Each party will bear its own costs associated with its
---- --------
respective development efforts described above.
2.5 *** Developments. ESL will have the ***
------- -------------
*** including, without limitation, any upgrades,
modifications, improvements, enhancements, derivatives or other changes to the
Licensed Products. If ESL exercises such rights, it shall have a license in
accordance with *** and ***
, as that term is defined herein. In each instance, ESL will have a reasonable
amount of time to ***
*** its rights under this Section.
ARTICLE 3
Term
----
The term of the Agreement will be *** years from the Effective Date,
unless sooner terminated in accordance with Article 9 hereof. Unless a
termination notice is given by either party hereto six (6) months prior to
expiration of such ***-year period, the Agreement shall be renewed
automatically for *** year from the date of expiration of the said period
under the same terms and conditions. Neither party will make any claims or
demands against the other party for any damages, losses, expenses or costs, if
any, incurred as a result of the expiration, termination without cause, or non-
renewal of the Agreement.
ARTICLE 4
Licenses Granted and Royalties
-------- ------- --- ---------
4.1 License to ESL. Subject to the terms and conditions of this Agreement,
PacTel hereby grants to ESL a worldwide, *** , ***, *** *** right
and license under PacTel's *** *** :
(a) to make, have made, copy and/or use the Licensed Products, including
the *** ;
(b) to sell the Licensed Products, including the ***
; and
(c) to provide support for the Licensed Products, including the
*** *** .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
4.2 License to PacTel. Subject to the terms and conditions of this
------- -- -------
Agreement, ESL hereby grants to PacTel a *** , non-exclusive, non-
transferable, *** right and license under ESL's *** to
copy and use the *** for PacTel's internal business purposes in
the United States only during the term of this Agreement.
4.3 Royalties. In consideration of the rights, licenses and benefits
----------
conferred upon ESL hereunder, during the term of this Agreement, *** will pay
to *** a *** in the amount of *** of
the *** of all ***
*** . *** will have no obligation
to pay *** . In
no event will more than *** .
Notwithstanding the foregoing, *** will be payable on any
*** , by a customer. In order to maintain the
*** shall pay to *** ***
*** during the *** and
*** *** thereafter,
*** . The first of such
*** later than *** , and every ***
thereafter during the term hereof. Should *** fail to make such
*** , the ***
*** shall retain only a ***
. The amounts of the *** and *** and
*** at the end of the *** of this
Agreement.
4.4 Accounting and Payment. Within *** after every
---------- --- --------
anniversary date of the Agreement during the term hereof, from and after the
date both parties agree that Licensed Products may be released for production,
*** will render to *** a certified check (or other form of payment
acceptable to ***) in the amount of all *** *** on account of
activities of *** under the Agreement during the calendar year preceding the
year in which such *** is required to be made. Further, *** will
transmit to *** , accompanying each such payment, an accurate, itemized
statement (certified upon request) setting forth in sufficient detail for
verification, the basis upon which such *** is determined and made. All
*** will be made to the order of *** in *** and will be
payable at *** address as set forth in Article 13.
4.5 Records and Audit. *** will keep complete and accurate books and
------- --- ------
records, containing adequate details for the calculation of the amounts of all
*** from the *** to *** hereunder. All such books and records will be
available for reasonable time periods during regular business hours, for a
period of three (3) years following the end of the calendar year to which they
pertain, for inspection and audit by *** accountants or independent
auditors for the purpose of verifying all *** submitted by ***. The
obligations of *** under this Article 4 will survive any termination or
expiration of the Agreement.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
4.6 Product Marketing.
------- ----------
(a) ESL will at all times have the sole discretion to set and determine
all terms and conditions of sale of all Licensed Products, including price,
position, distribution channels and name (including ESL trademarks, trade names
or logos). ESL will be responsible for distribution of the Licensed Products in
its sole discretion.
(b) ESL will at all times have the sole discretion to develop and approve
marketing materials and activities for, the Licensed Products. Further, ESL
will at all times during the term of the Agreement be responsible for
manufacturing, assembling and distributing the components that comprise the
Licensed Products.
(c) PacTel has adopted and owns certain trademarks and service marks used
in identifying and marketing PacTel technology, products and services, logos,
trade names and related acronyms and the like, whether or not registered (the
"PacTel Trademarks"). ESL recognizes and consents for all purposes that the
PacTel Trademarks constitute the exclusive property of PacTel and cannot be used
by ESL pursuant to this license, except as specified in the Agreement, nor will
ESL use any confusing similar trademark, logo, trade name or the like. PacTel
hereby grants to ESL the non-exclusive right to use the following statement in
the marketing of the Licensed Products: " ***
*** ." Nothing contained in the Agreement will be construed as
conferring any additional rights upon ESL to use in advertising, publicity or
other promotional activities any PacTel Trademark, other than specifically set
forth in the preceding sentence, unless PacTel grants to ESL its prior express
written consent. ESL will use the PacTel trade name with such words qualifying
or identifying the relationship of PacTel and ESL as PacTel, from time to time,
may reasonably prescribe. PacTel will have the sole right, but not the
obligation, to register and enforce the PacTel Trademarks and other marks it
adopts, acquires or uses in the United States or in any foreign country and all
rights generated by use of same by ESL will inure directly to the benefit of
PacTel.
(d) The parties will mutually plan and agree upon the contents, form and
manner of publicity with respect to the Licensed Products and will not respond
to inquiries from members of the public media, if such inquiries concern the
contents of the Agreement and details of the transactions contemplated by the
Agreement. In no event will the parties act unilaterally with regard to such
disclosures, unless otherwise required to by law.
(e) PacTel will provide to ESL *** , *** , and such
additional information that ESL may require in order to promote the Licensed
Products. In addition, PacTel will *** for Licensed Product ***
on *** .
(f) ESL reserves the right to ESL-developed trademarks, trade names, logos
and related acronyms and the like, whether or not registered, to identify the
Licensed Products or other ESL developed technology, products and services, so
long as such trademarks, etc., are not confusingly similar to the PacTel
Trademarks.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
ARTICLE 5
Ownership of Inventions and Technical Information
--------- -- ---------- --- --------- -----------
5.1 Patent Applications. Each party agrees to notify the other party
------ -------------
within ninety (90) days following the filing of a patent application with
respect to any invention relating to the Licensed Products first reduced to
practice during the term of the Agreement.
5.2 PacTel Inventions. All inventions developed conceived or first
------ -----------
reduced to practice, as those terms are used before the U.S. Patent
and.Trademark Office, by statute and under common law, solely by PacTel
personnel, will be the sole and exclusive property of PacTel. PacTel will
retain any and all rights to file any patent applications thereon and such
inventions shall be subsumed under ***
*** above.
5.3 ESL Inventions. All inventions developed, conceived or first reduced
--- -----------
to practice, as those terms are used before the U.S. Patent and Trademark
Office, by statute and under common law, solely by ESL personnel, will be the
sole and exclusive property of ESL. ESL will retain any and all rights to file
any patent applications thereon ***
in ***
with the ***
for the term of this Agreement.
5.4 Joint Inventions.
----- -----------
(a) Inventions developed, conceived or first reduced to practice, as those
terms are used before the U.S. Patent and Trademark Office, by statute and under
common law, jointly by the parties (the "Joint Inventions"), will be jointly
owned by the parties, each party having an equal and undivided interest therein,
without the duty to account to the other for any use made of such Joint
Inventions. Notwithstanding the foregoing, neither party may use the Joint
Inventions in any way which would harm the other's ownership interest therein.
The parties agree to mutually determine whether a patent application or
applications will be filed on such Joint Inventions, the party which will
prepare and file such application or applications, and the country or countries
in which the same are to be filed. The patent expenses incurred will be divided
equally between the parties.
(b) If the parties are not able to mutually agree to file an application
or applications on a Joint Invention, either one of the parties may elect to
assume such expenses (the "Electing Party"). The Electing Party will control the
preparation and prosecution of any such application and all rights in any
patents granted thereon will belong exclusively to the Electing Party. The party
declining to bear its share of the expenses of prosecuting or maintaining
patents covering a Joint Invention (the "Declining Party") agrees to execute any
and all forms, assignments or other documents to effect the foregoing; provided,
however, that the Declining Party will ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
***
*** ; provided further, however, that such
Declining Party will ***
*** or the U.S. Government. Neither party may, without the prior
written consent of the other party (which consent may be withheld for any
reason, in its sole and absolute discretion), assign or otherwise transfer its
interest in any Joint Invention, except as expressly provided herein.
5.5 Protection and Use of *** .
---------- --- --- -- ------------------------
(a) Each party agrees it will not disclose (unless compelled to disclose
by judicial or administrative process, or in the opinion of such party's
counsel, by other requirement of law), use, or permit the use by others of such
other party's *** *** , at any time during the Agreement, or at any time
thereafter, for a period of *** after the disclosure thereof. Without
limiting the foregoing, each party agrees to do the following with respect of
any such *** : (i) instruct and require all of its employees and agents to
maintain the confidentiality of such information; (ii) exercise either at least
the same degree of care to safeguard the confidentiality of such information as
that party exercises to safeguard the confidentiality of its own information of
a similar type, or a reasonable degree of care, whichever is greater; and (iii)
restrict disclosure of such information to those of its employees who have a
need to know consistent with the purposes for which such information was
disclosed. Each party further agrees not to remove or destroy any proprietary or
confidential legends or markings placed upon documentation or other materials
which contain or set forth the *** of the other party.
(b) The party receiving *** will obtain the
written agreement of any permitted transferee or licenses to hold in confidence
the information transferred to such transferee or licensee in accordance with
terms no less restrictive than those set forth above.
(c) The receiving party may disclose the other party's ***
to its employees, agents, suppliers and subcontractors to the extent that each
such disclosure is reasonably necessary for manufacturing, using, selling,
installing and/or servicing Licensed Products, or procuring goods and services
required in connection therewith; provided, however, that the receiving party
will take all desirable and necessary actions to preserve the confidentiality of
such information including, but not limited to: (i) marking any documents or
other material containing any ***
*** so disclosed to indicate that same contains proprietary data and
***
*** ; (ii) requiring each party to whom same is disclosed to sign a
written agreement limiting the use thereof to authorized purposes, prohibiting
the further reproduction or disclosure thereof and requiring the prompt return
thereof when no longer needed; and (iii) providing that any reproduction, notes
or summaries thereof, immediately upon the making thereof, will become the
property of the disclosing party and will be delivered to the disclosing party
with, and upon the return of, the *** *** .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
(d) Each reproduction of any *** , together with
each modification and revision thereof, made by or for the receiving party, will
automatically become the property of the disclosing party, will be deemed the
disclosing party's *** *** for all purposes hereunder and will be
clearly marked accordingly.
(e) Upon *** , the receiving party
will immediately discontinue the use of, and will promptly return to the
disclosing party or its designee, all *** , together
with copies thereof, in the possession or control of the receiving party,
together with all written documentation and/or other materials containing
information relating to the *** . The receiving
party further agrees that it will not, for a period of *** after the
date of any termination or expiration of this Agreement, use or disclose to any
third party any of disclosing party's *** , except
such information an the disclosing party has previously made generally available
to the public.
ARTICLE 6
*** *** Support Services, Minimum Order
--------- --------- ------- --------- ------- -----
6.1 *** . ESL will sell the Licensed Products to
------------------
PacTel ***
*** . *** that the ***
to *** and
*** as ***
to its
*** of *** , for *** delivered
within ***
*** calendar days before or *** after *** the
*** to *** . Such ***
shall be *** by an additional *** for ***
by *** , taking into account the fact that
*** on *** by *** and *** . In *** of
the *** of *** to the ***
agrees to *** a *** on ***
by *** who were introduced to *** . No *** will be
*** on any *** , but
*** by an *** . Further, *** shall give *** to
*** by *** and/or its *** , and to the extent that
*** after
*** and its *** have *** , *** may make a ***
to *** for *** to *** to *** . *** will have no
obligation to *** with *** and/or *** , if
*** to *** written request within five (5) business days after the
date of such written request. In addition to the foregoing,
*** shall have the *** to conduct all *** for
all new versions of the *** and/or the *** .
6.2 Minimum Order. PacTel shall place a minimum order for ***
------- ------
Licensed Products by December 31, 1993, at a *** of
***
*** , *** in accordance with the terms of Section
6.1. It is understood that such Licensed Products will initially be installed by
December 31, 1993, for *** PacTel, and that upon ***
of the finished Licensed Products, ESL shall *** such ***
, *** versions no later than March 31, 1994. ***
of the price is payable upon installation
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
and the balance of *** is due when such ***
pass all acceptance criteria set forth in Exhibit B. Provided that such initial
*** Licensed Products pass all acceptance criteria no later than March 31,
1994, PacTel shall place a follow-on order of *** Licensed
Products by March 31, 1994, at a *** *** of
*** , *** in accordance with the terms of Section 6.1
above. Finished, *** of the Licensed Products shall be
installed *** no later than August 30, 1994
6.3 Maintenance and Support. ESL agrees to provide maintenance and
----------- --- --------
support, including all software upgrades and support, to PacTel and its
Affiliates ***
*** .
ARTICLE 7
Indemnification
---------------
7.1 PacTel Indemnity. PacTel shall, at its own expense, defend, or at its
------ ----------
option, settle any suit, claim or proceeding brought against ESL insofar as such
suit or proceeding is based on a claim that PacTel does not have sufficient
right, title and interest in PacTel's ***
and/or ***
*** (collectively " *** ") delivered to ESL under
this Agreement for the design, manufacture, use and sale of the Licensed
Products or that such information constitutes a direct infringement of any
United States trade secret, patent, trademark, copyright or any other
proprietary right of any third party, and PacTel shall indemnify and hold ESL
harmless against all costs, expenses and damages arising from such claim
including, without limitation, reasonable attorneys' fees and shall pay all
settlements and costs finally awarded therein against ESL, provided that PacTel
is promptly informed and furnished a copy of each communication, notice or other
action relating to the alleged infringement and is given all authority,
information and assistance necessary to defend or settle such suit or
proceeding.
7.2 ESL Indemnity. ESL shall, at its own expense, defend, or at its
--- ----------
option, settle any suit, claim or proceeding brought against PacTel insofar as
such suit or proceeding is based on a claim that
***
*** (collectively "ESL Licensed Materials")
licensed to PacTel hereunder or that such information constitutes a
*** ***
of any third party, and ESL shall ***
***
*** PacTel, provided that *** and *** a
copy of each communication, *** relating to the ***
and is *** all *** , information and *** to
*** .
7.3 PacTel Limitations on Indemnity. PacTel shall not be obligated to
------ ----------- -- ----------
defend or be liable for costs and damages to the extent that infringement arises
out of a
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
modification of the PacTel *** after delivery by PacTel, out of
combination of the PacTel *** with other goods or devices not
supplied by PacTel, or from other fault or action of ESL.
7.4 ESL Limitations on Indemnity. ESL shall not be obligated to defend or
--- ----------- -- ----------
be liable for costs and damages to the extent that infringement arises out of
compliance with PacTel's specifications, from a modification of the ESL Licensed
Materials after delivery by ESL, out of combination of the ESL Licensed
Materials with other goods or devices not supplied by ESL, or from other fault
or action of PacTel.
ARTICLE 8
Default and Termination
------- --- -----------
8.1 Default. An event of default on the part of either party will exist
--------
under the Agreement if:
(a) Such party fails to perform any material obligation required to be
performed by it under any provision of the Agreement within the time specified
in such provision, or if no time is specified, within *** after written
notice from the other party that such performance has become due.
(b) Such party becomes insolvent, is unable to pay its debts as they
become due, makes an assignment for the benefit of creditors, files a petition
in any state insolvency proceeding or ceases to carry on its business; or
(c) A receiver or liquidator is appointed for any of such party's
properties or assets, or a petition is filed against such party in any state
insolvency proceeding and such petition is not withdrawn within 30 days after
such appointment or filing.
8.2 *** . Subject to any other provisions hereof
-----------------
***
the *** hereunder, if *** , as *** in this
*** , exists on the part of either party, then the *** may
***
*** and may *** any other ***
to *** .
8.3 Mutual Termination. The parties may mutually agree to terminate the
------ ------------
Agreement at any time.
ARTICLE 9
Arbitration and Dispute Resolution
----------- --- ------- ----------
If a dispute arises between the parties relating to the interpretation or
performance of the Agreement or the grounds for the termination thereof, the
parties agree to meet to try to resolve the dispute. Such meeting will be
attended by individuals with decision-making authority to attempt, in good
faith, to negotiate a resolution of the
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
dispute prior to pursuing other available remedies. If, within thirty days
after such a meeting, the parties have not succeeded in negotiating a resolution
of the dispute, either party may request that such dispute be resolved through
final and binding arbitration. Such arbitration will be conducted by three (3)
arbitrators familiar with the wireless telecommunications industry and will be
held in San Francisco, California, in accordance with the then-current Rules of
Conciliation and Arbitration of the American Arbitration Association. Such
arbitrators will be selected by mutual agreement of the parties, or failing such
agreement, each party will select one arbitrator and the two selected
arbitrators will usually agree upon the selection of a third arbitrator. The
arbitrators will be bound to apply California law, and where applicable, federal
statutory law. The parties will be afforded a reasonable period of time to
conduct discovery prior to the arbitration. A court reporter will be present at
all arbitration proceedings in order to transcribe them and such transcription
will be the official record of such proceedings for purposes of any judicial
enforcement or review proceeding. The arbitrators' decision will be binding on
the parties and will specify the basis for any award and the types of damages
awarded. The parties will bear the cost of such arbitration equally and the
prevailing party in any such arbitration will be entitled to reasonable
attorneys fees, in addition to any other award ordered by the arbitrators. The
prevailing party in any judicial enforcement or review proceeding shall also be
entitled to reasonable attorneys' fees and costs, in addition to any other award
ordered by the court. If judicial enforcement is sought by either party,
judgment may be entered in any court of competent jurisdiction. This Article
shall survive any expiration or termination of the Agreement and shall continue
to be enforceable in the event of the bankruptcy of a party.
ARTICLE 10
Limitation of Liability
---------- -- ---------
Notwithstanding anything in the Agreement to the contrary, in no event will
either party be liable to the other for loss of profits, or for any indirect,
incidental, special or consequential damages arising from this Agreement,
however caused, whether as a consequence of the negligence of the one party or
otherwise; and the sole and exclusive liability and maximum liability of one
party to the other hereunder, whether arising in warranty, contract, tort or
otherwise, shall not exceed $ *** .
ARTICLE 11
Licenses and Permits
-------- --- -------
PacTel, at its own expense, will obtain from the appropriate agencies or
departments of the government all experimental licenses during product
development and ***
*** the Licensed Products under this Agreement. This obligation of PacTel
is limited to ***
as more specifically set forth in Section 2.1 above.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
ARTICLE 12
Miscellaneous Provisions
------------- ----------
12.1 Any notice, demand, request, statement or other writing required or
permitted by the Agreement, will be deemed to have been sufficiently given when
personally delivered or mailed by certified or registered mail, postage prepaid,
addressed as follows:
If to PacTel: PacTel Corporation
390 No. Wiget Lane, Suite 200
Walnut Creek, California 94598
Attn: *** , Director
Technology Transfer
With a copy to: PacTel Corporation
2999 Oak Road, MS 800
Walnut Creek, California 94596
Attn: General Counsel
If to ESL: ESL Incorporated, MS __/__
495 Java Drive
Sunnyvale, California 94088
Attn: *** , New Venture Manager
12.2 The Agreement constitutes the entire agreement between the parties and
supersedes all previous agreements and understandings relating to the subject
hereof. The Agreement may not be altered, amended or modified, except by a
written instrument signed by the duly authorized representatives of both
parties.
12.3 The Agreement may not be assigned to any third party, in whole or in
part, by either party without the prior written consent of the other party. An
assignment to Affiliate of either party will not be deemed a third party and
will not require prior written consent from the other party.
12.4 Failure or successive failures on the part of either party, its
successors and assigns, to enforce any covenant or agreement herein, or any
waiver or successive waivers on its or their part of any covenant or condition
of the Agreement will not operate as a discharge of such covenant, agreement or
condition, render the same invalid or impair the right of either party, its
successors or assigns, to enforce the same.
12.5 Headings included in the Agreement are for convenience only and are
not to be used to interpret the Agreement between the parties.
12.6 Any news release, including photographs, films, advertisements,
publicity, public announcements or confirmation of same, to be released by
either party concerning
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
the activities of the other party or on any part of the subject matter of the
Agreement will be subject to the prior written approval of the other party. The
parties further agree that news releases made by either party will recognize the
participation and contributions of the other party. The nature of this
relationship will remain confidential to both parties.
12.7 No failure or omission on the part of either party to carry out or
observe any of the terms or provisions of the Agreement will be deemed a breach
of the Agreement, if same will arise or result from force majeure or from any
cause reasonably beyond the control of PacTel or ESL. Should such delay occur,
the date or dates of performance by the affected party will be extended for a
period equal to the number of days during which performance is so delayed. The
affected party will give the other party written notice of such delay within
fifteen (15) working days after identification of the delay.
12.8 Notwithstanding anything in the Agreement to the contrary, PacTel has
no obligation under the Agreement to perform any act whatsoever which would
violate the terms of the Modification of Final Judgment in U.S. v. Western
---------------
Electric Co., 552 P. Supp. 131 (D.D.C. 1982) (the "MFJ"). Following written
- ------------
notice to ESL, PacTel may discontinue performance of any activity required
herein or terminate the Agreement immediately, if in PacTel's sole opinion, such
discontinuation or termination is necessary in order to comply with the MFJ. In
the event that PacTel has determined that only certain activities, but not the
entire Agreement, must be discontinued, ESL will have the option to continue or
terminate the Agreement. In the event that ESL elects to continue the
Agreement, the parties will mutually agree upon royalty or payment terms which
will reasonably compensate ESL for PacTel's inability to perform certain of
PacTel's obligations hereunder.
12.9 Nothing in the Agreement will be construed to constitute ESL as the
partner or agent of PacTel, nor will either party have any authority to bind the
other. Each party will remain an independent contractor responsible only for
its own actions.
12.10 This Agreement has been entered into, will be governed by and
construed in accordance with the substantive laws of the State of California
applicable to agreements made and to be performed wholly within such
jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed by their duly authorized
representatives as of the Effective Date.
ESL INCORPORATED PACTEL CORPORATION
A TRW COMPANY
By:/s/ Arthur L. Money By:/s/ C. Lee Cox
-------------------- ---------------
Name:Arthur L. Money Name:C. Lee Cox
------------------ -------------
Title:President Title:President
----------------- ------------
Date:01 October 1993 Date:10/4/93
------------------ -------------
<PAGE>
DRAFT
EXHIBIT A
PACTEL
***
***
***
***
Application No:
***
*** to provide input.
***
N/A
***
*** to be provided includes:
. ***
. ***
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT A
ESL
***
*** has *** under the ***:
***
***
*** software is the *** software which will maintain database
information, apply *** of *** , and
*** .
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B DRAFT
STATEMENT OF WORK
PacTel
Regulatory
PacTel will apply for the *** , tariff modifications and
approvals necessary to *** the ***
product within *** Markets.
Product Specifications
PacTel will translate its market requirements into a complete generic
description of functionality, features, performance and compatibility
characteristics. This will include installation, platform and market location
considerations.
Procurement Requirements
PacTel will provide a description of the procurement procedures, methods and
requirements within its organization.
Field Testing
PacTel will support technology, prototype and product evaluations by providing
ESL access to *** and ***. Evaluations shall
include, but not be limited to, the following: ***
***
*** used for evaluation and deployment shall be selected by PacTel based on
technical and business considerations. The *** will allow *** to test its
product under various conditions including extreme *** and ***.
PacTel will assist with the definition of test requirements and conditions.
*** of the product will be based on the *** as
included herein.
Work In Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B DRAFT
Operations Training and Support
PacTel will provide documentation specifications including a statement of
requirements and objectives covering installation, maintenance,
repair/replacement and operational procedures. PacTel will assist with
development and implementation of a detailed plan addressing system integration,
FOT training and ongoing vendor support.
***
PacTel will provide *** as described in Exhibit A.
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B
STATEMENT OF WORK
ESL
Product Development
ESL will design, develop, and test new technology developments, taking into
account PacTel's requirements, for the advancement of the ***
Product.
Field Testing & Evaluation
***
*** will be performed at designated PacTel cell sites. With PacTel
assistance, ESL will generate the definition of the test requirements and
conditions for each test and ***
*** of the product. *** of the product will be based upon
the ***
*** as included herein.
Upon *** of the *** units, ESL will manufacture the quantity of
units being procured by PacTel to the agreed upon production configuration and
functionality performance.
Operations Training & Support
ESL will generate product installation and FOT training documentation taking
into consideration PacTel requirements for installation, maintenance,
replacement/repair, and operational procedures.
***
ESL will *** with PacTel in *** of the
***
*** . This will include engineering and manufacturing consideration through
test and evaluation of the *** and *** units.
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B
Milestones
.
.
.
.
.
. *** ***
.
.
.
.
.
.
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
PAC(TM) TEL
Corporation
A Pacific Telesis Company
THE *** SYSTEM
GENERIC PRODUCT SPECIFICATIONS
GENERAL EQUIPMENT SPECIFICATIONS
This section describes the physical and electrical specifications that are
important to operation in a ***. Most *** are air conditioned and shielded. To
work in most *** the following specifications are required. If more stringent,
FCC Type Acceptance requirements shall apply.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
ITEM SPECIFICATION COMMENTS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
*** *** ***
*** ***
- ----------------------------------------------------------------------------------------------------------
*** *** ***
***
- ----------------------------------------------------------------------------------------------------------
*** *** ***
- ----------------------------------------------------------------------------------------------------------
*** *** ***
- ----------------------------------------------------------------------------------------------------------
*** *** No performance degradation
- ----------------------------------------------------------------------------------------------------------
*** *** Normal cell site power
- ----------------------------------------------------------------------------------------------------------
*** *** ***
- ----------------------------------------------------------------------------------------------------------
*** ***
- ----------------------------------------------------------------------------------------------------------
*** *** Check FCC specifications
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
PAC(TEL)
Corporation
A Pacific Telesis Company
THE *** SYSTEM
GENERIC PRODUCT SPECIFICATIONS
*** (USING JAMMING)
Additional equipment is required to implement the *** function. This includes a
*** that can be used to terminate in process calls as required. This equipment
is controlled by the *** system.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
ITEM SPECIFICATION COMMENTS
- ------------------------------------------------------------------------------
<S> <C> <C>
*** *** Only mobile receive is needed
- ------------------------------------------------------------------------------
*** *** Monitor cell site transmit
- ------------------------------------------------------------------------------
*** *** ***
***
- ------------------------------------------------------------------------------
*** *** ***
*** ***
***
- ------------------------------------------------------------------------------
*** *** Need to control SAT frequency and
presence of 10 kHz
- ------------------------------------------------------------------------------
*** *** ***
*** ***
***
- ------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
PAC(TM) TEL
Corporation
A Pacific Telesis Company
THE *** SYSTEM
GENERIC PRODUCT SPECIFICATIONS
SYSTEM INTEGRATION
The *** system must integrate into the existing *** and *** functions.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
ITEM SPECIFICATION COMMENTS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
*** *** Security features must be in place
- ---------------------------------------------------------------------------------------------
*** *** Database must be remotely modified
- ---------------------------------------------------------------------------------------------
*** *** Activity must be available for further
analysis at the host site
- ---------------------------------------------------------------------------------------------
*** ***
- ---------------------------------------------------------------------------------------------
*** ***
- ---------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
DRAFT
TECHNICAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*** *** *** Must capture information on
*** all registrations and attempts
within test sites
- ----------------------------------------------------------------------------------------------------
***
- ----------------------------------------------------------------------------------------------------
***
- ----------------------------------------------------------------------------------------------------
***
- ----------------------------------------------------------------------------------------------------
*** ***
***
- ----------------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
*** DRAFT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hardware Installation Operations review prior Commercial equipment ***
to ***
final commercial roll-out
***
-
- ***
-
-
- ------------------------------------------------------------------------------------------------------------------------
Software Installation Operations review prior Commercial equipment ***
to final commercial roll-out
- ------------------------------------------------------------------------------------------------------------------------
Installation Documentation Operations review prior Published documentation Must include:
to final commercial roll-out -
- ***
-
-
- ------------------------------------------------------------------------------------------------------------------------
Trouble-Shooting Operations review prior Commercial equipment Must include:
Capabilities to final commercial roll-out - ***
- ------------------------------------------------------------------------------------------------------------------------
Alarming Operations review prior Commercial equipment ***
to final commercial roll-out
- ------------------------------------------------------------------------------------------------------------------------
Monitoring Operations review prior Commercial equipment ***
to final commercial roll-out
- ------------------------------------------------------------------------------------------------------------------------
Reporting Operations review prior Commercial equipment ***
to final commercial roll-out
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
*** SATISFACTION DRAFT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- --------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transparency Subjective evaluation *** and commercial roll- ***
through live drive test out ***
- -------------------------------------------------------------------------------------------------------------
Billing Records Evaluation of affected Commercial roll-out of ***
customer bills through *** *** configuration
***
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
DRAFT
*** MITIGATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
*** Identification *** *** ***
***
- ---------------------------------------------------------------------------------------
Review of performance *** ***
reports ***
- ---------------------------------------------------------------------------------------
Terminations Review of performance *** ***
reports ***
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT C
NONDISCLOSURE AGREEMENT
-----------------------
THIS NONDISCLOSURE AGREEMENT is made as of this 22 day of April, 1993
("Effective Date"), by and between PACTEL CORPORATION, a California corporation
(hereinafter referred to as "PacTel"), with offices located at 2999 Oak Road,
Walnut Creek, California 94596, and ESL INCORPORATED, a California corporation
(hereinafter referred to as "Vendor"), with offices located at 495 Java Drive,
Sunnyvale, California 94088-3510 (collectively "the Parties") which agree as
follows:
WHEREAS each Party wishes to evaluate and understand its potential
involvement in a project of mutual interest; and
WHEREAS PacTel may find it necessary to disclose to Vendor certain
confidential and proprietary information and intellectual property of PacTel,
relating to PacTel and its operations, which will be used by Vendor only for its
work on PacTel projects; and
WHEREAS Vendor may find it necessary to disclose to PacTel certain
confidential and proprietary information relating to Vendor and its operations
which will be used by PacTel only to evaluate its potential use of Vendor's
services; and
WHEREAS each Party is willing to release such Information to the other
on a confidential basis, and is willing to enter into this Agreement;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, PacTel and Vendor agree as follows:
1. All Information as defined below, provided by one Party (the
"Originator") to the other will be treated as confidential.
"Information" shall include all information in written, oral or other
tangible or intangible forms which may include, but is not limited to,
discoveries, ideas, concepts, know-how, techniques, designs,
specifications, drawings, blueprints, tracings, diagrams, models,
samples, flow charts, data, computer programs, disks, diskettes,
tapes, marketing plans, customer names and other technical, financial
or business information.
2. For a period of ten (10) years following the effective date of this
Agreement, each Party shall:
-1-
<PAGE>
a. restrict disclosure of the Information solely to those of its
employees with a need to know, and not to disclose it to other
parties; and,
b. advise its employees of the obligation of confidentiality
hereunder; and,
c. require its employees to use the same degree of care as is used
with that Party's own proprietary information.
3. Notwithstanding anything to the contrary herein, neither Party shall
have any obligation to preserve the confidentiality of any Information
that:
a. was previously known by it free of any obligation to keep it
confidential; or,
b. is distributed to third parties by the Originator without
restriction; or,
c. is or becomes publicly available, by other than unauthorized
disclosure by the Party receiving the Information; or,
d. is wholly and independently developed by the Party receiving the
Information.
4. All Information shall be deemed the property of the Originator, and,
upon request, the other Party will return all Information received in
tangible form to the Originator or destroy all such Information.
5. Nothing contained in this Agreement shall be construed as granting or
conferring any rights by license or otherwise in any Information
disclosed by the Originator.
6. This Agreement shall be governed and construed in accordance with the
laws of the State of California and shall benefit and be binding upon
the Parties hereto and their respective successors and assigns.
7. Since either Party may choose not to do business with the other in the
future, each acknowledges that the other is not responsible or liable
for any business decisions made by either in reliance upon disclosures
made during any meetings between the Parties or in reliance on any
results of the discussions.
-2-
<PAGE>
8. This Agreement shall continue until terminated in writing by either
Party. The obligation to protect the confidentiality of Information
received prior to such termination shall survive the termination of
this Agreement.
9. Each Party agrees that it will make no copies or otherwise reproduce
the data provided by the other, and further agrees to remove all such
data from its files and return all data to the other if requested to
do so.
PACTEL CORPORATION ESL INCORPORATED
("PacTel") ("Vendor")
By: /s/ L.R. Daniels By: /s/ Jill Kovacich
----------------------- ----------------------
Lyn R. Daniels Name: Jill Kovacich
---------------------
Chief Financial Officer Title: Manager of Contracts
--------------------
and Treasurer
-3-
<PAGE>
EXHIBIT B
FIRST AMENDMENT TO
THE DEVELOPMENT AND LICENSE AGREEMENT
DATED OCTOBER 4, 1993
BETWEEN
ESL INCORPORATED AND PACTEL CORPORATION
This First Amendment is made this 4th day of October, 1993, by and between
ESL Incorporated ("ESL") and PacTel Corporation ("PacTel").
WHEREAS, the parties entered into a Development and License Agreement,
dated October 4, 1993; and
WHEREAS, the parties now wish to amend that Agreement to correct certain
terms thereof;
NOW THEREFORE, the parties agree as follows:
1. In Section 2.5 of the Agreement the following clause shall be added at
the end of the second sentence:
", and shall be subject to the terms and conditions of this Agreement, with
the exception of Sections 6.2 and 6.3."
2. Section 5.5 of the Agreement is hereby deleted and the following is
substituted therefor:
5.5 Protection and Use of *** .
---------- --- --- -- --------------------
(a) Each party agrees it will not disclose (unless compelled to disclose by
judicial or administrative process, or in the opinion of such party's counsel,
by other requirement of law), use, or permit the use by others of such other
party's *** ,
*** and/or *** , at any time during the
Agreement, or at any time thereafter, for a period of *** years after the
disclosure thereof. Without limiting the foregoing, each party agrees to do the
following with respect of any such
*** , *** and/or *** : (i)
instruct and require all of its employees and agents to maintain the
confidentiality of such information; (ii)
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
exercise either at least the same degree of care to safeguard the
confidentiality of such information as that party exercises to safeguard the
confidentiality of its own information of a similar type, or a reasonable degree
of care, whichever is greater; and (iii) restrict disclosure of such information
to those of its employees who have a need to know consistent with the purposes
for which such information was disclosed. Each party further agrees not to
remove or destroy any proprietary or confidential legends or markings placed
upon documentation or other materials which contain or set forth the ***
*** of the other party.
(b) The party receiving *** , ***
and/or
*** will obtain the written agreement of any permitted
transferee or licensee to hold in confidence the information transferred to such
transferee or licensee in accordance with terms no less restrictive than those
set forth above.
(c) The receiving party may disclose the other party's ***
*** and/or *** to its
employees, agents, suppliers and subcontractors to the extent that each such
disclosure is reasonably necessary for manufacturing, using, selling, installing
and/or servicing Licensed Products, or procuring goods and services required in
connection therewith; provided, however, that the receiving party will take all
desirable and necessary actions to preserve the confidentiality of such
information including, but not limited to: (i) marking any documents or other
material containing any ***
*** so disclosed to indicate that same contains proprietary data
and
*** and/or *** ; (ii)
requiring each party to whom same is disclosed to sign a written agreement
limiting the use thereof to authorized purposes, prohibiting the further
reproduction or disclosure thereof and requiring the prompt return thereof when
no longer needed; and (iii) providing that any reproduction, notes or summaries
thereof, immediately upon the making thereof, will become the property of the
disclosing party and will be delivered to the disclosing party with, and upon
the return of, the ***
and/or *** .
(d) Each reproduction of any ***
and/or *** , together with each modification and
revision thereof, made by or for the receiving party, will automatically become
the property of the disclosing party, will be deemed the disclosing party's
*** and/or *** for all purposes
hereunder and will be clearly marked accordingly.
(e) Upon *** , the receiving party
will immediately discontinue the use of, and will promptly return to the
disclosing party or its designee, all ***
and/or *** , together with copies thereof, in the
possession or control of the receiving party, together with all written
documentation and/or other materials containing information relating to the
*** *** and/or *** .
The receiving party further agrees that it will not for a period of ***
after the date of any termination or expiration of this Agreement, use or
disclose to any third party any of disclosing party's
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** and/or ***
, except such information as the disclosing party has previously made generally
available to the public.
3. In Article 9, the following sentence shall be added at the end:
Any judicial review under this Article shall be limited to arbitrator
misconduct or the arbitrators' non-compliance with or failure to observe
the terms and conditions of this Agreement."
4. Except as amended herein, the Agreement between the parties, dated
October 4, 1993, shall remain in full force and effect.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as of the date first written above.
ESL INCORPORATED PACTEL CORPORATION
By: /s/ Jill Kovacich By: /s/ Don Winters
----------------------- --------------------------
Name: Jill Kovacich Name: Don Winters
--------------------- -----------------------
Title: Manager of Contracts Title: Director Technology Transfer
--------------------- ----------------------------
<PAGE>
EXHIBIT 10.6
DEVELOPMENT AND LICENSE AGREEMENT
This Development and License Agreement (the "Agreement") is made and
effective as of the later date signed below (the "Effective Date") by and
between ESL Incorporated, a California corporation and a TRW Company with
offices located at 495 Java Drive, Sunnyvale, California 94088-3510 ("ESL"), and
PacTel Corporation, a California corporation with offices located at 2999 Oak
Road, Walnut Creek, California 94596 ("PacTel")
WITNESSETH:
WHEREAS, ESL wishes to develop, and PacTel wishes to have developed, the
"Licensed Products," as that term is defined below; and
WHEREAS, PacTel has expertise in cellular telephony, including ***
*** , alpha and beta testing, field test facilities, and
FCC and regulatory requirements, such as experimental licenses; and
WHEREAS, ESL has expertise in emitter recognition and identification
technology including, but not limited to, *** , developing
and maintaining a database of authorized and unauthorized emitter security
patterns, emitter recognition, and enabling cellular systems to determine
whether to deliver services depending on certain ***
levels; and
WHEREAS, ESL intends to manufacture, have manufactured, use, market, sell
and distribute the Licensed Products in accordance with the terms hereof; and
WHEREAS, PacTel intends to provide business and technical development
support to ESL in accordance with the terms hereof including, but not limited
to, *** ***
; and
WHEREAS, each party intends to bear the costs associated with it own
efforts in the development of the Licensed Products;
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the parties hereby agree as follows:
*** Portions of this page have been omitted to a request for Confidential
Treatment and filed separately with the commission.
<PAGE>
ARTICLE 1
Definitions and Priority
----------- --- --------
1.1 Definitions. The following words and phrases will have the meanings
------------
set forth below:
1.1.1 Agreement. The term the "Agreement" means this Development and
----------
License Agreement between ESL and PacTel, including the following Exhibits
attached hereto, and any amendments thereto:
Exhibit A: The ***
*** . As of the Effective Date, this exhibit is in
*** and the parties ***.
Exhibit B: Statement of Work, Milestones and Functional and
Interface Specifications. As of the Effective Date, this
***
*** .
Exhibit C: Nondisclosure Agreement, dated *** .
1.1.2 Develop or Development. The term "develop" or "development,"
------- -- ------------
as used herein, means engineering, design, layout, hardware and Licensed
Software generation, prototyping, characterization, qualification, fabrication,
testing, and preparation of data sheets and application notes.
1.1.3 Licensed Products. The term "Licensed Products" means the
-------- ----------
*** , and any *** , developed in accordance
with the functional and interface specifications set forth in Exhibit B hereto,
and made under the *** and the ***
therein or by the use of *** .
1.1.4 *** . The term " *** " means the
------------------
*** and *** and their *** and
*** relating to the Licensed Products, together with any
*** *** .
1.1.5 *** . The term " ***
-----------------------------
" means PacTel's *** containing ***
, as described in Exhibit A, that is used in the Licensed Products for the
*** telephone usage, together with any
*** Portions of this page have been omitted to a request for Confidential
Treatment and filed separately with the commission.
<PAGE>
*** and other intellectual property rights thereto. The
term " *** " does not include any subscriber information.
1.1.6 *** . The term " *** " means the
-----------------
*** *** and *** for the
scheduling and *** operations within the Licensed Products, as
described in Exhibit A, together with any *** and other
intellectual property rights thereto.
1.1.7 *** . The term " ***
------------------------------
" means the information, as described in Exhibit A, that is directly related to
the *** *** and the production, manufacture, use,
operation, repair, maintenance, modification or reconstruction thereof, together
with any *** and other intellectual property rights
thereto. This includes, but is not limited to, information in the form of
blueprints, drawings, plans, photographs, instructions, masks, Licensed Software
and documentation.
1.1.8 Gross Sales Price. The term "Gross Sales Price" means the
----- ----- ------
amount that is the price at which each Licensed Product is sold or delivered to
the customer or user. In the event that the Gross Sales Price is less than the
*** , as a result of *** or *** under arrangements
with the customer or user, or in the event Licensed Products are *** or
otherwise *** , then for purposes of this Agreement, the Gross Sales
Price shall be the sales price ***
*** .
1.1.9 Net Sales Price. The term "Net Sales Price" means the Gross
--- ----- ------
Sales Price, net of expenses for transportation, shipping, insurance, boxing,
handling or similar charges, taxes and duties, if any, and other costs
incidental to shipment.
1.1.10 Affiliate. The term "Affiliate" means any corporation,
----------
partnership or other business entity in which either party hereto owns or
controls more than fifty percent (50%) of the voting stock or otherwise has more
than fifty percent (50%) of the right to control the entity.
1.1.11 Equity Partner. The term "Equity Partner" means any
------ --------
corporation, partnership or other business entity in which either party hereto
owns or controls between five percent (5%) and fifty percent (50%) of the voting
stock or otherwise has between five percent (5%) and fifty percent (50%) of the
right to control the entity.
*** Portions of this page have been omitted to a request for Confidential
Treatment and filed separately with the commission.
<PAGE>
1.2 Priority. In the event of any inconsistency between the text of the
---------
Agreement and the provisions of any of the Exhibits, the text of the Agreement
shall prevail.
ARTICLE 2
Scope of Work, Cost Sharing and Payment
----- -- ----- ---- ------- --- -------
2.1 Development by PacTel. PacTel will enhance its ***
----------- -- -------
and *** and will perform such other tasks as are set forth
in Exhibit B. PacTel agrees to provide ESL with access to its spectrum and
network to facilitate ESL's work on the Licensed Products. PacTel will be
responsible for *** including, but not limited to,
*** and *** , in *** , for *** of
the Licensed Products, and in *** localities only, for ***
release of the Licensed Products. PacTel will provide functional system
specifications including operating and support requirements.
2.2 Development by ESL. ESL will develop an *** for
----------- -- ----
wireless subscriber systems and perform such other tasks to develop the Licensed
Products as are set forth in Exhibit B.
2.3 Commercialization by ESL. ESL will commercialize the Licensed
----------------- -- ----
Products to meet the functional and interface specifications in Exhibit B, i.e.,
ESL will *** *** so that the Licensed
Products will be in manufacturable form for worldwide marketing, sales,
distribution and support by ESL to end user customers.
2.4 Cost Sharing. Each party will bear its own costs associated with its
---- --------
respective development efforts described above.
2.5 *** Developments. ESL will have the ***
------- -------------
*** including, without limitation, any upgrades,
modifications, improvements, enhancements, derivatives or other changes to the
Licensed Products. If ESL exercises such rights, it shall have a license in
accordance with *** and ***
, as that term is defined herein. In each instance, ESL will have a reasonable
amount of time to ***
*** its rights under this Section.
*** Portions of this page have been omitted to a request for Confidential
Treatment and filed separately with the commission.
<PAGE>
ARTICLE 3
Term
----
The term of the Agreement will be *** years from the Effective Date,
unless sooner terminated in accordance with Article 9 hereof. Unless a
termination notice is given by either party hereto six (6) months prior to
expiration of such ***-year period, the Agreement shall be renewed automatically
for *** year from the date of expiration of the said period under the same terms
and conditions. Neither party will make any claims or demands against the other
party for any damages, losses, expenses or costs, if any, incurred as a result
of the expiration, termination without cause, or non-renewal of the Agreement.
ARTICLE 4
Licenses Granted and Royalties
-------- ------- --- ---------
4.1 License to ESL. Subject to the terms and conditions of this
Agreement, PacTel hereby grants to ESL a worldwide,
*** , ***, *** *** right and
license under PacTel's ***
*** :
(a) to make, have made, copy and/or use the Licensed Products, including
the *** ;
(b) to sell the Licensed Products, including the ***
; and
(c) to provide support for the Licensed Products, including the
*** *** .
4.2 License to PacTel. Subject to the terms and conditions of this
------- -- -------
Agreement, ESL hereby grants to PacTel a *** , non-exclusive, non-
transferable, *** right and license under ESL's *** to
copy and use the *** for PacTel's internal business purposes in
the United States only during the term of this Agreement.
4.3 Royalties. In consideration of the rights, licenses and benefits
----------
conferred upon ESL hereunder, during the term of this Agreement, *** will pay
to *** a *** in the amount of *** of
the *** of all ***
*** . *** will have no obligation
to pay *** . In
no event will
*** Portions of this page have been omitted to a request for Confidential
Treatment and filed separately with the commission.
<PAGE>
more than *** .
Notwithstanding the foregoing, *** will be payable on any
*** , by a customer. In order to maintain the
*** shall pay to *** ***
*** during the *** and
*** *** thereafter,
*** . The first of such
*** later than *** , and every ***
thereafter during the term hereof. Should *** fail to make such
*** , the ***
*** shall retain only a ***
. The amounts of the *** and *** and
*** at the end of the *** of this
Agreement.
4.4 Accounting and Payment. Within *** after every
---------- --- --------
anniversary date of the Agreement during the term hereof, from and after the
date both parties agree that Licensed Products may be released for production,
*** will render to *** a certified check (or other form of payment
acceptable to ***) in the amount of all *** *** on account of
activities of *** under the Agreement during the calendar year preceding the
year in which such *** is required to be made. Further, *** will
transmit to *** , accompanying each such payment, an accurate, itemized
statement (certified upon request) setting forth in sufficient detail for
verification, the basis upon which such *** is determined and made. All
*** will be made to the order of *** in *** and will be
payable at *** address as set forth in Article 13.
4.5 Records and Audit. *** will keep complete and accurate books and
------- --- ------
records, containing adequate details for the calculation of the amounts of all
*** from the *** to *** hereunder. All such books and records will be
available for reasonable time periods during regular business hours, for a
period of three (3) years following the end of the calendar year to which they
pertain, for inspection and audit by *** accountants or independent
auditors for the purpose of verifying all *** submitted by ***. The
obligations of *** under this Article 4 will survive any termination or
expiration of the Agreement.
4.6 Product Marketing.
------- ----------
(a) ESL will at all times have the sole discretion to set and determine
all terms and conditions of sale of all Licensed Products, including price,
position, distribution channels and name (including ESL trademarks, trade names
or logos). ESL will
*** Portions of this page have been omitted to a request for Confidential
Treatment and filed separately with the commission.
<PAGE>
be responsible for distribution of the Licensed Products in its sole discretion.
(b) ESL will at all times have the sole discretion to develop and approve
marketing materials and activities for, the Licensed Products. Further, ESL
will at all times during the term of the Agreement be responsible for
manufacturing, assembling and distributing the components that comprise the
Licensed Products.
(c) PacTel has adopted and owns certain trademarks and service marks used
in identifying and marketing PacTel technology, products and services, logos,
trade names and related acronyms and the like, whether or not registered (the
"PacTel Trademarks"). ESL recognizes and consents for all purposes that the
PacTel Trademarks constitute the exclusive property of PacTel and cannot be used
by ESL pursuant to this license, except as specified in the Agreement, nor will
ESL use any confusing similar trademark, logo, trade name or the like. PacTel
hereby grants to ESL the non-exclusive right to use the following statement in
the marketing of the Licensed Products: " ***
*** ." Nothing contained in the Agreement will be
construed as conferring any additional rights upon ESL to use in advertising,
publicity or other promotional activities any PacTel Trademark, other than
specifically set forth in the preceding sentence, unless PacTel grants to ESL
its prior express written consent. ESL will use the PacTel trade name with such
words qualifying or identifying the relationship of PacTel and ESL as PacTel,
from time to time, may reasonably prescribe. PacTel will have the sole right,
but not the obligation, to register and enforce the PacTel Trademarks and other
marks it adopts, acquires or uses in the United States or in any foreign country
and all rights generated by use of same by ESL will inure directly to the
benefit of PacTel.
(d) The parties will mutually plan and agree upon the contents, form and
manner of publicity with respect to the Licensed Products and will not respond
to inquiries from members of the public media, if such inquiries concern the
contents of the Agreement and details of the transactions contemplated by the
Agreement. In no event will the parties act unilaterally with regard to such
disclosures, unless otherwise required to by law.
(e) PacTel will provide to ESL *** , *** , and such
additional information that ESL may require in order to promote the Licensed
Products. In addition, PacTel will *** for Licensed Product ***
on *** .
(f) ESL reserves the right to ESL-developed trademarks,
*** Portions of this page have been omitted to a request for Confidential
Treatment and filed separately with the commission.
<PAGE>
trade names, logos and related acronyms and the like, whether or not registered,
to identify the Licensed Products or other ESL developed technology, products
and services, so long as such trademarks, etc., are not confusingly similar to
the PacTel Trademarks.
ARTICLE 5
Ownership of Inventions and Technical Information
--------- -- ---------- --- --------- -----------
5.1 Patent Applications. Each party agrees to notify the other party
------ -------------
within ninety (90) days following the filing of a patent application with
respect to any invention relating to the Licensed Products first reduced to
practice during the term of the Agreement.
5.2 PacTel Inventions. All inventions developed conceived or first
------ -----------
reduced to practice, as those terms are used before the U.S. Patent
and.Trademark Office, by statute and under common law, solely by PacTel
personnel, will be the sole and exclusive property of PacTel. PacTel will
retain any and all rights to file any patent applications thereon and such
inventions shall be subsumed under ***
*** above.
5.3 ESL Inventions. All inventions developed, conceived or first reduced
--- -----------
to practice, as those terms are used before the U.S. Patent and Trademark
Office, by statute and under common law, solely by ESL personnel, will be the
sole and exclusive property of ESL. ESL will retain any and all rights to file
any patent applications thereon ***
in ***
with the ***
for the term of this Agreement.
5.4 Joint Inventions.
----- -----------
(a) Inventions developed, conceived or first reduced to practice, as those
terms are used before the U.S. Patent and Trademark Office, by statute and under
common law, jointly by the parties (the "Joint Inventions"), will be jointly
owned by the parties, each party having an equal and undivided interest therein,
without the duty to account to the other for any use made of such Joint
Inventions. Notwithstanding the foregoing, neither party may use the Joint
Inventions in any way which would harm the other's ownership interest therein.
The parties agree to mutually determine whether a patent application or
applications will be filed on such Joint Inventions, the party which will
prepare and file such application or applications, and the country or countries
in which the same are to be filed. The patent expenses incurred will be divided
equally between the
*** Portions of this page have been omitted to a request for Confidential
Treatment and filed separately with the commission.
<PAGE>
parties.
(b) If the parties are not able to mutually agree to file an application
or applications on a Joint Invention, either one of the parties may elect
to assume such expenses (the "Electing Party"). The Electing Party will
control the preparation and prosecution of any such application and all rights
in any patents granted thereon will belong exclusively to the Electing Party.
The party declining to bear its share of the expenses of prosecuting or
maintaining patents covering a Joint Invention (the "Declining Party") agrees
to execute any and all forms, assignments or other documents to effect the
foregoing; provided, however, that the Declining Party will ***
***
*** ; provided further, however,
that such Declining Party will ***
*** or the U.S. Government. Neither party may, without the
prior written consent of the other party (which consent may be withheld for any
reason, in its sole and absolute discretion), assign or otherwise transfer its
interest in any Joint Invention, except as expressly provided herein.
5.5 Protection and Use of *** .
---------- --- --- -- ------------------------
(a) Each party agrees it will not disclose (unless compelled to disclose
by judicial or administrative process, or in the opinion of such party's
counsel, by other requirement of law), use, or permit the use by others of
such other party's ***
*** , at any time during the Agreement, or at any time
thereafter, for a period of *** after the disclosure thereof.
Without limiting the foregoing, each party agrees to do the following with
respect of any such *** : (i) instruct and require all
of its employees and agents to maintain the confidentiality of such information;
(ii) exercise either at least the same degree of care to safeguard the
confidentiality of such information as that party exercises to safeguard the
confidentiality of its own information of a similar type, or a reasonable degree
of care, whichever is greater; and (iii) restrict disclosure of such information
to those of its employees who have a need to know consistent with the purposes
for which such information was disclosed. Each party further agrees not to
remove or destroy any proprietary or confidential legends or markings placed
upon documentation or other materials which contain or set forth the
*** of the other party.
(b) The party receiving *** will
*** Portions of this page have been omitted to a request for Confidential
Treatment and filed separately with the commission.
<PAGE>
obtain the written agreement of any permitted transferee or licenses to hold in
confidence the information transferred to such transferee or licensee in
accordance with terms no less restrictive than those set forth above.
(c) The receiving party may disclose the other party's ***
to its employees, agents, suppliers and subcontractors to the extent that each
such disclosure is reasonably necessary for manufacturing, using, selling,
installing and/or servicing Licensed Products, or procuring goods and services
required in connection therewith; provided, however, that the receiving party
will take all desirable and necessary actions to preserve the confidentiality of
such information including, but not limited to: (i) marking any documents or
other material containing any ***
*** so disclosed to indicate that same contains proprietary data and
***
*** ; (ii) requiring each party to whom same is disclosed to sign a
written agreement limiting the use thereof to authorized purposes, prohibiting
the further reproduction or disclosure thereof and requiring the prompt return
thereof when no longer needed; and (iii) providing that any reproduction, notes
or summaries thereof, immediately upon the making thereof, will become the
property of the disclosing party and will be delivered to the disclosing party
with, and upon the return of, the *** *** .
(d) Each reproduction of any *** , together with
each modification and revision thereof, made by or for the receiving party, will
automatically become the property of the disclosing party, will be deemed the
disclosing party's *** *** for all purposes hereunder and will be
clearly marked accordingly.
(e) Upon *** , the receiving party
will immediately discontinue the use of, and will promptly return to the
disclosing party or its designee, all *** , together
with copies thereof, in the possession or control of the receiving party,
together with all written documentation and/or other materials containing
information relating to the *** . The receiving
party further agrees that it will not, for a period of *** after the
date of any termination or expiration of this Agreement, use or disclose to any
third party any of disclosing party's *** , except
such information an the disclosing party has previously made generally available
to the public.
ARTICLE 6
*** *** Support Services, Minimum Order
--------- --------- ------- --------- ------- -----
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
6.1 *** . ESL will sell the Licensed Products to PacTel
------------------
***
*** . *** that the ***
to *** and
*** as ***
to its
*** of *** , for ***
delivered within ***
*** calendar days before or *** after *** the
*** to *** . Such ***
shall be *** by an additional *** for ***
by *** , taking into account the fact that
*** on *** by *** and *** . In *** of
the *** of *** to the ***
agrees to *** a *** on ***
by *** who were introduced to *** . No *** will be
*** on any *** , but
*** by an *** . Further, *** shall give *** to
*** by *** and/or its *** , and to the extent that
*** after
*** and its *** have *** , *** may make a ***
to *** for *** to *** to *** . *** will have no
obligation to *** with *** and/or *** , if
*** to *** written request within five (5) business days after the
date of such written request. In addition to the foregoing,
*** shall have the *** to conduct all ***
for all new versions of the *** and/or the *** .
6.2 Minimum Order. PacTel shall place a minimum order for ***
------- ------
Licensed Products by December 31, 1993, at a *** of
***
*** , *** in accordance with the terms of Section
6.1. It is understood that such Licensed Products will initially be installed by
December 31, 1993, for *** PacTel, and that upon ***
of the finished Licensed Products, ESL shall *** such ***
, *** versions no later than March 31, 1994. ***
of the price is payable upon installation and the balance of ***
is due when such *** pass all acceptance criteria set
forth in Exhibit B. Provided that such initial *** Licensed Products pass
all acceptance criteria no later than March 31, 1994, PacTel shall place a
follow-on order of *** Licensed Products by March 31, 1994,
at a *** *** of *** ,
*** in accordance with the terms of Section 6.1 above. Finished,
*** of the
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
Licensed Products shall be installed *** no
later than August 30, 1994
6.3 Maintenance and Support. ESL agrees to provide maintenance and
----------- --- --------
support, including all software upgrades and support, to PacTel and its
Affiliates ***
*** .
ARTICLE 7
Indemnification
---------------
7.1 PacTel Indemnity. PacTel shall, at its own expense, defend, or at its
------ ----------
option, settle any suit, claim or proceeding brought against ESL insofar as such
suit or proceeding is based on a claim that PacTel does not have sufficient
right, title and interest in PacTel's ***
and/or ***
*** (collectively " *** ") delivered to ESL
under this Agreement for the design, manufacture, use and sale of the Licensed
Products or that such information constitutes a direct infringement of any
United States trade secret, patent, trademark, copyright or any other
proprietary right of any third party, and PacTel shall indemnify and hold ESL
harmless against all costs, expenses and damages arising from such claim
including, without limitation, reasonable attorneys' fees and shall pay all
settlements and costs finally awarded therein against ESL, provided that PacTel
is promptly informed and furnished a copy of each communication, notice or other
action relating to the alleged infringement and is given all authority,
information and assistance necessary to defend or settle such suit or
proceeding.
7.2 ESL Indemnity. ESL shall, at its own expense, defend, or at its
--- ----------
option, settle any suit, claim or proceeding brought against PacTel insofar as
such suit or proceeding is based on a claim that ***
*** (collectively "ESL Licensed
Materials")
licensed to PacTel hereunder or that such information constitutes a
*** ***
of any third party, and ESL shall ***
***
*** PacTel, provided that *** and ***
a copy of each communication, *** relating to the
*** and is *** all *** , information and *** to
*** .
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
7.3 PacTel Limitations on Indemnity. PacTel shall not be obligated to
------ ----------- -- ----------
defend or be liable for costs and damages to the extent that infringement arises
out of a modification of the PacTel *** after delivery by PacTel,
out of combination of the PacTel *** with other goods or devices
not supplied by PacTel, or from other fault or action of ESL.
7.4 ESL Limitations on Indemnity. ESL shall not be obligated to defend or
--- ----------- -- ----------
be liable for costs and damages to the extent that infringement arises out of
compliance with PacTel's specifications, from a modification of the ESL Licensed
Materials after delivery by ESL, out of combination of the ESL Licensed
Materials with other goods or devices not supplied by ESL, or from other fault
or action of PacTel.
ARTICLE 8
Default and Termination
------- --- -----------
8.1 Default. An event of default on the part of either party will exist
--------
under the Agreement if:
(a) Such party fails to perform any material obligation required to be
performed by it under any provision of the Agreement within the time specified
in such provision, or if no time is specified, within *** after written
notice from the other party that such performance has become due.
(b) Such party becomes insolvent, is unable to pay its debts as they
become due, makes an assignment for the benefit of creditors, files a petition
in any state insolvency proceeding or ceases to carry on its business; or
(c) A receiver or liquidator is appointed for any of such party's
properties or assets, or a petition is filed against such party in any state
insolvency proceeding and such petition is not withdrawn within 30 days after
such appointment or filing.
8.2 *** . Subject to any other provisions hereof
-----------------
***
the *** hereunder, if *** , as *** in this
*** , exists on the part of either party, then the *** may
***
*** and may *** any other ***
to *** .
8.3 Mutual Termination. The parties may mutually agree to terminate the
------ ------------
Agreement at any time.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
ARTICLE 9
Arbitration and Dispute Resolution
----------- --- ------- ----------
If a dispute arises between the parties relating to the interpretation or
performance of the Agreement or the grounds for the termination thereof, the
parties agree to meet to try to resolve the dispute. Such meeting will be
attended by individuals with decision-making authority to attempt, in good
faith, to negotiate a resolution of the dispute prior to pursuing other
available remedies. If, within thirty days after such a meeting, the parties
have not succeeded in negotiating a resolution of the dispute, either party may
request that such dispute be resolved through final and binding arbitration.
Such arbitration will be conducted by three (3) arbitrators familiar with the
wireless telecommunications industry and will be held in San Francisco,
California, in accordance with the then-current Rules of Conciliation and
Arbitration of the American Arbitration Association. Such arbitrators will be
selected by mutual agreement of the parties, or failing such agreement, each
party will select one arbitrator and the two selected arbitrators will usually
agree upon the selection of a third arbitrator. The arbitrators will be bound to
apply California law, and where applicable, federal statutory law. The parties
will be afforded a reasonable period of time to conduct discovery prior to the
arbitration. A court reporter will be present at all arbitration proceedings in
order to transcribe them and such transcription will be the official record of
such proceedings for purposes of any judicial enforcement or review proceeding.
The arbitrators' decision will be binding on the parties and will specify the
basis for any award and the types of damages awarded. The parties will bear the
cost of such arbitration equally and the prevailing party in any such
arbitration will be entitled to reasonable attorneys fees, in addition to any
other award ordered by the arbitrators. The prevailing party in any judicial
enforcement or review proceeding shall also be entitled to reasonable attorneys'
fees and costs, in addition to any other award ordered by the court. If judicial
enforcement is sought by either party, judgment may be entered in any court of
competent jurisdiction. This Article shall survive any expiration or termination
of the Agreement and shall continue to be enforceable in the event of the
bankruptcy of a party.
ARTICLE 10
Limitation of Liability
---------- -- ---------
Notwithstanding anything in the Agreement to the contrary, in no event
will either party be liable to the other for loss of profits, or for any
indirect, incidental, special or consequential damages arising from this
Agreement, however
<PAGE>
caused, whether as a consequence of the negligence of the one party or
otherwise; and the sole and exclusive liability and maximum liability of one
party to the other hereunder, whether arising in warranty, contract, tort or
otherwise, shall not exceed $ *** .
ARTICLE 11
Licenses and Permits
-------- --- -------
PacTel, at its own expense, will obtain from the appropriate agencies or
departments of the government all experimental licenses during product
development and ***
*** the Licensed Products under this Agreement. This obligation of PacTel
is limited to ***
as more specifically set forth in Section 2.1 above.
ARTICLE 12
Miscellaneous Provisions
------------- ----------
12.1 Any notice, demand, request, statement or other writing required
or permitted by the Agreement, will be deemed to have been sufficiently given
when personally delivered or mailed by certified or registered mail, postage
prepaid, addressed as follows:
If to PacTel: PacTel Corporation
390 No. Wiget Lane, Suite 200
Walnut Creek, California 94598
Attn: *** , Director
Technology Transfer
With a copy to: PacTel Corporation
2999 Oak Road, MS 800
Walnut Creek, California 94596
Attn: General Counsel
If to ESL: ESL Incorporated, MS __/__
495 Java Drive
Sunnyvale, California 94088
Attn: *** , New Venture Manager
12.2 The Agreement constitutes the entire agreement between the
parties and supersedes all previous agreements and understandings relating to
the subject hereof. The Agreement may not be altered, amended or modified,
except by a written instrument signed by the duly authorized representatives of
both parties.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
12.3 The Agreement may not be assigned to any third party, in whole or in
part, by either party without the prior written consent of the other party. An
assignment to Affiliate of either party will not be deemed a third party and
will not require prior written consent from the other party.
12.4 Failure or successive failures on the part of either party, its
successors and assigns, to enforce any covenant or agreement herein, or any
waiver or successive waivers on its or their part of any covenant or condition
of the Agreement will not operate as a discharge of such covenant, agreement or
condition, render the same invalid or impair the right of either party, its
successors or assigns, to enforce the same.
12.5 Headings included in the Agreement are for convenience only and are
not to be used to interpret the Agreement between the parties.
12.6 Any news release, including photographs, films, advertisements,
publicity, public announcements or confirmation of same, to be released by
either party concerning the activities of the other party or on any part of the
subject matter of the Agreement will be subject to the prior written approval of
the other party. The parties further agree that news releases made by either
party will recognize the participation and contributions of the other party. The
nature of this relationship will remain confidential to both parties.
12.7 No failure or omission on the part of either party to carry out or
observe any of the terms or provisions of the Agreement will be deemed a breach
of the Agreement, if same will arise or result from force majeure or from any
cause reasonably beyond the control of PacTel or ESL. Should such delay occur,
the date or dates of performance by the affected party will be extended for a
period equal to the number of days during which performance is so delayed. The
affected party will give the other party written notice of such delay within
fifteen (15) working days after identification of the delay.
12.8 Notwithstanding anything in the Agreement to the contrary, PacTel has
no obligation under the Agreement to perform any act whatsoever which would
violate the terms of the Modification of Final Judgment in U.S. v. Western
---------------
Electric Co., 552 P. Supp. 131 (D.D.C. 1982) (the "MFJ"). Following written
- ------------
notice to ESL, PacTel may discontinue performance of any activity required
herein or terminate the Agreement immediately, if in PacTel's sole opinion, such
discontinuation or termination is necessary in order to comply with the MFJ. In
the event that PacTel has determined that only certain activities, but not the
entire Agreement, must be discontinued, ESL will have the option to continue or
terminate the Agreement. In the event that ESL elects to continue the Agreement,
<PAGE>
the parties will mutually agree upon royalty or payment terms which will
reasonably compensate ESL for PacTel's inability to perform certain of PacTel's
obligations hereunder.
12.9 Nothing in the Agreement will be construed to constitute ESL as the
partner or agent of PacTel, nor will either party have any authority to bind the
other. Each party will remain an independent contractor responsible only for its
own actions.
12.10 This Agreement has been entered into, will be governed by and
construed in accordance with the substantive laws of the State of California
applicable to agreements made and to be performed wholly within such
jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed by their duly authorized representatives as of the Effective Date.
ESL INCORPORATED PACTEL CORPORATION
A TRW COMPANY
By:/s/ Arthur L. Money By:/s/ C. Lee Cox
--------------------------- ----------------------------
Name:Arthur L. Money Name:C. Lee Cox
------------------------- --------------------------
Title:President Title:President
------------------------ -------------------------
Date:01 October 1993 Date:10/4/93
------------------------- --------------------------
<PAGE>
DRAFT
EXHIBIT A
PACTEL
***
***
***
***
Application No:
***
*** to provide input.
***
N/A
***
*** to be provided includes:
. ***
. ***
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT A
ESL
***
*** has *** under the ***:
***
***
*** software is the *** software which will maintain database
information, apply *** of *** , and
*** .
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
DRAFT
EXHIBIT B
STATEMENT OF WORK
PacTel
Regulatory
PacTel will apply for the *** , tariff modifications and
approvals necessary to *** the ***
product within *** Markets.
Product Specifications
PacTel will translate its market requirements into a complete generic
description of functionality, features, performance and compatibility
characteristics. This will include installation, platform and market location
considerations.
Procurement Requirements
PacTel will provide a description of the procurement procedures, methods and
requirements within its organization.
Field Testing
PacTel will support technology, prototype and product evaluations by providing
ESL access to *** and ***. Evaluations shall include, but
not be limited to, the following: ***
*** .
*** used for evaluation and deployment shall be selected by PacTel based
on technical and business considerations. The *** will allow *** to test its
product under various conditions including extreme *** and ***.
PacTel will assist with the definition of test requirements and conditions.
*** of the product will be based on the *** as
included herein.
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
DRAFT
EXHIBIT B
Operations Training and Support
PacTel will provide documentation specifications including a statement of
requirements and objectives covering installation, maintenance,
repair/replacement and operational procedures. PacTel will assist with
development and implementation of a detailed plan addressing system integration,
FOT training and ongoing vendor support.
***
PacTel will provide *** as described in Exhibit A.
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B
STATEMENT OF WORK
ESL
Product Development
ESL will design, develop, and test new technology developments, taking into
account PacTel's requirements, for the advancement of the ***
Product.
Field Testing & Evaluation
***
*** will be performed at designated PacTel cell sites. With PacTel
assistance, ESL will generate the definition of the test requirements and
conditions for each test and ***
*** of the product. *** of the product will be based upon
the ***
*** as included herein.
Upon *** of the *** units, ESL will manufacture the quantity of
units being procured by PacTel to the agreed upon production configuration and
functionality performance.
Operations Training & Support
ESL will generate product installation and FOT training documentation taking
into consideration PacTel requirements for installation, maintenance,
replacement/repair, and operational procedures.
***
ESL will *** with PacTel in *** of the
***
*** . This will include engineering and manufacturing consideration through
test and evaluation of the *** and *** units.
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT B
Milestones
.
.
.
.
.
. *** ***
.
.
.
.
.
.
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
PAC(TM) TEL
Corporation
A Pacific Telesis Company
THE *** SYSTEM
GENERIC PRODUCT SPECIFICATIONS
GENERAL EQUIPMENT SPECIFICATIONS
This section describes the physical and electrical specifications that are
important to operation in a ***. Most *** are air conditioned and shielded. To
work in most *** the following specifications are required. If more stringent,
FCC Type Acceptance requirements shall apply.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ITEM SPECIFICATION COMMENTS
- --------------------------------------------------------------------------------
<S> <C> <C>
*** *** ***
*** ***
- --------------------------------------------------------------------------------
*** *** ***
***
- --------------------------------------------------------------------------------
*** ***
***
- --------------------------------------------------------------------------------
*** *** ***
*** ***
***
***
- --------------------------------------------------------------------------------
*** *** No performance degradation
- --------------------------------------------------------------------------------
*** *** Normal cell site power
- --------------------------------------------------------------------------------
*** *** ***
- --------------------------------------------------------------------------------
*** ***
***
- --------------------------------------------------------------------------------
*** *** Check FCC specifications
*** ***
- --------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
PAC(TM) TEL
Corporation
A Pacific Telesis Company
THE *** SYSTEM
GENERIC PRODUCT SPECIFICATIONS
*** (USING JAMMING)
Additional equipment is required to implement the *** function. This includes a
*** that can be used to terminate in process calls as required. This equipment
is controlled by the *** system.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ITEM SPECIFICATION COMMENTS
- -------------------------------------------------------------------------------
<S> <C> <C>
*** *** Only mobile receive is needed
***
- --------------------------------------------------------------------------------
*** *** Monitor cell site transmit
***
- --------------------------------------------------------------------------------
*** *** ***
***
- --------------------------------------------------------------------------------
*** *** ***
*** ***
***
- --------------------------------------------------------------------------------
*** *** Need to control SAT frequency
*** presence of 10 kHz
- --------------------------------------------------------------------------------
*** *** ***
*** ***
***
- --------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
PAC(TM) TEL
Corporation
A Pacific Telesis Company
THE *** SYSTEM
PRODUCT SPECIFICATIONS
SYSTEM INTEGRATI
The *** system mto the existing *** and ***
functions.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
ITEM SPECIFICATION COMMENTS
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
*** *** Security features must be in place
- -----------------------------------------------------------------------------------------------
*** *** Database must be remotely modified
- -----------------------------------------------------------------------------------------------
*** *** Activity must be available for further
analysis at the host site
- -----------------------------------------------------------------------------------------------
*** ***
***
***
- -----------------------------------------------------------------------------------------------
*** ***
***
***
- -----------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
DRAFT
TECHNICAL
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- --------------------- ----------------- --------------- -------------------
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*** *** *** Must capture information on
*** all registrations and attempts
within test sites
- ------------------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------------------
*** ***
***
- ------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
DRAFT
***
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hardware Installation Operations review prior Commercial equipment ***
to ***
final commercial roll-out
***
-
- ***
-
-
d----------------------------------------------------------------------------------------------------------
Software Installation Operations review prior Commercial equipment ***
to
final commercial roll-out
- ----------------------------------------------------------------------------------------------------------
Installation Documentation Operations review prior Published documentation Must include:
to -
final commercial roll-out - ***
-
-
- ----------------------------------------------------------------------------------------------------------
Trouble-Shooting Operations review prior Commercial equipment Must include:
Capabilities to - ***
final commercial roll-out
- ----------------------------------------------------------------------------------------------------------
Alarming Operations review prior Commercial equipment ***
to
final commercial roll-out
- ----------------------------------------------------------------------------------------------------------
Monitoring Operations review prior Commercial equipment ***
to
final commercial roll-out
- ----------------------------------------------------------------------------------------------------------
Reporting Operations review prior Commercial equipment ***
to
final commercial roll-out
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
DRAFT
*** SATISFACTION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transparency Subjective evaluation *** and commercial roll- ***
through live drive test out ***
- ----------------------------------------------------------------------------------------------------------------
Billing Records Evaluation of affected Commercial roll-out of ***
customer bills through *** *** configuration
***
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** ACCEPTANCE CRITERIA
DRAFT
**** MITIGATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
PERFORMANCE METRICS EVALUATION METHOD TEST CONDITIONS ACCEPTANCE CRITERIA
- ------------------- ----------------- --------------- -------------------
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
*** Identification *** *** ***
***
- ---------------------------------------------------------------------------------------
Review of *** ***
performance
reports ***
- ---------------------------------------------------------------------------------------
Terminations Review of *** ***
performance
reports ***
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
Work in Progress
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
EXHIBIT C
NONDISCLOSURE AGREEMENT
-----------------------
THIS NONDISCLOSURE AGREEMENT is made as of this 22 day of April, 1993
("Effective Date"), by and between PACTEL CORPORATION, a California corporation
(hereinafter referred to as "PacTel"), with offices located at 2999 Oak Road,
Walnut Creek, California 94596, and ESL INCORPORATED, a California corporation
(hereinafter referred to as "Vendor"), with offices located at 495 Java Drive,
Sunnyvale, California 94088-3510 (collectively "the Parties") which agree as
follows:
WHEREAS each Party wishes to evaluate and understand its potential
involvement in a project of mutual interest; and
WHEREAS PacTel may find it necessary to disclose to Vendor certain
confidential and proprietary information and intellectual property of PacTel,
relating to PacTel and its operations, which will be used by Vendor only for its
work on PacTel projects; and
WHEREAS Vendor may find it necessary to disclose to PacTel certain
confidential and proprietary information relating to Vendor and its operations
which will be used by PacTel only to evaluate its potential use of Vendor's
services; and
WHEREAS each Party is willing to release such Information to the other
on a confidential basis, and is willing to enter into this Agreement;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, PacTel and Vendor agree as follows:
1. All Information as defined below, provided by one Party (the
"Originator") to the other will be treated as confidential.
"Information" shall include all information in written, oral or other
tangible or intangible forms which may include, but is not limited to,
discoveries, ideas, concepts, know-how, techniques, designs,
specifications, drawings, blueprints, tracings, diagrams, models,
samples, flow charts, data, computer programs, disks, diskettes,
tapes, marketing plans, customer names and other technical, financial
or business information.
2. For a period of ten (10) years following the effective date of this
Agreement, each Party shall:
a. restrict disclosure of the Information solely to those of its
employees with a need to know, and not
-1-
<PAGE>
to disclose it to other parties; and,
b. advise its employees of the obligation of confidentiality
hereunder; and,
c. require its employees to use the same degree of care as is used
with that Party's own proprietary information.
3. Notwithstanding anything to the contrary herein, neither Party shall
have any obligation to preserve the confidentiality of any Information
that:
a. was previously known by it free of any obligation to keep it
confidential; or,
b. is distributed to third parties by the Originator without
restriction; or,
c. is or becomes publicly available, by other than unauthorized
disclosure by the Party receiving the Information; or,
d. is wholly and independently developed by the Party receiving the
Information.
4. All Information shall be deemed the property of the Originator, and,
upon request, the other Party will return all Information received in
tangible form to the Originator or destroy all such Information.
5. Nothing contained in this Agreement shall be construed as granting or
conferring any rights by license or otherwise in any Information
disclosed by the Originator.
6. This Agreement shall be governed and construed in accordance with the
laws of the State of California and shall benefit and be binding upon
the Parties hereto and their respective successors and assigns.
7. Since either Party may choose not to do business with the other in the
future, each acknowledges that the other is not responsible or liable
for any business decisions made by either in reliance upon disclosures
made during any meetings between the Parties or in reliance on any
results of the discussions.
-2-
<PAGE>
8. This Agreement shall continue until terminated in writing by either
Party. The obligation to protect the confidentiality of Information
received prior to such termination shall survive the termination of
this Agreement.
9. Each Party agrees that it will make no copies or otherwise reproduce
the data provided by the other, and further agrees to remove all such
data from its files and return all data to the other if requested to
do so.
PACTEL CORPORATION ESL INCORPORATED
("PacTel") ("Vendor")
By: /s/ L.R. Daniels By: /s/ Jill Kovacich
----------------------------- ------------------------------
Lyn R. Daniels Name: Jill Kovacich
------------------------------
Chief Financial Officer Title: Manager of Contracts
-----------------------------
and Treasurer
-3-
<PAGE>
EXHIBIT 10.7
FIRST AMENDMENT TO
THE DEVELOPMENT AND LICENSE AGREEMENT
DATED OCTOBER 4, 1993
BETWEEN
ESL INCORPORATED AND PACTEL CORPORATION
This First Amendment is made this 4th day of October, 1993, by and between
ESL Incorporated ("ESL") and PacTel Corporation ("PacTel").
WHEREAS, the parties entered into a Development and License Agreement, dated
October 4, 1993; and
WHEREAS, the parties now wish to amend that Agreement to correct certain
terms thereof;
NOW THEREFORE, the parties agree as follows:
1. In Section 2.5 of the Agreement the following clause shall be added at
the end of the second sentence:
", and shall be subject to the terms and conditions of this Agreement, with
the exception of Sections 6.2 and 6.3."
2. Section 5.5 of the Agreement is hereby deleted and the following is
substituted therefor:
5.5 Protection and Use of *** .
---------- --- --- -- --------------------
(a) Each party agrees it will not disclose (unless compelled to disclose by
judicial or administrative process, or in the opinion of such party's counsel,
by other requirement of law), use, or permit the use by others of such other
party's *** ,
*** and/or *** , at any time during the
Agreement, or at any time thereafter, for a period of *** years after the
disclosure thereof. Without limiting the foregoing, each party agrees to do the
following with respect of any such
*** , *** and/or *** : (i)
instruct and require all of its employees and agents to maintain the
confidentiality of such information; (ii) exercise either at least the same
degree of care to safeguard the confidentiality of such information as that
party exercises to safeguard the confidentiality of its own information of a
similar type, or a reasonable degree of care, whichever is greater; and (iii)
restrict
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
disclosure of such information to those of its employees who have a need to know
consistent with the purposes for which such information was disclosed. Each
party further agrees not to remove or destroy any proprietary or confidential
legends or markings placed upon documentation or other materials which contain
or set forth the ***
*** of the other party.
(b) The party receiving *** , ***
and/or
*** will obtain the written agreement of any permitted
transferee or licensee to hold in confidence the information transferred to such
transferee or licensee in accordance with terms no less restrictive than those
set forth above.
(c) The receiving party may disclose the other party's ***
*** and/or *** to its
employees, agents, suppliers and subcontractors to the extent that each such
disclosure is reasonably necessary for manufacturing, using, selling, installing
and/or servicing Licensed Products, or procuring goods and services required in
connection therewith; provided, however, that the receiving party will take all
desirable and necessary actions to preserve the confidentiality of such
information including, but not limited to: (i) marking any documents or other
material containing any ***
*** so disclosed to indicate that same contains proprietary data
and
*** and/or *** ; (ii)
requiring each party to whom same is disclosed to sign a written agreement
limiting the use thereof to authorized purposes, prohibiting the further
reproduction or disclosure thereof and requiring the prompt return thereof when
no longer needed; and (iii) providing that any reproduction, notes or summaries
thereof, immediately upon the making thereof, will become the property of the
disclosing party and will be delivered to the disclosing party with, and upon
the return of, the ***
and/or *** .
(d) Each reproduction of any ***
and/or *** , together with each modification and
revision thereof, made by or for the receiving party, will automatically become
the property of the disclosing party, will be deemed the disclosing party's
*** and/or *** for all purposes
hereunder and will be clearly marked accordingly.
(e) Upon *** , the receiving party
will immediately discontinue the use of, and will promptly return to the
disclosing party or its designee, all ***
and/or *** , together with copies thereof, in the
possession or control of the receiving party, together with all written
documentation and/or other materials containing information relating to the
*** *** and/or *** .
The receiving party further agrees that it will not for a period of ***
after the date of any termination or expiration of this Agreement, use or
disclose to any third party any of disclosing party's
*** and/or *** , except such
information as the disclosing party has previously made generally available to
the public.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
3. In Article 9, the following sentence shall be added at the end:
"Any judicial review under this Article shall be limited to arbitrator
misconduct or the arbitrators' non-compliance with or failure to observe the
terms and conditions of this Agreement."
4. Except as amended herein, the Agreement between the parties, dated
October 4, 1993, shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as
of the date first written above.
ESL INCORPORATED PACTEL CORPORATION
By: /s/ Jill Kovacich By: /s/ Don Winters
---------------------------- ---------------------------
Name: Jill Kovacich Name: Don Winters
------------------------- ------------------------
Title: Manager of Contracts Title: Director Technology Transfer
----------------------- -----------------------------
<PAGE>
EXHIBIT 10.8
SECOND AMENDMENT TO
AND CONSENT TO ASSIGNMENT OF
THE DEVELOPMENT AND LICENSE AGREEMENT
DATED OCTOBER 4, 1993
BETWEEN ESL INCORPORATED AND
AIRTOUCH COMMUNICATIONS (PACTEL CORPORATION)
This Second Amendment and Consent to Assignment is made this 14th day of
December, 1994, by and between, PhonePrint, Inc. ("PhonePrint") and AirTouch
Communications, formerly PacTel Corporation ("AirTouch").
WHEREAS, ESL Incorporated ("ESL") and AirTouch entered into a Development
and License Agreement, dated October 4, 1993 (the "Agreement"); and
WHEREAS, ESL now wishes to assign the Agreement to PhonePrint; and
WHEREAS, AirTouch is willing to consent to such assignment on the terms and
conditions hereof; and
WHEREAS, ESL and AirTouch amended such Agreement in a First Amendment,
dated October 23, 1994; and
WHEREAS, the parties now wish to further amend the Agreement;
NOW, THEREFORE, the parties agree as follows:
1. The last two sentences of Section 6.2 of the Agreement are hereby
deleted and the following is substituted therefor:
Concurrently with the execution of this Second Amendment AirTouch shall
place a follow-on order of *** Licensed Products at a "***
*** " price of *** , ***
in accordance with the terms of *** of the Agreement. Such Licensed
Products shall be installed in lots of *** , beginning on November
1, 1994, with a minimum of *** Licensed Products being installed
each calendar month until all ordered Licensed Products have been installed.
***
*** of the purchase price is due and payable upon installation and
the balance of *** of the purchase price is due and
payable ***
1
*** Potions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
*** attached hereto as Exhibit A, the
*** of the *** of the Licensed Products with a ***
*** to be achieved by March 31, 1995. If this
*** by March 31, 1995, then AirTouch agrees to pay One Hundred Percent
(100%) for the purchase price upon installation of all Licensed Products
installed after March 31, 1995. This purchase price shall include the ***
*** , except for third party
hardware and software which AirTouch shall purchase on its own account.
2. Section 6.3 of the Agreement is hereby deleted and following is
substituted therefor:
6.3 Maintenance and Support. The purchase price in Section 6.2 above
-----------------------
includes all *** for *** after installation
of the Licensed Products. The term " *** " as used in the preceding sentence
includes any *** or the *** for the
***
*** by *** within *** of the final installation of the last of
the Licensed Products installed hereunder, or March 31, 1995, whichever comes
first. In addition to the foregoing, PhonePrint agrees to provide AirTouch
***
*** at PhonePrint's *** , not including labor, which are
released within *** of the final installation of the last of the Licensed
Products installed hereunder, or March 31, 1995, whichever comes first.
PhonePrint further agrees to provide the personnel and other resources necessary
to install the Licensed Products in accordance with the schedule outlined in
Section 6.2 above at *** through Much 31, 1995. Thereafter,
AirTouch shall either install the Licensed Products itself or shall pay
PhonePrint to assist AirTouch at PhonePrint's *** .
PhonePrint *** the sum of ***
*** and *** under AirTouch's
Purchase Order Number *** .
3. AirTouch hereby consents to the assignment of this Agreement by ESL
to PhonePrint, provided that *** pays *** ***
in *** and *** under Section 4.3 of the Agreement within 10 days
of such assignment, and provided further that the *** under Section ***
of the Agreement shall become *** from and after the execution of this
Second Amendment and Consent to Assignment.
4. Should AirTouch elect to *** at any time,
PhonePrint hereby consents to the *** *** with such Licensed
Products ***
Licensed Products.
5. Except as amended herein and in the First Amendment, the Agreement
between the parties, dated October 4, 1993, shall remain in full force and
effect.
*** Potions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
6. AirTouch hereby certifies that a complete, true and correct copy of
the Agreement is attached hereto as Exhibit B and that there are no
modifications, amendments, supplements or understandings, oral or written,
amending, supplementing of changing the terms of the Agreement, except as
reflected herein. The Agreement has been duly authorized, executed and
delivered by AirTouch and is in full force and effect and binding upon AirTouch.
7. AirTouch acknowledges receipt of notice that ESL will transfer certain
of its property to PhonePrint pursuant to that certain Asset Purchase Agreement
between ESL and PhonePrint, including the Agreement and ESL's rights and
obligations under the Agreement, and AirTouch hereby consents to such assignment
pursuant to Section 12.3 of the Agreement.
8. Upon execution of this Second Amendment and Consent to Assignment,
there shall exist no defenses or offsets to enforcement of the Agreement by
either party thereto and neither of the parties shall be in default in the
performance of any of its obligations thereunder and AirTouch shall have no
claims or causes of action against ESL or PhonePrint.
9. To the best of AirTouch's knowledge, there is no pending or threatened
litigation or other proceeding which would affect AirTouch's ability to perform
under the Agreement nor does AirTouch know of the existence of any facts which
might give rise to any such action or proceeding.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment and
Consent to Assignment as of the date first written above.
PHONEPRINT, INC. AIRTOUCH COMMUNICATIONS
By: /s/ Kevin Compton By: /s/ Don Winters
----------------------------- ---------------------------------
Name: Kevin Compton Name: Don Winters
--------------------------- -------------------------------
Title: Chairman Title: Director - Technology Transfer
-------------------------- ------------------------------
3
<PAGE>
EXHIBIT 10.9
THIRD AMENDMENT TO
THE DEVELOPMENT AND LICENSE AGREEMENT
DATED OCTOBER 4, 1993
BETWEEN CORSAIR COMMUNICATIONS, INC. (ESL
INCORPORATED)
AND AIRTOUCH COMMUNICATIONS (PACTEL CORPORATION)
This Third Amendment is made this 18th day of August, 1995, by and between
Corsair Communications, Inc., formerly PhonePrint, Inc. and assignee of ESL
Incorporated ("Corsair"), and AirTouch Communications, Inc., formerly AirTouch
Communications and formerly PacTel Corporation ("AirTouch").
WHEREAS, the parties entered into a Development and License
Agreement, dated October 4, 1993 (the "Agreement'); and
WHEREAS, the parties amended such Agreement in a First Amendment, dated
October 23, 1993; and
WHEREAS, the parties amended such Agreement in a Second Amendment, dated
December 7, 1994; and
WHEREAS, the parties now wish to further amend the Agreement;
NOW, THEREFORE, the parties agree as follows:
1. Section 1.1.1 of the Agreement is hereby deleted and the
following is substituted therefor:
"1.1.1 Agreement. The term the "Agreement" means this Development and
---------
License Agreement between Corsair and AirTouch, including the following Exhibits
attached hereto, and any amendments thereto:
Exhibit A: The *** .
Exhibit B: Nondisclosure Agreement, dated April 22, 1993.
Exhibit C: Nondisclosure Agreement, dated June 1, 1995.
2. Section 1.1.2 of the Agreement shall be amended to read as
follows:
"1.1.2 Develop or Development. The term "develop" or "development," as
----------------------
used herein, means engineering, design, layout and hardware generation,
prototyping,
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
characterization, qualification, fabrication, testing, and preparation of data
sheets and application notes."
3. Section 1.1.3 of the Agreement shall be amended to read as
follows:
"1.1.3 Licensed Products. The term "Licensed Products" means the ***
-----------------
*** to be developed hereunder, and any component parts thereof,
made under the *** described ***
therein."
4. Section 1.1.5 of the Agreement is hereby deleted.
5. Section i.1.6 of the Agreement is hereby deleted.
6. Section 1.1.7 of the Agreement is hereby deleted.
7. Section 1.2 of the Agreement is hereby deleted.
8. The first sentence of Section 2.1 of the Agreement is hereby
deleted.
9. Section 2.2 of the Agreement shall be amended to read as follows:
"2.2 Development by Corsair. Corsair will develop ***
----------------------
for wireless subscriber systems."
10. Section 2.3 of the Agreement shall be amended to read as follows:
"2.3 Commercialization by Corsair. Corsair will commercialize the Licensed
----------------------------
Products, i.e., Corsair will *** so that the Licensed
Products will be in manufacturable form for worldwide marketing, sales,
distribution and support by Corsair to end user customers."
11. Section 4.1 of the Agreement is hereby deleted and the following
is substituted therefor:
"4.1 License to Corsair. Subject to the terms and conditions of this
------------------
Agreement, AirTouch hereby grants to Corsair a perpetual, worldwide,
*** *** right and license under AirTouch's *** Patents:
(a) to make, have made, copy and/or use the Licensed Products;
(b) to sell the Licensed Products; and
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
(c) to provide support for the Licensed Products.
The license to use shall be extended to end user customers.
This license shall survive and shall be deemed to be fully paid-up upon any
expiration or termination of this Agreement, *** ***
of prior to such expiration or termination in accordance with Section 4.3
below."
12. Section 4.2 of the Agreement is hereby deleted and the following
is substituted therefor:
"4.2 License to AirTouch. Subject to the terms and conditions of this
-------------------
Agreement, Corsair hereby grants to AirTouch a *** , nonexclusive,
non-transferable, *** for AirTouch's internal business purposes
in the United States."
13. Section 4.3 of the Agreement is hereby deleted and the following
is substituted therefor:
"4.3 Royalties. In consideration of the rights, licenses and benefits
---------
conferred *** hereunder, during the term of this Agreement, will pay
to *** a *** in the *** of *** of the *** of all *** or otherwise
disposed of or put into use by ***; provided, however, that the *** shall
*** than *** *** thereafter, nor shall the *** than ***
in the *** of this ***
*** in any *** . *** will have no obligation to ***
*** on *** , its *** or *** . In no event will more than ***
to *** for any *** . Notwithstanding the foregoing, *** *** on any
*** , but *** , by a ***. *** *** shall be *** no later than
*** during the term hereof."
14. The last sentence of Section 5.3 of the Agreement is hereby
deleted and the following is substituted therefor:
"Corsair will retain any and all rights to file any patent applications
thereon ***
***
*** thereunder for the term of this Agreement."
15. Section 7.1 of the Agreement shall be amended to delete the
words:
", ***
(collectively "PacTel *** ")"
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
16. Section 7.2 of the Agreement shall be amended to delete the
words:
", and/or *** (collectively "ESL Licensed Materials")"
17. Section 7.3 of the Agreement shall be amended to replace the word
"Materials", wherever it should appear, with the word " *** ".
18. Section 7.4 of the Agreement shall be amended to replace the word
"Materials", wherever it should appear, with the word " *** ".
19. The last three paragraphs of Section 12.1 of the Agreement
pertaining to the addresses of the parties are hereby deleted and the following
is substituted therefor:
"If to AirTouch: AirTouch Communications, Inc.
2785 Mitchell Drive, MS 8-1
Walnut Creek, CA 94598
Attn: *** , Director
Technology Transfer
With a copy to: AirTouch Communications, Inc.
1 California Street
San Francisco, CA 94111
Attn: Intellectual Property Counsel
If to Corsair: Corsair Communications
3408 Hillview Avenue
Palo Alto, CA 94304
Attn: ***
***
With a copy to: Brobeck Phleger & Harris
550 West C Street, Suite 1300
San Diego, CA 92101
Attention: ***
20. Exhibit A of the Agreement is hereby deleted and the following is
substituted therefor:
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
<PAGE>
"EXHIBIT A
AirTouch *** :
***
***
***
Corsair ***
***
***
21. Exhibit B of the Agreement is hereby deleted and the following is
substituted therefor:
"EXHIBIT B
Nondisclosure Agreement, dated April 22, 1993"
22. Exhibit C of the Agreement is hereby deleted and the following is
substituted therefor:
"EXHIBIT C
Nondisclosure Agreement, dated June 1, 1995"
23. Section 2 of the First Amendment to the Agreement is hereby
amended to add the following paragraph before Subsection (a):
"Each party may find it necessary to disclose to the other party
certain confidential and proprietary information and intellectual
property relating to its operations which will be used by the
other party only for its work on the Licensed Products. Such
confidential and proprietary information is known to the parties
as: *** and *** ."
24. Section 4 of the Second Amendment to the Agreement is
hereby deleted and the following is substituted therefor:
"4. Should AirTouch elect at any time to *** Licensed Products ***
*** for its own use, Corsair *** to the *** of the ***
*** such Licensed Products to *** of such ***
*** ."
*** Portions of this page have been omitted pursuant to a request for
Confidential Treament and filed separately with the commission
<PAGE>
25. In conjunction with the operation of Licensed Products purchased
by AirTouch under the terms of this Agreement and any subsequent agreement,
AirTouch shall have a license to use application software installed in said
Licensed Products to the extent required for the authorized use of the Licensed
Products.
26. Except as amended herein, the Agreement dated October 4, 1993 and
amended by the First Amendment on October 23, 1993 and amended again by the
Second Amendment on December 7, 1994 shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment
as of the date first written above.
Corsair Communications, Inc. AirTouch Communications, Inc.
By:/s/ John F. Scott By:/s/ Michael Scullin
---------------------------- ------------------------------
Name:John F. Scott Name:Michael Scullin
-------------------------- ----------------------------
Title:Vice President Title:Director, Technology Transfer
------------------------- -----------------------------
6
<PAGE>
EXHIBIT 10.10
CORSAIR COMMUNICATIONS, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE I
GENERAL PROVISIONS
------------------
1. PURPOSE
This 1995 Stock Option/Stock Issuance Plan ("Plan") is intended to
promote the interests of Corsair Communications, Inc., a Delaware corporation
(the "Corporation"), by providing individuals who render valuable services to
the Corporation (or any Parent or Subsidiary) with the opportunity to acquire
ownership interests in the Corporation so as to encourage them to continue to
render services to the Corporation (or any Parent or Subsidiary).
2. STRUCTURE OF THE PLAN; TERMINOLOGY
This Plan has two separate components: the Option Grant Program set
forth in Article II and the Stock Issuance Program set forth in Article III.
For the purposes of this Plan, any capitalized term shall have the meaning
assigned under Article IV, Section 8 hereof.
3. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered either the Board or a committee of
two (2) or more Board members appointed by the Board to which the Board has
delegated administrative functions under the Plan (the "Plan Administrator").
Members of any committee to which the Board has delegated any administrative
functions shall serve for such terms as the Board shall determine and subject to
the Board's right of removal. All delegations of authority to any committee
shall be and remain revocable by the Board.
B. The Plan Administrator shall have full power and authority to
implement, interpret and administer the Plan, to establish all such rules and
regulations as it deems appropriate, and to make such determinations under the
Plan and any outstanding option grants or share issuances as it deems necessary
or advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any outstanding option or share
issuance.
<PAGE>
4. SELECTION OF OPTIONEES AND PARTICIPANTS
A. The persons eligible to receive share issuances under the Stock
Issuance Program and/or option grants pursuant to the Option Grant Program are
limited to Employees; non-employee members of the Board of the Corporation (or
of any Parent or Subsidiary); and consultants and other independent contractors
who provide valuable services to the Corporation (or of any Parent or
Subsidiary).
B. The Plan Administrator shall have the absolute discretion and
authority to determine, subject to the provisions of this Plan, the terms of any
option grant or share issuance. In addition to any other matters over which the
Plan Administrator has discretion hereunder, the Plan Administrator shall
determine which, if any, eligible individuals will be granted options in
accordance with Article II of the Plan and which will be issued shares in
accordance with Article III of the Plan. With respect to option grants made
under the Plan, the Plan Administrator will determine the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable, the vesting schedule (if any)
applicable to shares issued pursuant to the granted options, and the maximum
term for which the option may remain outstanding. With respect to share
issuances under the Stock Issuance Program, in addition to other matters over
which the Plan Administrator has discretion hereunder, the Plan Administrator
will determine the number of shares to be issued to each issuee, the vesting
schedule (if any) applicable to the issued shares, and the consideration to be
paid by the individual for such shares.
C. Common Stock issuable under the Plan, whether under the Option
Grant Program or the Stock Issuance Program, may be subject to such restrictions
on transfer, repurchase rights or other restrictions as may be imposed by the
Plan Administrator and set forth in the documents governing such option or
issuance.
5. STOCK SUBJECT TO THE PLAN
A. Common Stock of the Corporation will be issued under the Plan.
The maximum number of shares of Common Stock which may be issued over the term
of the Plan shall not exceed 2,030,000 shares, subject to adjustment from time
to time in accordance with the provisions of this Section 5 of Article I.
B. Shares reserved for issuance under granted options but not in fact
issued pursuant to options granted under the Plan due to the expiration or
termination of the option or the cancellation of the option in accordance with
Section 3 of
-2-
<PAGE>
Article II, will again become available for issuance under the Plan. Shares
actually issued under the Plan, whether pursuant to the exercise of an option
under the Option Grant Program or a stock issuance pursuant to the Stock
Issuance Program, which are subsequently repurchased by the Corporation will not
become available for future issuance.
C. In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock dividend, stock split, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments shall be
made to (i) the aggregate number and/or class of shares issuable under the Plan
and (ii) the aggregate number and/or class of shares and the option price per
share in effect under each outstanding option in order to prevent the dilution
or enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
6. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the rights and obligations of
an optionee with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any issuee with respect to Common Stock issued
under the Plan prior to such action unless such optionee or issuee consents to
such amendment. In addition, the Board shall not, without the approval of the
Corporation's shareholders, amend the Plan so as to (i) increase the maximum
number of shares issuable under the Plan (except for adjustments required under
Article I, Section 5.C), (ii) materially increase the benefits accruing to
individuals who participate in the Plan, or (iii) materially modify the
eligibility requirements for participation in the Plan.
B. Options to purchase shares of Common Stock may be granted under
the Option Grant Program and shares of Common Stock may be issued under the
Stock Issuance Program, which are in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
--------
issued under the Option Grant Program or the Stock Issuance Program are held in
escrow until shareholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan is
obtained. If such approval is not obtained within twelve (12) months after the
date the initial excess issuances are made, then (I) any unexercised options
representing such excess shall terminate and cease to be exercisable and (II)
the Corporation shall promptly refund to the optionees and issuees the option or
purchase price paid for any
-3-
<PAGE>
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
7. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board. Options
to purchase shares of Common Stock may be granted under the Option Grant Program
and shares of Common Stock may be issued under the Stock Issuance Program from
and after the effective date, provided any shares actually issued under the Plan
--------
Plan are held in escrow until shareholder approval of the Plan is obtained. If
such approval is not obtained within twelve (12) months after the effective
date, then (I) all options shall terminate and cease to be exercisable, (II) the
Corporation shall promptly refund to the optionees and issuees the option or
purchase price paid for any shares issued under the Plan, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding, and (III) this Plan shall terminate in its entirety.
B. Unless sooner terminated by reason of Section 7A of this Article
I, the Plan shall terminate upon the earlier of (i) March 23, 2005, or (ii) the
-------
date on which all shares available for issuance under the Plan have been issued
pursuant to the exercise of options granted under Article II or the issuance of
shares under Article III. The termination of the Plan shall have no effect on
any outstanding options under or shares issued and outstanding under the Plan,
and such securities shall thereafter continue to have force and effect in
accordance with the provisions of the agreements evidencing such options and
issuances.
8. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon any person 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)
or of the optionee or the issuee, which rights are hereby expressly reserved by
each, to terminate Service of the optionee or issuee at any time for any reason
whatsoever, with or without cause or to engage in any Corporate Transaction.
-4-
<PAGE>
ARTICLE II
OPTION GRANT PROGRAM
--------------------
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or Non-Statutory Options except that individuals who
are not Employees may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
--------
with the terms and conditions of Sections 1 and 3 of this Article II and each
instrument evidencing an Incentive Option shall, in addition, comply with the
provisions of Section 2 of this Article II.
A. OPTION PRICE.
------------
(I) The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than eighty-five percent (85%) of the Fair Market Value of a share of Common
Stock on the date of the option grant.
(II) The option price per share shall become immediately due
upon exercise of the option and shall, subject to the provisions of Article IV,
Section 1 and the agreement evidencing such grant, be payable in cash or check
drawn to the Corporation's order. Notwithstanding the above, should the
Corporation's outstanding Common Stock be registered under Section 12(g) of the
1934 Act, at the time the option is exercised, then the option price may also be
paid as follows:
- in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value; or
- through a special sale and remittance procedure pursuant
to which the optionee provides irrevocable written instructions (I) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, an amount sufficient to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and
State income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (II) to the Corporation to
deliver the certificates for the purchased
-5-
<PAGE>
shares directly to such brokerage firm in order to effect the sale
transaction.
Except to the extent such sale and remittance procedure is utilized, payment of
the option price must occur at the time the option is exercised.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
----------------------------
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement evidencing such option. However, no option
granted under the Plan shall have a term in excess of ten (10) years from the
grant date.
C. NO ASSIGNMENT. During the lifetime of the optionee, the option
-------------
shall be exercisable only by the optionee and shall not be assignable or
transferable by the optionee otherwise than by will or by the laws of descent
and distribution following the optionee's death.
D. TERMINATION OF SERVICE. The following provisions shall govern
----------------------
the exercise period applicable to any options held by the optionee at the time
of cessation of Service or death:
(I) Should the optionee cease to remain in Service for any
reason other than death or Permanent Disability, then the period during which
each outstanding option held by such optionee is to remain exercisable shall be
limited to the three (3)-month period following the date of such cessation of
Service.
(II) Should such Service terminate by reason of Permanent
Disability or should the optionee die while holding one or more outstanding
options, then the period during which each such option is to remain exercisable
shall be limited to the twelve (12)-month period following the date of the
optionee's cessation of Service or death. During the limited exercise period
following the optionee's death, the option may be exercised by the personal
representative of the optionee's estate or by the person or persons to whom the
option is transferred pursuant to the optionee's will or in accordance with the
laws of descent and distribution.
(III) The Plan Administrator shall have full power and authority
to extend (either at the time the option is granted or at any time while the
option remains outstanding) the period of time for which the option is to remain
exercisable following the optionee's cessation of Service, from the limited
period otherwise applicable under subsection 1C of this Article II, to such
greater period of time as the Plan Administrator may deem appropriate under the
circumstances.
-6-
<PAGE>
(IV) Notwithstanding the above no option shall be exercisable
after the specified expiration date of the option term.
(V) Each such option shall, during the applicable limited
exercise period, be exercisable only with respect to the shares for which the
option was exercisable on the date of the optionee's cessation of Service.
E. SHAREHOLDER RIGHTS. An optionee shall not have rights as a
------------------
shareholder with respect to any shares subject to an option until such optionee
shall have exercised the option and paid the option price.
2. INCENTIVE OPTIONS
All provisions of the Plan shall be applicable to Incentive Options
granted hereunder and, in addition, the terms and conditions specified in this
Section 2 shall be applicable to Incentive Options granted under the Plan.
Options which are specifically designated as Non-Statutory Options when issued
under the Plan shall not be subject to such terms and conditions set forth
---
herein.
A. OPTION PRICE.
------------
(I) The option price per share of the Common Stock subject to
an Incentive Option shall in no event be less than one hundred percent (100%) of
the Fair Market Value of a share of Common Stock on the grant date.
(II) If the individual to whom the option is granted is a 10%
Shareholder, then the option price per share shall not be less than one hundred
ten percent (110%) of the Fair Market Value of the Common Stock on the date of
the option grant.
B. DOLLAR LIMITATION. The aggregate Fair Market Value (determined
-----------------
as of the date or dates of grant) of Common Stock which first becomes
exercisable during any one calendar year under Incentive Options granted to any
Employee under any option plan of the Corporation (or any parent or subsidiary
corporation) shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds options which become exercisable
in the same calendar year, the foregoing limitation on such options shall be
applied on the basis of the order in which such options are granted. Any
options in excess of such limitation shall automatically be treated as Non-
statutory Options.
-7-
<PAGE>
C. TERM OF OPTION FOR 10% SHAREHOLDERS. No option granted to a 10%
-----------------------------------
Shareholder shall have a term in excess of five (5) years from the grant date.
3. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or a
different numbers of shares of Common Stock but having an option price per share
established at the time of such cancellation and regrant in accordance with the
provisions of this Plan.
ARTICLE III
STOCK ISSUANCE PROGRAM
----------------------
1. STOCK ISSUANCES
Shares of Common Stock shall be issuable under the Stock Issuance
Program through direct and immediate issuances without any intervening stock
option grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") in a form acceptable to the Plan Administrator,
which form shall be in compliance with the provisions of the Plan.
2. ISSUE PRICE
The purchase price per share shall be fixed by the Plan Administrator,
but in no event shall it be less than eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock at the time of issuance.
3. PAYMENT OF ISSUE PRICE
Except as provided in Article IV, Section 1, shares shall be issued
only in exchange for cash, a check payable to the Corporation, for services
previously rendered to the Corporation (or any Parent or Subsidiary) or such
other lawful consideration as may be acceptable to the Plan Administrator.
ARTICLE IV
MISCELLANEOUS
-------------
1. LOANS
A. The Plan Administrator may assist any optionee or issuee (other
than a non-employee director) in the exercise of
-8-
<PAGE>
one or more options granted to such optionee under the Option Grant Program or
the purchase of one or more shares to be issued to such issuee under the Stock
Issuance Program, including the satisfaction of any Federal and State income and
employment tax obligations arising therefrom, by (i) authorizing the extension
of a loan from the Corporation to such optionee or issuee, or (ii) permitting
the optionee or issuee to pay the option price or purchase price for the
purchased Common Stock in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
authorized with or without security or collateral. However, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events the maximum credit
available to each optionee or issuee may not exceed the sum of (i) the aggregate
---
option price or purchase price payable for the purchased shares plus (ii) any
Federal and State income and employment tax liability incurred by the optionee
or issuee in connection with such exercise or purchase.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.
2. VESTING OF SHARES AND REPURCHASE RIGHTS
A. The Plan Administrator, in its absolute discretion, may issue
fully and immediately vested shares of Common Stock, or the Plan Administrator
may impose such vesting requirements as it deems appropriate with the
Corporation retaining a right to repurchase any unvested shares. The terms of
the vesting schedule and of the Corporation's repurchase rights shall be as
determined by the Plan Administrator and set forth in the agreement governing
such issuance.
B. Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash dividend) which the
holder of unvested Common Stock may have the right to receive by reason of a
stock dividend, stock split, reclassification or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting and repurchase
limitations applicable to the unvested Common Stock with respect to which it was
paid or arose, and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.
-9-
<PAGE>
C. No person to whom shares of Common Stock have been issued pursuant
to the Plan may transfer any such shares which have not vested. Notwithstanding
the above, the issuee shall have the right to make a gift of unvested shares
acquired under the Plan to his/her spouse, parents or issue or to a trust
established for such spouse, parents or issue, provided the transferee of such
shares delivers to the Corporation a written agreement to be bound by all the
provisions of the Plan and the Issuance or Stock Purchase Agreement executed by
the issuee at the time of his/her acquisition of the gifted shares.
3. MARKET STAND-OFF AGREEMENTS
The Plan Administrator may require each person to whom any shares are
issued under this Plan to enter into an agreement which restricts or prohibits
the sale of any stock of the Corporation by such person for a reasonable period
of time following a public offering of any shares of stock by the Corporation.
4. RIGHT OF FIRST REFUSAL
Until such time as the Corporation's outstanding shares of Common
Stock are first registered under Section 12(g) of the 1934 Act, the Plan
Administrator may subject any shares issued pursuant to the Plan to a right of
first refusal with respect to any proposed disposition of such shares other than
a transfer permitted by Section 2.C of this Article IV. Such right of first
refusal shall be exercisable by the Corporation (or its assignees) in accordance
with the terms and conditions specified in the instrument governing the issuance
of such shares.
5. SECURITIES LAWS; LEGENDS
A. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until the Corporation shall have determined
that there has been full and adequate compliance with all applicable
requirements of the Federal and state securities laws and all other applicable
legal and regulatory requirements.
B. Shares issued under the Plan shall bear such legends as the Plan
Administrator deems necessary or appropriate, including such restrictive legends
as the Plan Administrator shall require to reflect the terms of any agreement
between the issuee and the Corporation.
6. SHAREHOLDER RIGHTS
Subject to the rights of the Corporation set forth herein or in any
other agreement entered into between the
-10-
<PAGE>
Corporation and an issuee of shares under the Plan, each person to whom shares
of Common Stock have been issued under the Plan shall have all the rights of a
shareholder with respect to those shares whether or not his/her interest in such
shares is vested. Accordingly, the issuee shall have the right to vote such
shares and to receive any cash dividends or other distributions paid or made
with respect to such shares.
7. ACCELERATION
The Plan Administrator may, in its discretion, provide for the
automatic acceleration upon a Change of Control and\or Corporate Transaction of
the time at which any option will become exercisable or for the lapse of any
repurchase right tied to vesting by including a provision to such effect in the
documents evidencing the rights of the optionee or issuee.
8. DEFINITIONS
The following definitions shall be in effect under this Plan:
A. BOARD shall mean the Board of Directors of the Corporation.
-----
B. COMMON STOCK shall mean the common stock of the Corporation.
------------
C. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) any transaction or series of related transactions
(including, without limitation, any reorganization, merger or
consolidation) in which more than fifty percent (50%) of the Corporation's
outstanding voting stock is transferred to a person or persons different
from those who held the stock immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
D. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation or any Parent or Subsidiary, 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.
-11-
<PAGE>
E. FAIR MARKET VALUE per share of Common Stock on any relevant date
-----------------
under the Plan shall be the value determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or admitted
to trading on any Stock Exchange but is traded on the NASDAQ National
Market System, the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers through the NASDAQ National
Market System or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(ii) If the Common Stock is at the time listed or admitted to
trading on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on the NASDAQ National
Market System, then such Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
F. INCENTIVE OPTION shall mean a stock option which satisfies the
----------------
requirements of Internal Revenue Code Section 422.
G. NON-STATUTORY OPTION shall mean a stock option not intended
--------------------
to meet the requirements of Code Section 422.
H. PARENT shall mean any corporation (other than the Corporation)
------
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
-12-
<PAGE>
I. PERMANENT DISABILITY shall have the meaning assigned to such term
--------------------
in Code Section 22(e)(3).
J. SERVICE shall mean the provision of services to the Corporation
-------
or any Parent or Subsidiary by an individual in the capacity of an Employee, a
non-employee member of the Board or a consultant or independent contractor.
K. SUBSIDIARY shall mean each corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
L. 10% STOCKHOLDER shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation.
9. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
10. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any options granted under Article II or the purchase of any shares issued under
Article III shall be subject to the satisfaction of all applicable Federal,
State and local income and employment tax withholding requirements.
11. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the
Option Grant Program, the issuance of any shares under the Stock Issuance
Program, and the issuance of Common Stock upon the exercise of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
-13-
<PAGE>
EXHIBIT 10.11
CORSAIR COMMUNICATIONS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") pursuant to the 1995 STOCK OPTION/STOCK ISSUANCE PLAN (the "Plan") to
purchase shares of the Common Stock of Corsair Communications, Inc. (the
"Corporation"):
Optionee: _______________________________________
--------
Grant Date: ______________________________________
----------
Grant Number: _____ Option Price: $_____ per share
------------ ------------
Vesting Commencement Date: ______________________
-------------------------
Number of Option Shares: __________________ shares
-----------------------
Expiration Date: _________________________________
---------------
Type of Option: _____ Incentive Stock Option
--------------
_____ Non-Statutory Stock Option
Date Exercisable:
----------------
The Option shall be immediately exercisable for all vested and
unvested shares.
Vesting Schedule
----------------
The Option Shares shall be vest in accordance with the following
vesting schedule:
(i) No Option Shares shall vest unless and until the Optionee
has completed twelve (12) months of Service (as defined in the Plan) measured
from the Vesting Commencement Date.
(ii) Upon the completion of the twelve (12) month service
period specified in subparagraph (i) above, 25% of the Option Shares shall
become vested.
(iii) The Remaining Option 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 (i) above.
<PAGE>
Optionee understands that the Option is granted pursuant to the
Corporation's Plan. By signing below, optionee agrees to be bound by the terms
and conditions of the Plan and the terms and conditions of the Option as set
forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee
understands that any Option Shares purchased under the Option will be subject to
the terms and conditions set forth in the Stock Purchase Agreement attached
hereto as Exhibit B.
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
-----------------
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO REPURCHASE RIGHTS
AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS UPON
ANY PROPOSED SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER DISPOSITION OF THE
CORPORATION'S SHARES. THE TERMS AND CONDITIONS OF SUCH RIGHTS ARE SPECIFIED IN
THE STOCK PURCHASE AGREEMENT.
No Employment or Service Contract. Nothing in this Agreement or in the
---------------------------------
Plan shall confer upon the Optionee any right to continue in the Service of the
Corporation for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation or the Optionee, which rights
are hereby expressly reserved by each, to terminate Optionee's Service at any
time for any reason whatsoever, with or without cause.
________________________, 199__
Date
Corsair Communications, Inc.
By____________________________________
Title:________________________________
______________________________________
Optionee
Address:
______________________________________
______________________________________
-2-
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
A-1
<PAGE>
CORSAIR COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
--------
A. The Board of Directors of the Corporation has adopted the Corsair
Communications, Inc. 1995 Stock Option/Stock Issuance Plan (the "Plan") for the
purpose of attracting and retaining the services of persons who contribute to
the growth and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and this
Agreement is executed pursuant to and is intended to carry out the purposes of
the Plan.
AGREEMENT
---------
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 Corporation hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that number
of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
-----------
years measured from the Grant Date and shall expire at the close of business on
the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
-----------------------
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
-----------------
in part at any time prior to the time the Plan is approved by the Corporation's
shareholders in accordance with Paragraph 17. Provided such shareholder
approval is obtained, this option shall thereupon become exercisable for the
Option Shares in one or more installments as is specified in the Grant Notice.
As the option becomes exercisable in one or more installments, the
<PAGE>
installments shall accumulate and the option shall remain exercisable for such
installments until the Expiration Date or the sooner termination of the option
term under Paragraph 5 or Paragraph 6 of this Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified
--------------------------------------
in Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced to
a three (3)-month period commencing with the date of such cessation of
Service, but in no event shall this option be exercisable at any time after
the Expiration Date. Upon the expiration of such three (3)-month period or
(if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(ii) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the law of descent and distribution shall have the
right to exercise this option. Such right shall lapse and this option shall
cease to be exercisable upon the earlier of (A) the expiration of the
-------
twelve (12) month period measured from the date of Optionee's death or (B)
the Expiration Date. Upon the expiration of such twelve (12) month period
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service while this option is outstanding, then
the Optionee shall have a period of twelve (12) months (commencing with the
date of such cessation of Service) during which to exercise this option,
but in no event shall this option be exercisable at any time after the
Expiration Date. Optionee shall be deemed to be permanently disabled if
Optionee is unable to engage in any substantial gainful activity for the
Corporation or the parent or subsidiary corporation retaining his/her
services by reason of any medically determinable physical or mental
impairment, which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than twelve
(12) months. Upon the expiration of such limited period of exercisability
or (if earlier)
-2-
<PAGE>
upon the Expiration Date, this option shall terminate and cease to be
outstanding.
(iv) During the limited period of exercisability applicable
under subparagraph (i), (ii) or (iii) above, this option may be exercised
for any or all of the Option Shares for which this option is, at the time
of the Optionee's cessation of Service, exercisable in accordance with the
exercise schedule specified in the Grant Notice and the provisions of
Paragraph 6 of this Agreement.
(v) For purposes of this Paragraph 5 and for all other
purposes under this Agreement:
A. 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.
B. The Optionee shall be deemed to be an EMPLOYEE of the
Corporation and to continue in the Corporation's employ for so long as the
Optionee remains in the employ of the Corporation or one or more of its
parent or subsidiary corporations, 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.
C. A corporation shall be considered to be a SUBSIDIARY
corporation of the Corporation if it is a member of an unbroken chain of
corporations beginning with the Corporation, provided each such corporation
in the chain (other than the last corporation) owns, at the time of
determination, stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
D. A corporation shall be considered to be a PARENT corporation
of the Corporation if it is a member of an unbroken chain ending with the
Corporation, provided each such corporation in the chain (other than the
Corporation) owns, at the time of determination, stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
6. SPECIAL TERMINATION OF OPTION.
-----------------------------
-3-
<PAGE>
A. This Option, to the extent not previously exercised, shall
terminate and cease to be exercisable upon the consummation of one or more of
the following shareholder-approved transactions (a "Corporate Transaction")
unless this Option is expressly assumed by the successor corporation or parent
thereof:
(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.
B. 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.
7. ADJUSTMENT IN OPTION SHARES.
---------------------------
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the total number of Option Shares subject to this option,
(ii) the number of Option Shares for which this option is to be exercisable from
and after each installment date specified in the Grant Notice and (iii) the
Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, 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.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
----------------------------
not have any of the rights of a shareholder with
-4-
<PAGE>
respect to the Option Shares until such individual shall have exercised the
option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
---------------------------
A. In order to exercise this option with respect to all or any part
of the Option 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 Corporation a
stock purchase agreement (the "Purchase Agreement") in substantially the
form of Exhibit B to the Grant Notice.
(ii) Pay the aggregate Option Price for the purchased shares in
one or more forms approved under the Plan.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option, if other than Optionee, have
the right to exercise this option.
B. Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
(i) in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at fair market value on the
Exercise Date; or
(ii) through a special sale and remittance procedure pursuant to
which the Optionee is to provide irrevocable written instructions (a) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation by
reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to effect the sale transaction.
-5-
<PAGE>
C. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted
to trading on any stock exchange but is traded on the NASDAQ National
Market System, the fair market value shall be the closing selling price of
one share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through its
NASDAQ system or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the closing selling
price on the last preceding date for which such quotation exists shall be
determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-
counter market, or if the Plan Administrator determines that the value
determined pursuant to subparagraphs (i) and (ii) above does not accurately
reflect the fair market value of the Common Stock, then such fair market
value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
D. As soon after the Exercise Date as practical, the Corporation
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, with the appropriate legends affixed thereto.
E. In no event may this option be exercised for any fractional
shares.
-6-
<PAGE>
10. COMPLIANCE WITH LAWS AND REGULATIONS.
------------------------------------
A. The exercise of this option and the issuance of Option Shares
upon such exercise shall be subject to compliance by the Corporation 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
Corporation's Common Stock may be listed at the time of such exercise and
issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
----------------------
in Paragraph 3 or 6, 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
Corporation.
12. LIABILITY OF CORPORATION.
------------------------
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
13. NOTICES. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal 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 the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit
-7-
<PAGE>
in the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
14. LOANS. The Plan Administrator may, in its absolute discretion
-----
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. GOVERNING LAW. The interpretation, performance, and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. The grant of this option is subject to
--------------------
approval of the Plan by the Corporation's shareholders within twelve (12) months
after the adoption of the Plan by the Board of Directors. Notwithstanding any
-------------------
provision of this Agreement to the contrary, this option may not be exercised in
- --------------------------------------------------------------------------------
whole or in part until such shareholder approval is obtained. In the event that
- ------------------------------------------------------------
such shareholder approval is not obtained, then this option shall thereupon
terminate in its entirety and the Optionee shall have no further rights to
acquire any Option Shares hereunder.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
-------------------------------------------------- ------
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
-8-
<PAGE>
B. Should this option be designated as immediately exercisable in the
Grant Notice, then this option shall not become exercisable in the calendar year
in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
C. Should this option be designated as exercisable in installments
in the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Corporation's Common Stock for which
such installment first becomes exercisable hereunder will, when added to the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any parent or subsidiary
corporation) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
19. WITHHOLDING. Optionee hereby agrees to make appropriate
-----------
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
-9-
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
B-1
<PAGE>
IMMEDIATELY EXERCISABLE
REPURCHASE RIGHT
RIGHT OF FIRST REFUSAL
----------------------
CORSAIR COMMUNICATIONS, INC.
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made as of this ___ day of _________, 19__, by and among
Corsair Communications, Inc., a Delaware corporation (the "Corporation"),
_________________________, the holder of a stock option (the "Optionee") under
the Corporation's 1995 Stock Option/Stock Issuance Plan and
_______________________, the Optionee's spouse.
I. EXERCISE OF OPTION
------------------
1.1 EXERCISE. Optionee hereby purchases _____________ shares
--------
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on _____________, 19___
("Grant Date") to purchase up to ____________ shares of the Common Stock ("Total
Purchasable Shares") under the Corporation's 1995 Stock Option/Stock Issuance
Plan (the "Plan") at an option price of $__________ per share ("Option Price").
1.2 PAYMENT. Concurrently with the delivery of this Agreement to the
-------
Corporate Secretary of the Corporation, Optionee shall pay the Option Price for
the Purchased Shares in accordance with the provisions of the agreement between
the Corporation and Optionee evidencing the Option (the "Option Agreement") and
shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise, together with a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
1.3 DELIVERY OF CERTIFICATES. The certificates representing the
------------------------
Purchased Shares hereunder shall be held in escrow by the Corporate Secretary of
the Corporation in accordance with the provisions of Article VII.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation actually
------------------
exercises its repurchase right, rights of first refusal or special purchase
right under this Agreement, Optionee (or any successor in interest) shall have
all the rights of a shareholder (including voting and dividend rights) with
respect to the Purchased Shares, including the Purchased Shares held in escrow
under Article VII, subject, however, to the transfer restrictions of Article IV.
<PAGE>
II. SECURITIES LAW COMPLIANCE
-------------------------
2.1 EXEMPTION FROM REGISTRATION. The Purchased Shares have not been
---------------------------
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form of Exhibit C to the Notice of Grant of Stock Option (the "Grant
Notice") accompanying the Option Agreement.
2.2 RESTRICTED SECURITIES.
---------------------
A. Optionee hereby confirms that Optionee has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchased Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is prepared
to hold the Purchased Shares for an indefinite period and that Optionee is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period immediately
following the date on which the Corporation first becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Purchased Shares, to the extent vested under Article V, may
be sold (without registration) pursuant to the applicable requirements of Rule
144. If Optionee is at the time of such sale an affiliate of the Corporation
for purposes of Rule 144 or was such an affiliate during the preceding three (3)
months, then the sale must comply with all the requirements of Rule 144
(including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two (2)-year holding period requirement
of the Rule will not be applicable. If Optionee is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will be
applicable to the sale.
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation
-2-
<PAGE>
(nor was such an affiliate during the preceding three (3) months), sell the
Purchased Shares (without registration) pursuant to paragraph (k) of Rule 144
after the Purchased Shares have been held for a period of three (3) years
following the payment in cash of the Option Price for such shares.
2.3 DISPOSITION OF SHARES. Optionee hereby agrees that Optionee
---------------------
shall make no disposition of the Purchased Shares (other than a permitted
transfer under paragraph 4.1) unless and until there is compliance with all of
the following requirements:
(a) Optionee shall have notified the Corporation of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition.
(b) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (i) the
proposed disposition does not require registration of the Purchased Shares under
the 1933 Act or (ii) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
(d) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Purchased Shares pursuant to the provisions of
the Commissioner Rules identified in paragraph 2.5.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Article II nor (ii) to treat as the owner of the Purchased
---
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
2.4 RESTRICTIVE LEGENDS. In order to reflect the restrictions on
-------------------
disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or more of the
following legends:
-3-
<PAGE>
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action' letter of the Securities and
Exchange Commission with respect to such sale or offer, or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement dated
____________, 19___ between the Corporation and the registered holder of the
shares (or the predecessor in interest to the shares). Such agreement grants
certain repurchase rights and rights of first refusal to the Corporation (or its
assignees) upon the sale, assignment, transfer, encumbrance or other disposition
of the Corporation's shares or upon termination of service with the Corporation.
The Corporation will upon written request furnish a copy of such agreement to
the holder hereof without charge."
III. SPECIAL TAX ELECTION
--------------------
3.1 SECTION 83(B) ELECTION APPLICABLE TO THE EXERCISE OF A NON-
----------------------------------------------------------
STATUTORY STOCK OPTION. If the Purchased Shares are acquired hereunder pursuant
- ----------------------
to the exercise of a non-statutory stock option, as specified in the Grant
--------------------------
Notice, then the Optionee understands that under Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), the excess of the fair market
value of the Purchased Shares on the date any forfeiture restrictions applicable
to such shares lapse over the Option Price paid for such shares will be
reportable as ordinary income on such lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. Optionee understands that he/she may elect under Section
83(b) of the Code to be taxed at the time the Purchased Shares are acquired
hereunder, rather than when and as such Purchased Shares cease to be subject to
such forfeiture restrictions. Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement. Even
if the fair market value of the Purchased Shares at the date of this Agreement
equals the Option Price paid (and thus no tax is payable), the election must be
made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT II HERETO. OPTIONEE UNDERSTANDS THAT FAILURE TO
MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE RESTRICTIONS
LAPSE.
-4-
<PAGE>
3.2 CONDITIONAL SECTION 83(B) ELECTION APPLICABLE TO THE EXERCISE OF
----------------------------------------------------------------
AN INCENTIVE STOCK OPTION. If the Purchased Shares are acquired hereunder
- -------------------------
pursuant to the exercise of an incentive stock option under the Federal tax
----------------------
laws, as specified in the Grant Notice, then the following tax principles shall
be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
B. The excess of (i) the fair market value of the Purchased
Shares on the date the Option is exercised or (if later) on the date any
forfeiture restrictions applicable to the Purchased Shares lapse over (ii)
the Option Price paid for the Purchased Shares will be includible in the
Optionee's taxable income for alternative minimum tax purposes.
C. If the Optionee makes a disqualifying disposition of the
Purchased Shares, then the Optionee will recognize ordinary income in the
year of such disposition equal in amount to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised or
(if later) on the date any forfeiture restrictions applicable to the
Purchased Shares lapse over (ii) the Option Price paid for the Purchased
Shares. Any additional gain recognized upon the disqualifying disposition
will be either short-term or long-term capital gain depending upon the
period for which the Purchased Shares are held prior to the disposition.
D. For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase the
Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. The term "disqualifying disposition" means any sale or
other disposition /1/ of the Purchased Shares within two (2) years after
-
the Grant Date or within one (1) year after the execution date of this
Agreement.
______________________
/1/ Generally, a disposition of shares purchased under an incentive stock
-
option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse,
a transfer into joint ownership with right of survivorship if Optionee
remains one of the joint owners, a pledge, a transfer by bequest or
inheritance or certain tax free exchanges permitted under the Code.
-5-
<PAGE>
E. In the absence of final Treasury Regulations relating to incentive
stock options, it is not certain whether the Optionee may, in connection
with the exercise of the Option for any Purchased Shares at the time
subject to forfeiture restrictions, file a protective election under
Section 83(b) of the Code which would limit (I) the Optionee's alternative
minimum taxable income upon exercise and (II) the Optionee's ordinary
income upon a disqualifying disposition, to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised
over (ii) the Option Price paid for the Purchased Shares. THE APPROPRIATE
FORM FOR MAKING SUCH A PROTECTIVE ELECTION IS ATTACHED AS EXHIBIT II TO
THIS AGREEMENT AND MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN
THIRTY (30) DAYS AFTER THE DATE OF THIS AGREEMENT. HOWEVER, SUCH ELECTION
----------------------
IF PROPERLY FILED WILL ONLY BE ALLOWED TO THE EXTENT THE FINAL TREASURY
-----------------------------------------------------------------------
REGULATIONS PERMIT SUCH A PROTECTIVE ELECTION.
---------------------------------------------
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY,
AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(B), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS/HER BEHALF. This filing should be made by registered or certified mail,
return receipt requested, and Optionee must retain two (2) copies of the
completed form for filing with his or her State and Federal tax returns for the
current tax year and an additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
---------------------
4.1 RESTRICTION ON TRANSFER. Optionee shall not transfer, assign,
-----------------------
encumber or otherwise dispose of any of the Purchased Shares which are subject
to the Corporation's Repurchase Right under Article V. In addition, Purchased
Shares which are released from the Repurchase Right shall not be transferred,
assigned, encumbered or otherwise made the subject of disposition in
contravention of the Corporation's First Refusal Right under Article VI. Such
restrictions on transfer, however, shall not be applicable to (i) a gratuitous
---
transfer of the Purchased Shares made to the Optionee's spouse or issue,
including adopted children, or to a trust for the exclusive benefit of the
Optionee or the Optionee's spouse or issue, provided and only if the Optionee
--------------------
obtains the Corporation's prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by the
Optionee in connection with the acquisition of the Purchased Shares.
-6-
<PAGE>
4.2 TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
----------------------
to whom the Purchased Shares are transferred by means of one of the permitted
transfers specified in paragraph 4.1 must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Corporation that such
person is bound by the provisions of this Agreement and that the transferred
shares are subject to (i) both the Corporation's Repurchase Right and the
Corporation's First Refusal Right granted hereunder and (ii) the market stand-
off provisions of paragraph 4.4, to the same extent such shares would be so
subject if retained by the Optionee.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI and VII
-------------------
of this Agreement, the term "Owner" shall include the Optionee and all
subsequent holders of the Purchased Shares who derive their chain of ownership
through a permitted transfer from the Optionee in accordance with paragraph 4.1.
4.4 MARKET STAND-OFF PROVISIONS.
---------------------------
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Corporation or such underwriters; provided, however,
--------
that in no event shall such period exceed one hundred-eighty (180) days. The
limitations of this paragraph 4.4 shall remain in effect for the two-year period
immediately following the effective date of the Corporation's initial public
offering and shall thereafter terminate and cease to have any force or effect.
B. Owner shall be subject to the market stand-off provisions of this
paragraph 4.4 provided and only if the officers and directors of the Corporation
--------------------
are also subject to similar arrangements.
C. In the event of any stock dividend, stock split, recapitalization
or other change affecting the Corporation's outstanding Common Stock effected as
a class without receipt of consideration, then any new, substituted or
additional securities distributed with respect to the Purchased Shares shall be
immediately subject to the provisions of this paragraph 4.4, to the same extent
the Purchased Shares are at such time covered by such provisions.
-7-
<PAGE>
D. In order to enforce the limitations of this paragraph 4.4, the
Corporation may impose stop-transfer instruc tions with respect to the Purchased
Shares until the end of the applicable stand-off period.
V. REPURCHASE RIGHT
----------------
5.1 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 Purchased
Shares in which the Optionee has not acquired a vested interest in accordance
with the vesting provisions of paragraph 5.3 (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.
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable sixty (60)-day period specified in
paragraph 5.1. 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. To the extent one
or more certificates representing Unvested Shares may have been previously
delivered out of escrow to the Owner, then 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
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), 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.
5.3 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 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right
-8-
<PAGE>
lapses shall, however, continue to be subject to (i) the First Refusal Right of
the Corporation and its assignees under Article VI, (ii) the market stand-off
provisions of paragraph 4.4 and (iii) the Special Purchase Right under Article
VIII.
5.4 AGGREGATE VESTING LIMITATION. If the Option is exercised in more
----------------------------
than one increment so that the Optionee is a party to one or more other Stock
Purchase Agreements ("Prior Purchase Agreements") which are executed prior to
the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which the Optionee would otherwise at the time
be vested, in accordance with the vesting provisions of paragraph 5.3, had all
the Purchased Shares been acquired exclusively under this Agreement.
5.5 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 5.3) 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.
5.6 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 Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased 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 Purchased 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.
-9-
<PAGE>
VI. RIGHT OF FIRST REFUSAL
----------------------
6.1 GRANT. The Corporation is hereby granted rights of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner desires
------------------------------
to accept a bona fide third-party offer for the transfer of any or all of the
Purchased Shares (the shares subject to such offer to be hereinafter called the
"Target Shares"), Owner shall promptly (i) deliver to the Corporate Secretary of
the Corporation written notice (the "Disposition Notice") of the terms and
conditions of the offer, including the purchase price and the identity of the
third-party offeror, and (ii) provide satisfactory proof that the disposition of
the Target Shares to such third-party offeror would not be in contravention of
the provisions set forth in Articles II and IV of this Agreement.
6.3 EXERCISE OF RIGHT. The Corporation shall, for a period of forty-
-----------------
five (45) days following receipt of the Disposition Notice, have the right to
repurchase any or all of the Target Shares specified in the Disposition Notice
upon the same terms and conditions specified therein or upon terms and
conditions which do not materially vary from those specified therein. Such
right shall be exercisable by delivery of written notice (the "Exercise Notice")
to Owner prior to the expiration of the forty-five (45)-day exercise period. If
such right is exercised with respect to all the Target Shares specified in the
Disposition Notice, then the Corporation (or its assignees) shall effect the
repurchase of the Target Shares, including payment of the purchase price, not
more than ten (10) business days after delivery of the Exercise Notice; and at
such time Owner shall deliver to the Corporation the certificates representing
the Target Shares to be repurchased, each certificate to be properly endorsed
for transfer. To the extent any of the Target Shares are at the time held in
escrow under Article VII, the certificates for such shares shall automatically
be released from escrow and delivered to the Corporation for purchase. Should
the purchase price specified in the Disposition Notice be payable in property
other than cash or evidences of indebtedness, the Corporation (or its assignees)
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If the Owner and the Corporation (or its
assignees) cannot agree on such cash value within ten (10) days after the
Corporation's receipt of the Disposition Notice, the valuation shall be made by
an appraiser of recognized standing
-10-
<PAGE>
selected by the Owner and the Corporation (or its assignees) or, if they cannot
agree on an appraiser within twenty (20) days after the Corporation's receipt of
the Disposition Notice, each shall select an appraiser of recognized standing
and the two appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by the Owner and the Corporation. The closing
shall then be held on the later of (i) the tenth business day following delivery
-----
of the Exercise Notice or (ii) the tenth business day after such cash valuation
shall have been made.
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is not
---------------------
given to Owner within forty-five (45) days following the date of the
Corporation's receipt of the Disposition Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; provided,
--------
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of paragraph 2.2(a) and
(ii) the market stand-off provisions of paragraph 4.4. In the event Owner does
not effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the Corporation's First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation (or its
-------------------------
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within thirty (30) days after the date of the Disposition Notice, to
effect the sale of the Target Shares pursuant to one of the following
alternatives:
(i) sale or other disposition of all the Target Shares to the third-
party offeror identified in the Disposition Notice, but in full compliance
with the requirements of paragraph 6.4, as if the Corporation did not
exercise the First Refusal Right hereunder; or
-11-
<PAGE>
(ii) sale to the Corporation (or its assignees) of the portion of the
Target Shares which the Corporation (or its assignees) has elected to
purchase, such sale to be effected in substantial conformity with the
provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
-----------------------
(a) In the event of any stock dividend, stock split, recapitalization
or other transaction 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 which is by reason of such transaction
distributed with respect to the Purchased Shares shall be immediately subject to
the Corporation's First Refusal Right hereunder, but only to the extent the
Purchased Shares are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation in which the Corporation is not
the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to person or persons other than those who
held such securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the State in
which the Corporation is incorporated, or to create a holding company
structure,
the Corporation's First Refusal Right shall remain in full force and
effect and shall apply to the new capital stock or other property received in
exchange for the Purchased Shares in consummation of the transaction but only to
the extent the Purchased Shares are at the time covered by such right.
6.7 LAPSE. The First Refusal Right under this Article VI shall lapse
-----
and cease to have effect upon the earliest to occur of (i) the first date on
--------
which shares of the Corporation's
-12-
<PAGE>
Common Stock are held of record by more than five hundred (500) persons, (ii) a
determination is made by the Corporation's Board of Directors that a public
market exists for the outstanding shares of the Corporation's Common Stock, or
(iii) a firm commitment underwritten public offering pursuant to an effective
registration statement under the 1933 Act, covering the offer and sale of the
Corporation's Common Stock in the aggregate amount of at least $5,000,000.
However, the market stand-off provisions of paragraph 4.4 shall continue to
remain in full force and effect following the lapse of the First Refusal Right
hereunder.
VII. ESCROW
------
7.1 DEPOSIT. Upon issuance, the certificates for any Unvested Shares
-------
purchased hereunder shall be deposited in escrow with the Corporate Secretary of
the Corporation to be held in accordance with the provisions of this Article
VII. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Corporate Secretary pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with paragraph 7.3. Upon delivery of the
certificates (or other assets and securities) to the Corporate Secretary of the
Corporation, the Owner shall be issued an instrument of deposit acknowledging
the number of Unvested Shares (or other assets and securities) delivered in
escrow.
7.2 RECAPITALIZATION. All regular cash dividends on the Unvested
----------------
Shares (or other securities at the time held in escrow) shall be paid directly
to the Owner and shall not be held in escrow. However, 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 or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporate Secretary to be held in escrow under this Article
VII, but only to the extent the Unvested Shares are at the time subject to the
escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any other
-----------------
assets or securities held in escrow hereunder, shall be subject to the following
terms and conditions relating to their release from escrow or their surrender to
the Corporation for repurchase and cancellation:
-13-
<PAGE>
(i) Should the Corporation (or its assignees) elect to exercise the
Repurchase Right under Article V with respect to any Unvested Shares, then
the escrowed certificates for such Unvested Shares (together with any other
assets or securities issued with respect thereto) shall be delivered to the
Corporation concurrently with the payment to the Owner, in cash or cash
equivalent (including the cancellation of any purchase-money indebtedness),
of an amount equal to the aggregate Option Price for such Unvested Shares,
and the Owner shall cease to have any further rights or claims with respect
to such Unvested Shares (or other assets or securities attributable to such
Unvested Shares).
(ii) Should the Corporation (or its assignees) elect to exercise its
First Refusal Right under Article VI with respect to any vested Target
Shares held at the time in escrow hereunder, then the escrowed certificates
for such Target Shares (together with any other assets or securities
attributable thereto) shall, concurrently with the payment of the paragraph
6.3 purchase price for such Target Shares to the Owner, be surrendered to
the Corporation, and the Owner shall cease to have any further rights or
claims with respect to such Target Shares (or other assets or securities).
(iii) Should the Corporation (or its assignees) elect not to
---
exercise its First Refusal Right under Article VI with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Owner for
disposition in accordance with provisions of paragraph 6.4.
(iv) As the interest of the Optionee in the Unvested Shares (or any
other assets or securities attributable thereto) vests in accordance with
the provisions of Article V, the certificates for such vested shares (as
well as all other vested assets and securities) shall be released from
escrow and delivered to the Owner in accordance with the following
schedule:
a. The initial release of vested shares (or other vested
-
assets and securities) from escrow shall be effected within thirty
(30) days following the expiration of the initial twelve (12)-month
period measured from the Grant Date.
-14-
<PAGE>
b. Subsequent releases of vested shares (or other vested assets
-
and securities) from escrow shall be effected at semi-annual intervals
thereafter, with the first such semi-annual release to occur eighteen
(18) months after the Grant Date.
c. Upon the Optionee's cessation of Service, any escrowed
-
Purchased Shares (or other assets or securities) in which the Optionee
is at the time vested shall be promptly released from escrow.
d. Upon any earlier termination of the Corporation's Repurchase
-
Right in accordance with the applicable provisions of Article V, any
Purchased Shares (or other assets or securities) at the time held in
escrow hereunder shall promptly be released to the Owner as fully-
vested shares or other property.
(v) All Purchased Shares (or other assets or securities) released from
escrow in accordance with the provisions of subparagraph (iv) above shall
nevertheless remain subject to (I) the Corporation's First Refusal Right
under Article VI until such right lapses pursuant to paragraph 6.7, (II)
the market stand-off provisions of paragraph 4.4 until such provisions
terminate in accordance therewith and (III) the Special Purchase Right
under Article VIII.
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
---------------------------------------
8.1 GRANT. In connection with the dissolution of the Optionee's
-----
marriage or the legal separation of the Optionee and the Optionee's spouse, the
Corporation shall have the right (the "Special Purchase Right"), exercisable at
any time during the thirty (30)-day period following the Corporation's receipt
of the required Dissolution Notice under paragraph 8.2, to purchase from the
Optionee's spouse, in accordance with the provisions of paragraph 8.3, all or
any portion of the Purchased Shares which would otherwise be awarded to such
spouse in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Optionee shall promptly
-----------------------------
provide the Secretary of the Corporation with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the property
rights of the Optionee and the Optionee's spouse in connection with their
marital dissolution
-15-
<PAGE>
or legal separation or (ii) the execution of any contract or agreement relating
to the distribution or division of such property rights. The Dissolution Notice
shall be accompanied by a copy of the actual decree of dissolution or settlement
agreement between the Optionee and the Optionee's spouse which provides for the
award to the spouse of one or more Purchased Shares in settlement of any
community property or other marital property rights such spouse may have in such
shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The Special Purchase Right
----------------------------------
shall be exercisable by delivery of written notice (the "Purchase Notice") to
the Optionee and the Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice), and the fair market value to be paid for such Purchased Shares. The
Optionee (or the Optionee's spouse, to the extent such spouse has physical
possession of the Purchased Shares) shall, prior to the close of business on the
date specified for the purchase, deliver to the Corporate Secretary of the
Corporation the certificates representing the shares to be purchased, each
certificate to be properly endorsed for transfer. To the extent any of the
shares to be purchased by the Corporation are at the time held in escrow under
Article VII, the certificates for such shares shall be promptly delivered out of
escrow to the Corporation. The Corporation shall, concurrently with the receipt
of the stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the fair market value specified for such shares
in the Purchase Notice.
If the Optionee's spouse does not agree with the fair market value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two appraisers shall
designate a third appraiser of recognized standing whose appraisal shall be
determinative of such value. The cost of the appraisal shall be shared equally
by the Corporation and the Optionee's spouse. The closing shall then be held on
the fifth business day following the completion of such appraisal; provided,
--------
however, that if the appraised value is more than fifteen percent (15%) greater
than the fair market value specified for the shares in the Purchase Notice, the
Corporation shall have the right, exercisable prior to the expiration of such
five (5)-business-day period, to rescind the exercise of the
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<PAGE>
Special Purchase Right and thereby revoke its election to purchase the shares
awarded to the spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII shall
-----
lapse and cease to have effect upon the earlier to occur of (i) the first date
-------
on which the First Refusal Right under Article VI lapses or (ii) the expiration
of the thirty (30)-day exercise period specified in paragraph 8.3, to the extent
the Special Purchase Right is not timely exercised in accordance with such
paragraph.
IX. GENERAL PROVISIONS
------------------
9.1 ASSIGNMENT. The Corporation may assign its Repurchase Right
----------
under Article V, its First Refusal Right under Article VI and/or its Special
Purchase Right under Article VIII to any person or entity selected by the
Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
If the assignee of the Repurchase Right is other than a one hundred
percent (100%) owned subsidiary corporation of the Corporation or the parent
corporation owning one hundred percent (100%) of the Corporation, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the fair
market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Unvested Shares thereunder.
9.2 DEFINITIONS. For purposes of this Agreement, the following
-----------
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a parent corporation of the Corporation, provided each
such corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
(ii) Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a subsidiary of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total
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<PAGE>
combined voting power of all classes of stock in one of the other
corporations in such chain.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon the Optionee any right to continue in the Service
of the Corporation (or any parent or subsidiary corporation of the Corporation
employing or retaining Optionee) 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 corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
-------
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
9.5 NO WAIVER. The failure of the Corporation (or its assignees) in
---------
any instance to exercise the Repurchase Right granted under Article V, or the
failure of the Corporation (or its assignees) in any instance to exercise the
First Refusal Right granted under Article VI, or the failure of the Corporation
(or its assignees) in any instance to exercise the Special Purchase Right
granted under Article VIII shall not constitute a waiver of any other repurchase
rights and/or rights of first refusal that may subsequently arise under the
provisions of this Agreement or any other agreement between the Corporation and
the Optionee or the Optionee's spouse. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its assignees)
----------------------
shall make available, at the time and place and in the amount and form provided
in this Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement), and such
shares shall be deemed purchased in accordance with the applicable provisions
hereof and the Corporation (or its assignees) shall be deemed the owner and
holder of such shares,
-18-
<PAGE>
whether or not the certificates therefor have been delivered as required by this
Agreement.
X. MISCELLANEOUS PROVISIONS
------------------------
10.1 OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
--------------------
additional action and execute whatever additional documents the Corporation may
in its judgment deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either the Optionee or the
Purchased Shares pursuant to the express provisions of this Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State without resort
to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and the Optionee and the Optionee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
10.6 POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
-----------------
his or her true and lawful attorney in fact, for him or her and in his or her
name, place and stead, and for his or her use and benefit, to agree to any
amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all
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<PAGE>
that Optionee shall lawfully do and cause to be done by virtue of this power of
attorney.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
Corsair Communications, INC.
By:____________________________________________
Title:_________________________________________
Address: _______________________________________________
_______________________________________________
_______________________________________________
Optionee */
-
Address: ________________________________________________
________________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, 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: ________________________________________________
________________________________________________
__________________
*/ I have executed the Section 83(b) election that was attached hereto as an
- -
Exhibit. As set forth in Article III, I understand that I, and not the
---
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Corsair Communications, Inc. (the "Corporation"),
________________________ (__________) shares of the Common Stock of the
Corporation standing in his\her name on the books of the Corporation represented
by Certificate No. ___________________ and do hereby irrevocably constitute and
appoint _______________________________ as Attorney to transfer the said stock
on the books of the Corporation with full power of substitution in the premises.
Dated: ________________
Signature ____________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
<PAGE>
REPURCHASE RIGHTS
-----------------
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
____________ shares of the common stock of Corsair Communications, Inc.
(3) The property was issued on _____________, 19___.
(4) The taxable year in which the election is being made is the calendar year
19__.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of annual and monthly
installments over a four year period ending on ____________, 19__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $________ per share.
(7) The amount paid for such property is $_______ per share.
(8) A copy of this statement was furnished to Corsair Communications, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed as of: _______________________.
__________________________ ________________________________
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
EXHIBIT III-1
<PAGE>
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL
REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON EXERCISE OF AN
INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN INCENTIVE
STOCK OPTION.
<PAGE>
EXHIBIT C
1995 STOCK OPTION/STOCK ISSUANCE PLAN
C-1
<PAGE>
CORSAIR COMMUNICATIONS, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE I
GENERAL PROVISIONS
------------------
1. PURPOSE
This 1995 Stock Option/Stock Issuance Plan ("Plan") is intended to
promote the interests of Corsair Communications, Inc., a Delaware corporation
(the "Corporation"), by providing individuals who render valuable services to
the Corporation (or any Parent or Subsidiary) with the opportunity to acquire
ownership interests in the Corporation so as to encourage them to continue to
render services to the Corporation (or any Parent or Subsidiary).
2. STRUCTURE OF THE PLAN; TERMINOLOGY
This Plan has two separate components: the Option Grant Program set
forth in Article II and the Stock Issuance Program set forth in Article III.
For the purposes of this Plan, any capitalized term shall have the meaning
assigned under Article IV, Section 8 hereof.
3. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered either the Board or a committee
of two (2) or more Board members appointed by the Board to which the Board has
delegated administrative functions under the Plan (the "Plan Administrator").
Members of any committee to which the Board has delegated any administrative
functions shall serve for such terms as the Board shall determine and subject to
the Board's right of removal. All delegations of authority to any committee
shall be and remain revocable by the Board.
B. The Plan Administrator shall have full power and authority to
implement, interpret and administer the Plan, to establish all such rules and
regulations as it deems appropriate, and to make such determinations under the
Plan and any outstanding option grants or share issuances as it deems necessary
or advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any outstanding option or share
issuance.
<PAGE>
4. SELECTION OF OPTIONEES AND PARTICIPANTS
A. The persons eligible to receive share issuances under the Stock
Issuance Program and/or option grants pursuant to the Option Grant Program are
limited to Employees; non-employee members of the Board of the Corporation (or
of any Parent or Subsidiary); and consultants and other independent contractors
who provide valuable services to the Corporation (or of any Parent or
Subsidiary).
B. The Plan Administrator shall have the absolute discretion and
authority to determine, subject to the provisions of this Plan, the terms of any
option grant or share issuance. In addition to any other matters over which the
Plan Administrator has discretion hereunder, the Plan Administrator shall
determine which, if any, eligible individuals will be granted options in
accordance with Article II of the Plan and which will be issued shares in
accordance with Article III of the Plan. With respect to option grants made
under the Plan, the Plan Administrator will determine the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable, the vesting schedule (if any)
applicable to shares issued pursuant to the granted options, and the maximum
term for which the option may remain outstanding. With respect to share
issuances under the Stock Issuance Program, in addition to other matters over
which the Plan Administrator has discretion hereunder, the Plan Administrator
will determine the number of shares to be issued to each issuee, the vesting
schedule (if any) applicable to the issued shares, and the consideration to be
paid by the individual for such shares.
C. Common Stock issuable under the Plan, whether under the Option
Grant Program or the Stock Issuance Program, may be subject to such restrictions
on transfer, repurchase rights or other restrictions as may be imposed by the
Plan Administrator and set forth in the documents governing such option or
issuance.
5. STOCK SUBJECT TO THE PLAN
A. Common Stock of the Corporation will be issued under the Plan.
The maximum number of shares of Common Stock which may be issued over the term
of the Plan shall not exceed 2,030,000 shares, subject to adjustment from time
to time in accordance with the provisions of this Section 5 of Article I.
B. Shares reserved for issuance under granted options but not in
fact issued pursuant to options granted under the Plan due to the expiration or
termination of the option or the cancellation of the option in accordance with
Section 3 of Article II, will again become available for issuance under the
Plan. Shares actually issued under the Plan, whether pursuant to the exercise
of an option under the Option Grant Program or a stock issuance pursuant to the
Stock Issuance Program, which are
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<PAGE>
subsequently repurchased by the Corporation will not become available for future
issuance.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the aggregate number and/or class of shares issuable under
the Plan and (ii) the aggregate number and/or class of shares and the option
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive.
6. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the rights and obligations of
an optionee with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any issuee with respect to Common Stock issued
under the Plan prior to such action unless such optionee or issuee consents to
such amendment. In addition, the Board shall not, without the approval of the
Corporation's shareholders, amend the Plan so as to (i) increase the maximum
number of shares issuable under the Plan (except for adjustments required under
Article I, Section 5.C), (ii) materially increase the benefits accruing to
individuals who participate in the Plan, or (iii) materially modify the
eligibility requirements for participation in the Plan.
B. Options to purchase shares of Common Stock may be granted under
the Option Grant Program and shares of Common Stock may be issued under the
Stock Issuance Program, which are in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
--------
issued under the Option Grant Program or the Stock Issuance Program are held in
escrow until shareholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan is
obtained. If such approval is not obtained within twelve (12) months after the
date the initial excess issuances are made, then (I) any unexercised options
representing such excess shall terminate and cease to be exercisable and (II)
the Corporation shall promptly refund to the optionees and issuees the option or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
7. EFFECTIVE DATE AND TERM OF PLAN
-3-
<PAGE>
A. The Plan shall become effective when adopted by the Board.
Options to purchase shares of Common Stock may be granted under the Option Grant
Program and shares of Common Stock may be issued under the Stock Issuance
Program from and after the effective date, provided any shares actually issued
--------
under the Plan are held in escrow until shareholder approval of the Plan is
obtained. If such approval is not obtained within twelve (12) months after the
effective date, then (I) all options shall terminate and cease to be
exercisable, (II) the Corporation shall promptly refund to the optionees and
issuees the option or purchase price paid for any shares issued under the Plan,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding, and (III) this Plan shall
terminate in its entirety.
B. Unless sooner terminated by reason of Section 7A of this Article
I, the Plan shall terminate upon the earlier of (i) March 23, 2005, or (ii) the
-------
date on which all shares available for issuance under the Plan have been issued
pursuant to the exercise of options granted under Article II or the issuance of
shares under Article III. The termination of the Plan shall have no effect on
any outstanding options under or shares issued and outstanding under the Plan,
and such securities shall thereafter continue to have force and effect in
accordance with the provisions of the agreements evidencing such options and
issuances.
8. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon any person 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)
or of the optionee or the issuee, which rights are hereby expressly reserved by
each, to terminate Service of the optionee or issuee at any time for any reason
whatsoever, with or without cause or to engage in any Corporate Transaction.
-4-
<PAGE>
ARTICLE II
OPTION GRANT PROGRAM
--------------------
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or Non-Statutory Options except that individuals who
are not Employees may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
--------
with the terms and conditions of Sections 1 and 3 of this Article II and each
instrument evidencing an Incentive Option shall, in addition, comply with the
provisions of Section 2 of this Article II.
A. OPTION PRICE.
------------
(I) The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than eighty-five percent (85%) of the Fair Market Value of a share of Common
Stock on the date of the option grant.
(II) The option price per share shall become immediately due upon
exercise of the option and shall, subject to the provisions of Article IV,
Section 1 and the agreement evidencing such grant, be payable in cash or check
drawn to the Corporation's order. Notwithstanding the above, should the
Corporation's outstanding Common Stock be registered under Section 12(g) of the
1934 Act, at the time the option is exercised, then the option price may also be
paid as follows:
- in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value; or
- through a special sale and remittance procedure pursuant to
which the optionee provides irrevocable written instructions (I) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, an amount sufficient to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and
State income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (II) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
-5-
<PAGE>
Except to the extent such sale and remittance procedure is utilized, payment of
the option price must occur at the time the option is exercised.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
----------------------------
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement evidencing such option. However, no option
granted under the Plan shall have a term in excess of ten (10) years from the
grant date.
C. NO ASSIGNMENT. During the lifetime of the optionee, the option
-------------
shall be exercisable only by the optionee and shall not be assignable or
transferable by the optionee otherwise than by will or by the laws of descent
and distribution following the optionee's death.
D. TERMINATION OF SERVICE. The following provisions shall govern
----------------------
the exercise period applicable to any options held by the optionee at the time
of cessation of Service or death:
(I) Should the optionee cease to remain in Service for any
reason other than death or Permanent Disability, then the period during which
each outstanding option held by such optionee is to remain exercisable shall be
limited to the three (3)-month period following the date of such cessation of
Service.
(II) Should such Service terminate by reason of Permanent
Disability or should the optionee die while holding one or more outstanding
options, then the period during which each such option is to remain exercisable
shall be limited to the twelve (12)-month period following the date of the
optionee's cessation of Service or death. During the limited exercise period
following the optionee's death, the option may be exercised by the personal
representative of the optionee's estate or by the person or persons to whom the
option is transferred pursuant to the optionee's will or in accordance with the
laws of descent and distribution.
(III) The Plan Administrator shall have full power and authority
to extend (either at the time the option is granted or at any time while the
option remains outstanding) the period of time for which the option is to remain
exercisable following the optionee's cessation of Service, from the limited
period otherwise applicable under subsection 1C of this Article II, to such
greater period of time as the Plan Administrator may deem appropriate under the
circumstances.
(IV) Notwithstanding the above no option shall be exercisable
after the specified expiration date of the option term.
(V) Each such option shall, during the applicable limited
exercise period, be exercisable only with
-6-
<PAGE>
respect to the shares for which the option was exercisable on the date of the
optionee's cessation of Service.
E. SHAREHOLDER RIGHTS. An optionee shall not have rights as a
------------------
shareholder with respect to any shares subject to an option until such optionee
shall have exercised the option and paid the option price.
2. INCENTIVE OPTIONS
All provisions of the Plan shall be applicable to Incentive Options
granted hereunder and, in addition, the terms and conditions specified in this
Section 2 shall be applicable to Incentive Options granted under the Plan.
Options which are specifically designated as Non-Statutory Options when issued
under the Plan shall not be subject to such terms and conditions set forth
---
herein.
A. OPTION PRICE.
------------
(I) The option price per share of the Common Stock subject to
an Incentive Option shall in no event be less than one hundred percent (100%) of
the Fair Market Value of a share of Common Stock on the grant date.
(II) If the individual to whom the option is granted is a 10%
Shareholder, then the option price per share shall not be less than one hundred
ten percent (110%) of the Fair Market Value of the Common Stock on the date of
the option grant.
B. DOLLAR LIMITATION. The aggregate Fair Market Value (determined
-----------------
as of the date or dates of grant) of Common Stock which first becomes
exercisable during any one calendar year under Incentive Options granted to any
Employee under any option plan of the Corporation (or any parent or subsidiary
corporation) shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds options which become exercisable
in the same calendar year, the foregoing limitation on such options shall be
applied on the basis of the order in which such options are granted. Any
options in excess of such limitation shall automatically be treated as Non-
statutory Options.
C. TERM OF OPTION FOR 10% SHAREHOLDERS. No option granted to a 10%
-----------------------------------
Shareholder shall have a term in excess of five (5) years from the grant date.
3. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or a
different numbers of shares of Common Stock but having an option price per share
-7-
<PAGE>
established at the time of such cancellation and regrant in accordance with the
provisions of this Plan.
ARTICLE III
STOCK ISSUANCE PROGRAM
----------------------
1. STOCK ISSUANCES
Shares of Common Stock shall be issuable under the Stock Issuance
Program through direct and immediate issuances without any intervening stock
option grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") in a form acceptable to the Plan Administrator,
which form shall be in compliance with the provisions of the Plan.
2. ISSUE PRICE
The purchase price per share shall be fixed by the Plan Administrator,
but in no event shall it be less than eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock at the time of issuance.
3. PAYMENT OF ISSUE PRICE
Except as provided in Article IV, Section 1, shares shall be issued
only in exchange for cash, a check payable to the Corporation, for services
previously rendered to the Corporation (or any Parent or Subsidiary) or such
other lawful consideration as may be acceptable to the Plan Administrator.
ARTICLE IV
MISCELLANEOUS
-------------
1. LOANS
A. The Plan Administrator may assist any optionee or issuee (other
than a non-employee director) in the exercise of one or more options granted to
such optionee under the Option Grant Program or the purchase of one or more
shares to be issued to such issuee under the Stock Issuance Program, including
the satisfaction of any Federal and State income and employment tax obligations
arising therefrom, by (i) authorizing the extension of a loan from the
Corporation to such optionee or issuee, or (ii) permitting the optionee or
issuee to pay the option price or purchase price for the purchased Common Stock
in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
authorized with or without security or collateral. However, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events the maximum
-8-
<PAGE>
credit available to each optionee or issuee may not exceed the sum of (i) the
---
aggregate option price or purchase price payable for the purchased shares plus
(ii) any Federal and State income and employment tax liability incurred by the
optionee or issuee in connection with such exercise or purchase.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.
2. VESTING OF SHARES AND REPURCHASE RIGHTS
A. The Plan Administrator, in its absolute discretion, may issue
fully and immediately vested shares of Common Stock, or the Plan Administrator
may impose such vesting requirements as it deems appropriate with the
Corporation retaining a right to repurchase any unvested shares. The terms of
the vesting schedule and of the Corporation's repurchase rights shall be as
determined by the Plan Administrator and set forth in the agreement governing
such issuance.
B. Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash dividend) which the
holder of unvested Common Stock may have the right to receive by reason of a
stock dividend, stock split, reclassification or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting and repurchase
limitations applicable to the unvested Common Stock with respect to which it was
paid or arose, and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.
C. No person to whom shares of Common Stock have been issued
pursuant to the Plan may transfer any such shares which have not vested.
Notwithstanding the above, the issuee shall have the right to make a gift of
unvested shares acquired under the Plan to his/her spouse, parents or issue or
to a trust established for such spouse, parents or issue, provided the
transferee of such shares delivers to the Corporation a written agreement to be
bound by all the provisions of the Plan and the Issuance or Stock Purchase
Agreement executed by the issuee at the time of his/her acquisition of the
gifted shares.
3. MARKET STAND-OFF AGREEMENTS
The Plan Administrator may require each person to whom any shares are
issued under this Plan to enter into an agreement which restricts or prohibits
the sale of any stock of the Corporation by such person for a reasonable period
of time following a public offering of any shares of stock by the Corporation.
-9-
<PAGE>
4. RIGHT OF FIRST REFUSAL
Until such time as the Corporation's outstanding shares of Common
Stock are first registered under Section 12(g) of the 1934 Act, the Plan
Administrator may subject any shares issued pursuant to the Plan to a right of
first refusal with respect to any proposed disposition of such shares other than
a transfer permitted by Section 2.C of this Article IV. Such right of first
refusal shall be exercisable by the Corporation (or its assignees) in accordance
with the terms and conditions specified in the instrument governing the issuance
of such shares.
5. SECURITIES LAWS; LEGENDS
A. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until the Corporation shall have determined
that there has been full and adequate compliance with all applicable
requirements of the Federal and state securities laws and all other applicable
legal and regulatory requirements.
B. Shares issued under the Plan shall bear such legends as the Plan
Administrator deems necessary or appropriate, including such restrictive legends
as the Plan Administrator shall require to reflect the terms of any agreement
between the issuee and the Corporation.
6. SHAREHOLDER RIGHTS
Subject to the rights of the Corporation set forth herein or in any
other agreement entered into between the Corporation and an issuee of shares
under the Plan, each person to whom shares of Common Stock have been issued
under the Plan shall have all the rights of a shareholder with respect to those
shares whether or not his/her interest in such shares is vested. Accordingly,
the issuee shall have the right to vote such shares and to receive any cash
dividends or other distributions paid or made with respect to such shares.
7. ACCELERATION
The Plan Administrator may, in its discretion, provide for the
automatic acceleration upon a Change of Control and\or Corporate Transaction of
the time at which any option will become exercisable or for the lapse of any
repurchase right tied to vesting by including a provision to such effect in the
documents evidencing the rights of the optionee or issuee.
8. DEFINITIONS
The following definitions shall be in effect under this Plan:
-10-
<PAGE>
A. BOARD shall mean the Board of Directors of the Corporation.
-----
B. COMMON STOCK shall mean the common stock of the Corporation.
------------
C. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) any transaction or series of related transactions
(including, without limitation, any reorganization, merger or
consolidation) in which more than fifty percent (50%) of the Corporation's
outstanding voting stock is transferred to a person or persons different
from those who held the stock immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
D. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation or any Parent or Subsidiary, 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.
E. FAIR MARKET VALUE per share of Common Stock on any relevant date
-----------------
under the Plan shall be the value determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or admitted
to trading on any Stock Exchange but is traded on the NASDAQ National
Market System, the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers through the NASDAQ National
Market System or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(ii) If the Common Stock is at the time listed or admitted to
trading on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
-11-
<PAGE>
(iii) If the Common Stock is at the time neither listed nor admitted
to trading on any Stock Exchange nor traded on the NASDAQ National Market
System, then such Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
F. INCENTIVE OPTION shall mean a stock option which satisfies
----------------
the requirements of Internal Revenue Code Section 422.
G. NON-STATUTORY OPTION shall mean a stock option not intended
--------------------
to meet the requirements of Code Section 422.
H. PARENT shall mean any corporation (other than the
------
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
I. PERMANENT DISABILITY shall have the meaning assigned to such
--------------------
term in Code Section 22(e)(3).
J. SERVICE shall mean the provision of services to the
-------
Corporation or any Parent or Subsidiary by an individual in the capacity of an
Employee, a non-employee member of the Board or a consultant or independent
contractor.
K. SUBSIDIARY shall mean each corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
L. 10% STOCKHOLDER shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation.
9. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance
of shares of Common Stock under the Plan shall be used for general corporate
purposes.
10. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise
of any options granted under Article II or the purchase of any shares issued
under Article III shall be subject to the
-12-
<PAGE>
satisfaction of all applicable Federal, State and local income and employment
tax withholding requirements.
11. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the
Option Grant Program, the issuance of any shares under the Stock Issuance
Program, and the issuance of Common Stock upon the exercise of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
-13-
<PAGE>
EXHIBIT 10.12
CORSAIR COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
--------
A. The Board of Directors of the Corporation has adopted the Corsair
Communications, Inc. 1995 Stock Option/Stock Issuance Plan (the "Plan") for the
purpose of attracting and retaining the services of persons who contribute to
the growth and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and this
Agreement is executed pursuant to and is intended to carry out the purposes of
the Plan.
AGREEMENT
---------
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 Corporation hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that number
of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
-----------
years measured from the Grant Date and shall expire at the close of business on
the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
-----------------------
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
-----------------
in part at any time prior to the time the Plan is approved by the Corporation's
shareholders in accordance with Paragraph 17. Provided such shareholder
approval is obtained, this option shall thereupon become exercisable for the
<PAGE>
Option Shares in one or more installments as is specified in the Grant Notice.
As the option becomes exercisable in one or more installments, the installments
shall accumulate and the option shall remain exercisable for such installments
until the Expiration Date or the sooner termination of the option term under
Paragraph 5 or Paragraph 6 of this Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified
--------------------------------------
in Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced to
a three (3)-month period commencing with the date of such cessation of
Service, but in no event shall this option be exercisable at any time after
the Expiration Date. Upon the expiration of such three (3)-month period or
(if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(ii) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the law of descent and distribution shall have the
right to exercise this option. Such right shall lapse and this option shall
cease to be exercisable upon the earlier of (A) the expiration of the
-------
twelve (12) month period measured from the date of Optionee's death or (B)
the Expiration Date. Upon the expiration of such twelve (12) month period
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service while this option is outstanding, then
the Optionee shall have a period of twelve (12) months (commencing with the
date of such cessation of Service) during which to exercise this option,
but in no event shall this option be exercisable at any time after the
Expiration Date. Optionee shall be deemed to be permanently disabled if
Optionee is unable to engage in any substantial gainful activity for the
Corporation or the parent or subsidiary corporation retaining his/her
services by reason of any medically determinable physical or mental
impairment, which can be expected to
-2-
<PAGE>
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months. Upon the expiration
of such limited period of exercisability or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be outstanding.
(iv) During the limited period of exercisability applicable under
subparagraph (i), (ii) or (iii) above, this option may be exercised for any
or all of the Option Shares for which this option is, at the time of the
Optionee's cessation of Service, exercisable in accordance with the
exercise schedule specified in the Grant Notice and the provisions of
Paragraph 6 of this Agreement.
(v) For purposes of this Paragraph 5 and for all other purposes
under this Agreement:
A. 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.
B. The Optionee shall be deemed to be an EMPLOYEE of the
Corporation and to continue in the Corporation's employ for so long as the
Optionee remains in the employ of the Corporation or one or more of its
parent or subsidiary corporations, 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.
C. A corporation shall be considered to be a SUBSIDIARY
corporation of the Corporation if it is a member of an unbroken chain of
corporations beginning with the Corporation, provided each such corporation
in the chain (other than the last corporation) owns, at the time of
determination, stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
D. A corporation shall be considered to be a PARENT corporation
of the Corporation if it is a member of an unbroken chain ending with the
Corporation, provided each such corporation in the chain (other than the
Corporation) owns, at the time of determination, stock possessing 50% or
more of the
-3-
<PAGE>
total combined voting power of all classes of stock in one of the other
corporations in such chain.
6. SPECIAL TERMINATION OF OPTION.
-----------------------------
A. This Option, to the extent not previously exercised, shall
terminate and cease to be exercisable upon the consummation of one or more of
the following shareholder-approved transactions (a "Corporate Transaction")
unless this Option is expressly assumed by the successor corporation or parent
thereof:
(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.
B. 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.
7. ADJUSTMENT IN OPTION SHARES.
---------------------------
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the total number of Option Shares subject to this option,
(ii) the number of Option Shares for which this option is to be exercisable from
and after each installment date specified in the Grant Notice and (iii) the
Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately
-4-
<PAGE>
prior to such Corporate Transaction, 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.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall not
----------------------------
have any of the rights of a shareholder with respect to the Option Shares until
such individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
---------------------------
A. In order to exercise this option with respect to all or any part
of the Option 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 Corporation a
stock purchase agreement (the "Purchase Agreement") in substantially the
form of Exhibit B to the Grant Notice.
(ii) Pay the aggregate Option Price for the purchased shares in
one or more forms approved under the Plan.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option, if other than Optionee, have
the right to exercise this option.
B. Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
(i) in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at fair market value on the
Exercise Date; or
(ii) through a special sale and remittance procedure pursuant to
which the Optionee is to provide irrevocable written instructions (a) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares plus all applicable
-5-
<PAGE>
Federal and State income and employment taxes required to be withheld by
the Corporation by reason of such purchase and (b) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
C. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ National Market
System, the fair market value shall be the closing selling price of one
share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers through its NASDAQ system or
any successor system. If there is no closing selling price for the Common
Stock on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of
fair market value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-
counter market, or if the Plan Administrator determines that the value
determined pursuant to subparagraphs (i) and (ii) above does not accurately
reflect the fair market value of the Common Stock, then such fair market
value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
-6-
<PAGE>
D. As soon after the Exercise Date as practical, the Corporation
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, with the appropriate legends affixed thereto.
E. In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
------------------------------------
A. The exercise of this option and the issuance of Option Shares upon
such exercise shall be subject to compliance by the Corporation 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 Corporation's Common
Stock may be listed at the time of such exercise and issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
----------------------
in Paragraph 3 or 6, 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
Corporation.
12. LIABILITY OF CORPORATION.
------------------------
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
-7-
<PAGE>
13. NOTICES. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal 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 the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
14. LOANS. The Plan Administrator may, in its absolute discretion
-----
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby
------------
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. GOVERNING LAW. The interpretation, performance, and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. The grant of this option is subject to
--------------------
approval of the Plan by the Corporation's shareholders within twelve (12) months
after the adoption of the Plan by the Board of Directors. Notwithstanding any
-------------------
provision of this Agreement to the contrary, this option may not be exercised in
- --------------------------------------------------------------------------------
whole or in part until such shareholder approval is obtained. In the event that
- ------------------------------------------------------------
such shareholder approval is not obtained, then this option shall thereupon
terminate in its entirety and the Optionee shall have no further rights to
acquire any Option Shares hereunder.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
-------------------------------------------------- ------
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
-8-
<PAGE>
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
B. Should this option be designated as immediately exercisable in the
Grant Notice, then this option shall not become exercisable in the calendar year
in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
C. Should this option be designated as exercisable in installments in
the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Corporation's Common Stock for which
such installment first becomes exercisable hereunder will, when added to the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any parent or subsidiary
corporation) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
19. WITHHOLDING. Optionee hereby agrees to make appropriate
-----------
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
-9-
<PAGE>
EXHIBIT 10.13
IMMEDIATELY EXERCISABLE
REPURCHASE RIGHT
RIGHT OF FIRST REFUSAL
----------------------
CORSAIR COMMUNICATIONS, INC.
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made as of this ___ day of _________, 19__, by and among
Corsair Communications, Inc., a Delaware corporation (the "Corporation"),
_________________________, the holder of a stock option (the "Optionee") under
the Corporation's 1995 Stock Option/Stock Issuance Plan and
_______________________, the Optionee's spouse.
I. EXERCISE OF OPTION
------------------
1.1 EXERCISE. Optionee hereby purchases _____________ shares
--------
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on _____________, 19___
("Grant Date") to purchase up to ____________ shares of the Common Stock ("Total
Purchasable Shares") under the Corporation's 1995 Stock Option/Stock Issuance
Plan (the "Plan") at an option price of $__________ per share ("Option Price").
1.2 PAYMENT. Concurrently with the delivery of this Agreement to the
-------
Corporate Secretary of the Corporation, Optionee shall pay the Option Price for
the Purchased Shares in accordance with the provisions of the agreement between
the Corporation and Optionee evidencing the Option (the "Option Agreement") and
shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise, together with a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
1.3 DELIVERY OF CERTIFICATES. The certificates representing the
------------------------
Purchased Shares hereunder shall be held in escrow by the Corporate Secretary of
the Corporation in accordance with the provisions of Article VII.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation actually
------------------
exercises its repurchase right, rights of first refusal or special purchase
right under this Agreement, Optionee (or any successor in interest) shall have
all the rights of a shareholder (including voting and dividend rights) with
respect to the Purchased Shares, including the Purchased Shares
<PAGE>
held in escrow under Article VII, subject, however, to the transfer restrictions
of Article IV.
II. SECURITIES LAW COMPLIANCE
-------------------------
2.1 EXEMPTION FROM REGISTRATION. The Purchased Shares have not been
---------------------------
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form of Exhibit C to the Notice of Grant of Stock Option (the "Grant
Notice") accompanying the Option Agreement.
2.2 RESTRICTED SECURITIES.
---------------------
A. Optionee hereby confirms that Optionee has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchased Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is prepared
to hold the Purchased Shares for an indefinite period and that Optionee is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period immediately
following the date on which the Corporation first becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Purchased Shares, to the extent vested under Article V, may
be sold (without registration) pursuant to the applicable requirements of Rule
144. If Optionee is at the time of such sale an affiliate of the Corporation
for purposes of Rule 144 or was such an affiliate during the preceding three (3)
months, then the sale must comply with all the requirements of Rule 144
(including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two (2)-year holding period requirement
of the Rule will not be applicable. If Optionee is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will be
applicable to the sale.
-2-
<PAGE>
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation (nor was such an affiliate during the
preceding three (3) months), sell the Purchased Shares (without registration)
pursuant to paragraph (k) of Rule 144 after the Purchased Shares have been held
for a period of three (3) years following the payment in cash of the Option
Price for such shares.
2.3 DISPOSITION OF SHARES. Optionee hereby agrees that Optionee
---------------------
shall make no disposition of the Purchased Shares (other than a permitted
transfer under paragraph 4.1) unless and until there is compliance with all of
the following requirements:
(a) Optionee shall have notified the Corporation of the proposed
disposition and provided a written summary of the terms and conditions of
the proposed disposition.
(b) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (i)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
(d) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Purchased Shares pursuant to the provisions
of the Commissioner Rules identified in paragraph 2.5.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Article II nor (ii) to treat as the owner of the Purchased
---
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
2.4 RESTRICTIVE LEGENDS. In order to reflect the restrictions on
-------------------
disposition of the Purchased Shares, the stock
-3-
<PAGE>
certificates for the Purchased Shares will be endorsed with restrictive legends,
including one or more of the following legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action' letter of the Securities and
Exchange Commission with respect to such sale or offer, or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement dated
____________, 19___ between the Corporation and the registered holder of the
shares (or the predecessor in interest to the shares). Such agreement grants
certain repurchase rights and rights of first refusal to the Corporation (or its
assignees) upon the sale, assignment, transfer, encumbrance or other disposition
of the Corporation's shares or upon termination of service with the Corporation.
The Corporation will upon written request furnish a copy of such agreement to
the holder hereof without charge."
III. SPECIAL TAX ELECTION
--------------------
3.1 SECTION 83(B) ELECTION APPLICABLE TO THE EXERCISE OF A NON-
----------------------------------------------------------
STATUTORY STOCK OPTION. If the Purchased Shares are acquired hereunder pursuant
- ----------------------
to the exercise of a non-statutory stock option, as specified in the Grant
--------------------------
Notice, then the Optionee understands that under Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), the excess of the fair market
value of the Purchased Shares on the date any forfeiture restrictions applicable
to such shares lapse over the Option Price paid for such shares will be
reportable as ordinary income on such lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. Optionee understands that he/she may elect under Section
83(b) of the Code to be taxed at the time the Purchased Shares are acquired
hereunder, rather than when and as such Purchased Shares cease to be subject to
such forfeiture restrictions. Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement. Even
if the fair market value of the Purchased Shares at the date of this Agreement
equals the Option Price paid (and thus no tax is payable), the election must be
-4-
<PAGE>
made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT II HERETO. OPTIONEE UNDERSTANDS THAT FAILURE TO
MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE RESTRICTIONS
LAPSE.
3.2 CONDITIONAL SECTION 83(B) ELECTION APPLICABLE TO THE EXERCISE
-------------------------------------------------------------
OF AN INCENTIVE STOCK OPTION. If the Purchased Shares are acquired hereunder
- ----------------------------
pursuant to the exercise of an incentive stock option under the Federal tax
----------------------
laws, as specified in the Grant Notice, then the following tax principles shall
be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
B. The excess of (i) the fair market value of the Purchased
Shares on the date the Option is exercised or (if later) on the date any
forfeiture restrictions applicable to the Purchased Shares lapse over (ii)
the Option Price paid for the Purchased Shares will be includible in the
Optionee's taxable income for alternative minimum tax purposes.
C. If the Optionee makes a disqualifying disposition of the
Purchased Shares, then the Optionee will recognize ordinary income in the
year of such disposition equal in amount to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised or
(if later) on the date any forfeiture restrictions applicable to the
Purchased Shares lapse over (ii) the Option Price paid for the Purchased
Shares. Any additional gain recognized upon the disqualifying disposition
will be either short-term or long-term capital gain depending upon the
period for which the Purchased Shares are held prior to the disposition.
D. For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase the
Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. The term "disqualifying disposition" means any sale or
other disposition /1/ of the
-
_____________________
/1/ Generally, a disposition of shares purchased under an incentive stock
-
option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into
-5-
<PAGE>
Purchased Shares within two (2) years after the Grant Date or within one
(1) year after the execution date of this Agreement.
E. In the absence of final Treasury Regulations relating to
incentive stock options, it is not certain whether the Optionee may, in
connection with the exercise of the Option for any Purchased Shares at the
time subject to forfeiture restrictions, file a protective election under
Section 83(b) of the Code which would limit (I) the Optionee's alternative
minimum taxable income upon exercise and (II) the Optionee's ordinary
income upon a disqualifying disposition, to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised
over (ii) the Option Price paid for the Purchased Shares. THE APPROPRIATE
FORM FOR MAKING SUCH A PROTECTIVE ELECTION IS ATTACHED AS EXHIBIT II TO
THIS AGREEMENT AND MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN
THIRTY (30) DAYS AFTER THE DATE OF THIS AGREEMENT. HOWEVER, SUCH ELECTION
----------------------
IF PROPERLY FILED WILL ONLY BE ALLOWED TO THE EXTENT THE FINAL TREASURY
-----------------------------------------------------------------------
REGULATIONS PERMIT SUCH A PROTECTIVE ELECTION.
---------------------------------------------
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE
RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER
SECTION 83(B), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON HIS/HER BEHALF. This filing should be made by registered
or certified mail, return receipt requested, and Optionee must retain two (2)
copies of the completed form for filing with his or her State and Federal tax
returns for the current tax year and an additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
---------------------
4.1 RESTRICTION ON TRANSFER. Optionee shall not transfer, assign,
-----------------------
encumber or otherwise dispose of any of the Purchased Shares which are subject
to the Corporation's Repur chase Right under Article V. In addition, Purchased
Shares which are released from the Repurchase Right shall not be transferred,
assigned, encumbered or otherwise made the subject of disposition in
contravention of the Corporation's First Refusal Right under Article VI. Such
restrictions on transfer, however, shall not be
---
_______________________
joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
-6-
<PAGE>
applicable to (i) a gratuitous transfer of the Purchased Shares made to the
Optionee's spouse or issue, including adopted children, or to a trust for the
exclusive benefit of the Optionee or the Optionee's spouse or issue, provided
--------
and only if the Optionee obtains the Corporation's prior written consent to such
- -----------
transfer, (ii) a transfer of title to the Purchased Shares effected pursuant to
the Optionee's will or the laws of intestate succession or (iii) a transfer to
the Corporation in pledge as security for any purchase-money indebtedness
incurred by the Optionee in connection with the acquisition of the Purchased
Shares.
4.2 TRANSFEREE OBLIGATIONS. Each person (other than the
----------------------
Corporation) to whom the Purchased Shares are transferred by means of one of the
permitted transfers specified in paragraph 4.1 must, as a condition precedent to
the validity of such transfer, acknowledge in writing to the Corporation that
such person is bound by the provisions of this Agreement and that the
transferred shares are subject to (i) both the Corporation's Repurchase Right
and the Corporation's First Refusal Right granted hereunder and (ii) the market
stand-off provisions of paragraph 4.4, to the same extent such shares would be
so subject if retained by the Optionee.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI and
-------------------
VII of this Agreement, the term "Owner" shall include the Optionee and all
subsequent holders of the Purchased Shares who derive their chain of ownership
through a permitted transfer from the Optionee in accordance with paragraph 4.1.
4.4 MARKET STAND-OFF PROVISIONS.
---------------------------
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Corporation or such underwriters; provided, however,
--------
that in no event shall such period exceed one hundred-eighty (180) days. The
limitations of this paragraph 4.4 shall remain in effect for the two-year period
immediately following the effective date of the Corporation's initial public
offering and shall thereafter terminate and cease to have any force or effect.
-7-
<PAGE>
B. Owner shall be subject to the market stand-off provisions of this
paragraph 4.4 provided and only if the officers and directors of the Corporation
--------------------
are also subject to similar arrangements.
C. In the event of any stock dividend, stock split,
recapitalization or other change affecting the Corporation's outstanding Common
Stock effected as a class without receipt of consideration, then any new,
substituted or additional securities distributed with respect to the Purchased
Shares shall be immediately subject to the provisions of this paragraph 4.4, to
the same extent the Purchased Shares are at such time covered by such
provisions.
D. In order to enforce the limitations of this paragraph 4.4, the
Corporation may impose stop-transfer instruc tions with respect to the Purchased
Shares until the end of the applicable stand-off period.
V. REPURCHASE RIGHT
----------------
5.1 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 Purchased
Shares in which the Optionee has not acquired a vested interest in accordance
with the vesting provisions of paragraph 5.3 (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.
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall
--------------------------------
be exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable sixty (60)-day period specified in
paragraph 5.1. 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. To the extent one
or more certificates representing Unvested Shares may have been previously
delivered out of escrow to the Owner, then 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
-8-
<PAGE>
properly endorsed for transfer. The Corporation shall, concurrently with the
receipt of such stock certificates (either from escrow in accordance with
paragraph 7.3 or from Owner as herein provided), 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.
5.3 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 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right lapses shall, however, continue to be subject to (i) the First Refusal
Right of the Corporation and its assignees under Article VI, (ii) the market
stand-off provisions of paragraph 4.4 and (iii) the Special Purchase Right under
Article VIII.
5.4 AGGREGATE VESTING LIMITATION. If the Option is exercised in
----------------------------
more than one increment so that the Optionee is a party to one or more other
Stock Purchase Agreements ("Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which the Optionee would otherwise at the time
be vested, in accordance with the vesting provisions of paragraph 5.3, had all
the Purchased Shares been acquired exclusively under this Agreement.
5.5 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 5.3) 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.
5.6 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 Purchased
Shares shall be immediately subject to
-9-
<PAGE>
the Repurchase Right, but only to the extent the Purchased 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 Purchased 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.
VI. RIGHT OF FIRST REFUSAL
----------------------
6.1 GRANT. The Corporation is hereby granted rights of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner desires
------------------------------
to accept a bona fide third-party offer for the transfer of any or all of the
Purchased Shares (the shares subject to such offer to be hereinafter called the
"Target Shares"), Owner shall promptly (i) deliver to the Corporate Secretary of
the Corporation written notice (the "Disposition Notice") of the terms and
conditions of the offer, including the purchase price and the identity of the
third-party offeror, and (ii) provide satisfactory proof that the disposition of
the Target Shares to such third-party offeror would not be in contravention of
the provisions set forth in Articles II and IV of this Agreement.
6.3 EXERCISE OF RIGHT. The Corporation shall, for a period of
-----------------
forty-five (45) days following receipt of the Disposition Notice, have the right
to repurchase any or all of the Target Shares specified in the Disposition
Notice upon the same terms and conditions specified therein or upon terms and
conditions which do not materially vary from those specified therein. Such
right shall be exercisable by delivery of written notice (the "Exercise Notice")
to Owner prior to the expiration of the forty-five (45)-day exercise period. If
such right is exercised with respect to all the Target Shares specified in the
Disposition Notice, then the Corporation (or its assignees) shall effect the
repurchase of the Target Shares, including payment of the purchase price, not
more than ten (10) business days after delivery of the Exercise Notice; and at
such time Owner shall deliver to the Corporation the certificates representing
the Target Shares to be repurchased, each certificate to be properly
-10-
<PAGE>
endorsed for transfer. To the extent any of the Target Shares are at the time
held in escrow under Article VII, the certificates for such shares shall
automatically be released from escrow and delivered to the Corporation for
purchase. Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation (or its assignees) shall have the right to pay the purchase price in
the form of cash equal in amount to the value of such property. If the Owner
and the Corporation (or its assignees) cannot agree on such cash value within
ten (10) days after the Corporation's receipt of the Disposition Notice, the
valuation shall be made by an appraiser of recognized standing selected by the
Owner and the Corporation (or its assignees) or, if they cannot agree on an
appraiser within twenty (20) days after the Corporation's receipt of the
Disposition Notice, each shall select an appraiser of recognized standing and
the two appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by the Owner and the Corporation. The closing
shall then be held on the later of (i) the tenth business day following delivery
-----
of the Exercise Notice or (ii) the tenth business day after such cash valuation
shall have been made.
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is not
---------------------
given to Owner within forty-five (45) days following the date of the
Corporation's receipt of the Dis position Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; provided,
--------
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of paragraph 2.2(a) and
(ii) the market stand-off provisions of paragraph 4.4. In the event Owner does
not effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the Corporation's First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
-11-
<PAGE>
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation (or its
-------------------------
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within thirty (30) days after the date of the Disposition Notice, to
effect the sale of the Target Shares pursuant to one of the following
alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of paragraph 6.4, as if the Corporation
did not exercise the First Refusal Right hereunder; or
(ii) sale to the Corporation (or its assignees) of the portion of
the Target Shares which the Corporation (or its assignees) has elected to
purchase, such sale to be effected in substantial conformity with the
provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
-----------------------
(a) In the event of any stock dividend, stock split, recapitalization
or other transaction 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 which is by reason of such transaction
distributed with respect to the Purchased Shares shall be immediately subject to
the Corporation's First Refusal Right hereunder, but only to the extent the
Purchased Shares are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation in which the Corporation is not
the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to person or persons
-12-
<PAGE>
other than those who held such securities immediately prior to the merger,
or
(iv) any transaction effected primarily to change the State in
which the Corporation is incorporated, or to create a holding company
structure,
the Corporation's First Refusal Right shall remain in full force and
effect and shall apply to the new capital stock or other property received in
exchange for the Purchased Shares in consummation of the transaction but only to
the extent the Purchased Shares are at the time covered by such right.
6.7 LAPSE. The First Refusal Right under this Article VI shall lapse
-----
and cease to have effect upon the earliest to occur of (i) the first date on
--------
which shares of the Corporation's Common Stock are held of record by more than
five hundred (500) persons, (ii) a determination is made by the Corporation's
Board of Directors that a public market exists for the outstanding shares of the
Corporation's Common Stock, or (iii) a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act,
covering the offer and sale of the Corporation's Common Stock in the aggregate
amount of at least $5,000,000. However, the market stand-off provisions of
paragraph 4.4 shall continue to remain in full force and effect following the
lapse of the First Refusal Right hereunder.
VII. ESCROW
------
7.1 DEPOSIT. Upon issuance, the certificates for any Unvested Shares
-------
purchased hereunder shall be deposited in escrow with the Corporate Secretary of
the Corporation to be held in accordance with the provisions of this Article
VII. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Corporate Secretary pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with paragraph 7.3. Upon delivery of the
certificates (or other assets and securities) to the Corporate Secretary of the
Corporation, the Owner shall be issued an instrument of deposit acknowledging
the number of Unvested Shares (or other assets and securities) delivered in
escrow.
7.2 RECAPITALIZATION. All regular cash dividends on the Unvested
----------------
Shares (or other securities at the time held in
-13-
<PAGE>
escrow) shall be paid directly to the Owner and shall not be held in escrow.
However, 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 or in the event of a Corporate
Transaction, any new, substituted or additional securities or other property
which is by reason of such transaction distributed with respect to the Unvested
Shares shall be immediately delivered to the Corporate Secretary to be held in
escrow under this Article VII, but only to the extent the Unvested Shares are at
the time subject to the escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any other
-----------------
assets or securities held in escrow hereunder, shall be subject to the following
terms and conditions relating to their release from escrow or their surrender to
the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees) elect to
exercise the Repurchase Right under Article V with respect to any Unvested
Shares, then the escrowed certificates for such Unvested Shares (together
with any other assets or securities issued with respect thereto) shall be
delivered to the Corporation concurrently with the payment to the Owner, in
cash or cash equivalent (including the cancellation of any purchase-money
indebtedness), of an amount equal to the aggregate Option Price for such
Unvested Shares, and the Owner shall cease to have any further rights or
claims with respect to such Unvested Shares (or other assets or securities
attributable to such Unvested Shares).
(ii) Should the Corporation (or its assignees) elect to
exercise its First Refusal Right under Article VI with respect to any
vested Target Shares held at the time in escrow hereunder, then the
escrowed certificates for such Target Shares (together with any other
assets or securities attributable thereto) shall, concurrently with the
payment of the paragraph 6.3 purchase price for such Target Shares to the
Owner, be surrendered to the Corporation, and the Owner shall cease to have
any further rights or claims with respect to such Target Shares (or other
assets or securities).
(iii) Should the Corporation (or its assignees) elect not to
-----
exercise its First Refusal Right under Article VI with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together
-14-
<PAGE>
with any other assets or securities attributable thereto) shall be
surrendered to the Owner for disposition in accordance with provisions of
paragraph 6.4.
(iv) As the interest of the Optionee in the Unvested Shares (or
any other assets or securities attributable thereto) vests in accordance
with the provisions of Article V, the certificates for such vested shares
(as well as all other vested assets and securities) shall be released from
escrow and delivered to the Owner in accordance with the following
schedule:
a. The initial release of vested shares (or other vested
-
assets and securities) from escrow shall be effected within thirty
(30) days following the expiration of the initial twelve (12)-month
period measured from the Grant Date.
b. Subsequent releases of vested shares (or other vested
-
assets and securities) from escrow shall be effected at semi-annual
intervals thereafter, with the first such semi-annual release to occur
eighteen (18) months after the Grant Date.
c. Upon the Optionee's cessation of Service, any escrowed
-
Purchased Shares (or other assets or securities) in which the Optionee
is at the time vested shall be promptly released from escrow.
d. Upon any earlier termination of the Corporation's
-
Repurchase Right in accordance with the applicable provisions of
Article V, any Purchased Shares (or other assets or securities) at the
time held in escrow hereunder shall promptly be released to the Owner
as fully-vested shares or other property.
(v) All Purchased Shares (or other assets or securities)
released from escrow in accordance with the provisions of subparagraph (iv)
above shall nevertheless remain subject to (I) the Corporation's First
Refusal Right under Article VI until such right lapses pursuant to
paragraph 6.7, (II) the market stand-off provisions of paragraph 4.4 until
such provisions terminate in accordance therewith and (III) the Special
Purchase Right under Article VIII.
-15-
<PAGE>
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
---------------------------------------
8.1 GRANT. In connection with the dissolution of the Optionee's
-----
marriage or the legal separation of the Optionee and the Optionee's spouse, the
Corporation shall have the right (the "Special Purchase Right"), exercisable at
any time during the thirty (30)-day period following the Corporation's receipt
of the required Dissolution Notice under paragraph 8.2, to purchase from the
Optionee's spouse, in accordance with the provisions of paragraph 8.3, all or
any portion of the Purchased Shares which would otherwise be awarded to such
spouse in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Optionee shall promptly
-----------------------------
provide the Secretary of the Corporation with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the property
rights of the Optionee and the Optionee's spouse in connection with their
marital dissolution or legal separation or (ii) the execution of any contract or
agreement relating to the distribution or division of such property rights. The
Dissolution Notice shall be accompanied by a copy of the actual decree of
dissolution or settlement agreement between the Optionee and the Optionee's
spouse which provides for the award to the spouse of one or more Purchased
Shares in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The Special Purchase
----------------------------------
Right shall be exercisable by delivery of written notice (the "Purchase Notice")
to the Optionee and the Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice), and the fair market value to be paid for such Purchased Shares. The
Optionee (or the Optionee's spouse, to the extent such spouse has physical
possession of the Purchased Shares) shall, prior to the close of business on the
date specified for the purchase, deliver to the Corporate Secretary of the
Corporation the certificates representing the shares to be purchased, each
certificate to be properly endorsed for transfer. To the extent any of the
shares to be purchased by the Corporation are at the time held in escrow under
Article VII, the certificates for such shares shall be promptly delivered out of
escrow to the Corporation. The Corporation shall, concurrently with the receipt
of the stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the fair market value specified for such shares
in the Purchase Notice.
-16-
<PAGE>
If the Optionee's spouse does not agree with the fair market value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two appraisers shall
designate a third appraiser of recognized standing whose appraisal shall be
determinative of such value. The cost of the appraisal shall be shared equally
by the Corporation and the Optionee's spouse. The closing shall then be held on
the fifth business day following the completion of such appraisal; provided,
--------
however, that if the appraised value is more than fifteen percent (15%) greater
than the fair market value specified for the shares in the Purchase Notice, the
Corporation shall have the right, exercisable prior to the expiration of such
five (5)-business-day period, to rescind the exercise of the Special Purchase
Right and thereby revoke its election to purchase the shares awarded to the
spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII shall
lapse and cease to have effect upon the earlier to occur of (i) the first date
-------
on which the First Refusal Right under Article VI lapses or (ii) the
expiration of the thirty (30)-day exercise period specified in paragraph 8.3, to
the extent the Special Purchase Right is not timely exercised in accordance with
such paragraph.
IX. GENERAL PROVISIONS
------------------
9.1 ASSIGNMENT. The Corporation may assign its Repurchase Right under
----------
Article V, its First Refusal Right under Article VI and/or its Special Purchase
Right under Article VIII to any person or entity selected by the Corporation's
Board of Directors, including (without limitation) one or more shareholders of
the Corporation.
If the assignee of the Repurchase Right is other than a one hundred
percent (100%) owned subsidiary corporation of the Corporation or the parent
corporation owning one hundred percent (100%) of the Corporation, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the fair
market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Unvested Shares thereunder.
9.2 DEFINITIONS. For purposes of this Agreement, the following
-----------
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
-17-
<PAGE>
(i) Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be considered to be
a parent corporation of the Corporation, provided each such corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(ii) Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a subsidiary of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon the Optionee any right to continue in the Service
of the Corporation (or any parent or subsidiary corporation of the Corporation
employing or retaining Optionee) 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 corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
-------
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
9.5 NO WAIVER. The failure of the Corporation (or its assignees) in
---------
any instance to exercise the Repurchase Right granted under Article V, or the
failure of the Corporation (or its assignees) in any instance to exercise the
First Refusal Right granted under Article VI, or the failure of the Corporation
(or its assignees) in any instance to exercise the Special Purchase Right
granted under Article VIII shall not constitute a
-18-
<PAGE>
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Corporation and the Optionee or the Optionee's spouse. No waiver of
any breach or condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition, whether of like or different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its assignees)
----------------------
shall make available, at the time and place and in the amount and form provided
in this Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement), and such
shares shall be deemed purchased in accordance with the applicable provisions
hereof and the Corporation (or its assignees) shall be deemed the owner and
holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.
X. MISCELLANEOUS PROVISIONS
------------------------
10.1 OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
--------------------
additional action and execute whatever additional documents the Corporation may
in its judgment deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either the Optionee or the
Purchased Shares pursuant to the express provisions of this Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State without resort
to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
-19-
<PAGE>
10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and the Optionee and the Optionee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
10.6 POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
-----------------
his or her true and lawful attorney in fact, for him or her and in his or her
name, place and stead, and for his or her use and benefit, to agree to any
amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
Corsair Communications, INC.
By:_______________________________________________
Title:____________________________________________
Address: __________________________________________________
__________________________________________________
__________________________________________________
Optionee */
-
Address: __________________________________________________
__________________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consider ation of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, 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: __________________________________________________
__________________________________________________
________________________
*/ I have executed the Section 83(b) election that was attached hereto as an
- -
Exhibit. As set forth in Article III, I understand that I, and not the
---
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Corsair Communications, Inc. (the "Corporation"),
________________________ (__________) shares of the Common Stock of the
Corporation standing in his\her name on the books of the Corporation represented
by Certificate No. ___________________ and do hereby irrevocably constitute and
appoint _______________________________ as Attorney to transfer the said stock
on the books of the Corporation with full power of substitution in the premises.
Dated: ________________
Signature ____________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
<PAGE>
REPURCHASE RIGHTS
-----------------
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
____________ shares of the common stock of Corsair Communications, Inc.
(3) The property was issued on _____________, 19___.
(4) The taxable year in which the election is being made is the calendar year
19__.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of annual and monthly
installments over a four year period ending on ____________, 19__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $________ per share.
(7) The amount paid for such property is $_______ per share.
(8) A copy of this statement was furnished to Corsair Communications, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed as of: _______________________.
- ------------------------- ------------------------------------------
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
EXHIBIT III-1
<PAGE>
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL
REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON EXERCISE OF AN
INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN INCENTIVE
STOCK OPTION.
<PAGE>
***
EXHIBIT 10.14
CORSAIR/*** PATENT LICENSE AGREEMENT
------------------------------------
This CORSAIR/*** PATENT LICENSE AGREEMENT ("Agreement") is effective as of
*** , ("Effective Date") by and between the Parties,
*** ("LICENSOR"), a
corporation organized and existing under the laws of the State of
*** and having its principal place of business at *** ,
*** , and
CORSAIR COMMUNICATIONS, INC. ("LICENSEE"), a corporation organized and
existing under the laws of the State of Delaware and having a
principal place of business at 207 Java Drive, Sunnyvale, California
94089.
RECITALS
--------
0.1 WHEREAS, *** Patent *** issued ***
with inventor *** and entitled ***
*** .
0.2 WHEREAS, LICENSOR has obtained all rights to license and enforce the
*** ***.
0.3 WHEREAS, LICENSOR believes the *** has commercial potential in
*** including ***
*** , and in other *** .
0.4 ***
*** .
1
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission. ***
<PAGE>
***
0.5 WHEREAS, LICENSEE is desirous of acquiring and LICENSOR is desirous of
granting a *** , *** license under the *** .
NOW THEREFORE, for the mutual promises and other good and valuable
consideration set forth, the Parties agree to the terms and conditions as
follows:
TERM AND CONDITIONS
-------------------
ARTICLE 1
---------
1. DEFINITIONS. Terms defined in this ARTICLE 1, and elsewhere in this
Agreement, shall have the same meaning throughout the Agreement and will appear
in singular or plural form as the context indicates.
1.1 " *** " means *** Patent No. *** and any
reissues, extensions, reexaminations, or renewals thereof.
1.2 "Cellular Service" means a service in which a plurality of Cell
Sites, each covering a different limited geographic region, are established
for wireless communication, each Cell Site for communication with a
plurality of transmitters within the geographic region of the Cell Site.
***
*** .
1.3 "Cell Site" means any physical location containing installed
wireless receiver equipment for receiving transmitter signals from
transmitters in a limited geographic region where the transmitter signals
are processed in connection with Cellular Service.
2
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission. ***
<PAGE>
***
1.4 "Unit" means any and all equipment, including hardware and/or
software, for a Cell Site that operates for ***
in accordance with the claims of the *** .
1.5 "Territory" means the *** including ***
where *** Patents have effect.
1.6 "Disposition" means delivery of a Unit in connection with a sale,
lease, license or other marketing of a Unit.
ARTICLE 2
---------
2. LICENSE.
2.1 LICENSOR hereby grants to LICENSEE a *** , ***
*** license under the *** as follows:
2.1.1 to *** Units for the ***
*** and in connection therewith to practice any method,
2.1.2 to *** Units in the ***
*** and in connection therewith to practice any method, and
2.1.3 to *** and/or
software, Units in the *** and in connection therewith to
practice any method.
3
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission. ***
<PAGE>
***
2.2 LICENSEE shall have the right, without further payment to
LICENSOR, to extend to remarketers of Units from LICENSEE, the license granted
to LICENSEE under Section 2.1.2.
2.3 LICENSEE shall have the right, without further payment to
LICENSOR, to extend to users of Units obtained from LICENSEE, directly or
through remarketers, the license granted to LICENSEE under Section 2.1.3.
2.4 Except as provided in this Section 2 and Section 7.2.2, LICENSEE
shall have *** the licenses granted
under this Agreement without the express written consent of LICENSOR and
LICENSOR shall retain the *** right to decide whether to permit such
sublicense, assignment or other transfer by LICENSEE.
2.5 LICENSOR *** to the *** , subject to the
license granted to LICENSEE under this Agreement.
ARTICLE 3
---------
3. PAYMENT
3.1 On the Effective Date, LICENSEE shall pay LICENSOR ***
*** .
ARTICLE 4
---------
4. REPRESENTATIONS, WARRANTIES AND COVENANTS.
4.1 LICENSOR represents, warrants and covenants to LICENSEE that:
4
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission. ***
<PAGE>
***
4.1.1 It is a corporation duly organized, validly existing and in
good standing under the laws of the State of ***.
4.1.2 It has the corporate authority to own its own assets and
properties and to carry on its business as now being and heretofore
conducted.
4.1.3 The execution, delivery and performance of this Agreement
4.1.3.1 has been duly authorized and does not violate its
certificate of incorporation, bylaws or similar governing instruments
or applicable law; and
4.1.3.2 will not, with the passage of time, materially conflict
with or constitute a breach of any other agreement, judgment or
instrument to which LICENSOR is a party or by which LICENSOR is bound.
4.1.4 It is the *** of the *** and has the
consent of ***, the inventor, to enter into this Agreement.
4.1.5 Nothing in this Agreement shall be deemed to be a
representation or warranty by LICENSOR of the validity of the *** or
its accuracy, safety, merchantability or usefulness for any purpose, of any
technical information, techniques, or practices at any time made available
by
LICENSOR to LICENSEE.
4.1.6 *** and LICENSOR together own all right, title and
interest in the *** and no other person or entity has, or has
made, any claim of ownership or other interest in the *** .
4.1.7 Other than the *** , neither LICENSOR nor ***
5
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission. ***
<PAGE>
***
have any ownership or other right, title or interest in any patent or
application therefor that has claims that might cover equipment, including
hardware and/or software, for a *** or any *** .
4.1.8 The REPRESENTATIONS AND WARRANTIES OF ***
*** are attached hereto and are an integral part of this Agreement.
4.2 LICENSEE represents, warrants and covenants to LICENSOR that:
4.2.1 It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
4.2.2 It has the corporate authority to own its own assets and
properties and to carry on its business as now being and heretofore
conducted.
4.2.3 The execution, delivery and performance of this Agreement:
4.2.3.1 has been duly authorized and does not violate its
certificate of incorporation, bylaws or similar governing instruments
or applicable law; and
4.2.3.2 will not, with the passage of time, materially conflict
with or constitute a breach of any other agreement, judgment or
instrument to which LICENSEE is a party or by which LICENSEE is bound.
ARTICLE 5
---------
5. PATENT INFRINGEMENT AND PATENT RENEWAL COSTS.
5.1 *** shall be solely responsible for the payment of all
costs and legal expenses in pursuing any action to recover damages for
infringement, violation or
6
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission. ***
<PAGE>
***
challenges to the *** .
5.2 *** shall control any litigation, dispute, cause of
action, affirmative defense or other legal remedy pertaining to any third party
infringement or challenge to the *** , including but not limited to,
all decisions relating to compromise or settlement.
5.3 *** shall, to the extent that it is successful in recovering
damages for infringement of the *** , be solely entitled to any recovery of
damages, costs and expenses recovered by *** for infringement of the ***
in the Territory.
5.4 *** shall be solely responsible for paying all patent
fees, including renewal fees, and related expenses for securing and maintaining
the *** .
ARTICLE 6
---------
6. TERM
6.1 The term of this Agreement shall commence on the Effective Date
and terminate upon the expiration of the *** .
6.2 The waiver by LICENSOR of any single breach or default by
LICENSEE, or of any successions of breaches or defaults, shall not be construed
as a wavier of any similar breach or default by LICENSEE or any other breach or
default of any other provisions of this Agreement.
7
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ARTICLE 7
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7. GENERAL PROVISIONS.
7.1 PATENT MARKING AND NOTICE: Units having a Disposition under this
-------------------------
Agreement shall bear the notice "Licensed under *** ".
7.2 ASSIGNMENT:
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7.2.1 This Agreement and the license granted herein under the ***
***, shall inure to the benefit of and be binding upon LICENSOR'S
successors or assigns.
7.2.2 This Agreement and the licenses granted herein ***
*** the *** of ***
in connection with a ***
which relates to ***.
7.3 NOTICES: All notices, requests, demands or other communications to or
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from the respective Parties required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been received when
delivered in person or sent by registered or certified mail, return receipt
requested, postage and registration or certification fees prepaid, or sent by a
reliable overnight delivery service providing a receipt evidencing such
delivery, to the recipient at its address given above or at such other address
as hereafter shall be furnished by a notice sent in like manner to such address
by the other.
7.4 NO WAIVER: No modification, limitation, waiver, termination,
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rescission, discharge or cancellation of this Agreement or any provision thereof
shall be binding on
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***
a Party to be bound unless in writing and signed by the Party to be bound.
7.5 ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
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between the Parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings, oral and written, of
the Parties concerning the subject matter hereof.
7.6 EXECUTION IN COUNTERPARTS: This Agreement is executed in two
-------------------------
counterparts, each of which when executed shall be deemed to be an original and
both counterparts shall constitute one and the same agreement.
7.7 CONFIDENTIALITY: The Parties shall maintain the terms and conditions
---------------
of this Agreement in strict confidence except that either Party may disclose
information concerning this Agreement to the extent required by law or by order
of any court of competent jurisdiction.
7.8 ARBITRATION: Other than for matters relating to the scope and/or
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validity of the *** , the Parties shall submit all disputes arising out
of the interpretation of this Agreement to binding arbitration.
7.8.1 Any arbitration will be in the *** before a panel
of three (3) Arbitrators certified by the American Arbitration Association
and conducted under its rules, with any decision thereunder to be final and
nonappealable.
7.8.2 All costs of arbitration shall be paid by *** . The
award shall be binding and conclusive and may be sued on or enforced by the
prevailing party in any court of competent jurisdiction.
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7.8.3 The prevailing party in any arbitration shall recover all
costs and reasonable attorney's fees, including attorney's fees for
services rendered on appeal.
7.9 PATENT DISPUTES: Any dispute involving the scope and/or validity of
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the *** shall only be brought in the ***
or in a *** court of competent jurisdiction.
IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals.
By: ***
By:/s/ Mary Ann Byrnes
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MARY ANN BYRNES, as President
of CORSAIR COMMUNICATIONS, INC. (LICENSEE)
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REPRESENTATIONS AND WARRANTIES OF ***
1. I, *** , represent and warrant that,
1.1 I am the inventor of and sole owner of ***
*** ;
1.2 I have granted exclusive rights under the *** to
*** and
under such rights *** has the right to enter into the ***
*** set forth above;
1.3 Other than to ***, I have not granted any rights in or under
the *** to any person or entity;
1.4 I am not aware that any claim has been made adverse to my
ownership of or my right to license the *** ;
1.5 I consent to *** entering into the ***
*** and to the terms and conditions thereof as set
forth above.
***
***
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MASTER LEASE AGREEMENT EXHIBIT 10.15
MASTER LEASE AGREEMENT (the "Master Lease") dated August 31, 1995 by and between
COMDISCO, INC. ("Lessor") and Corsair Communications, Inc. ("Lessees").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes
Lessor, as Lessee's agent, and at Lessor's expense, to prepare, execute and file
in Lessee's name precautionary Uniform Commercial Code financing statements
showing the interest of the Owner, Lessor, and any Assignee or Secured Party in
the Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear
from any liens or encumbrances of any kind (except any caused by Lessor) and
will indemnify and hold the Owner, Lessor, any Assignee and Secured Party
harmless from and against any loss caused by Lessee's failure to do so, except
where such is caused by Lessor.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee
meets the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be edited to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The Secured
Party will not disturb Lessee's quiet and peaceful possession and unrestricted
use of the Equipment so long as Lessee is not in default and the Secured Party
continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease.
Lessee's obligation to pay Rent and all other amounts due hereunder is absolute
and unconditional and is not subject to any abatement, reduction, set-off,
defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all
taxes, fees or any other charges (together with any related interest or
penalties not arising from the negligence of Lessor) accrued for or arising
during the term of each Summary Equipment Schedule against Lessor, Lessee or the
Equipment by any governmental authority (except only Federal, state, local and
franchise taxes on the capital or the net income of Lessor). Lessor will file
all personal property tax returns for the Equipment and pay all such property
taxes due. Lessee will reimburse Lessor for property taxer within thirty (30)
days of receipt of an invoice.
7. Care, Use and Maintenance; inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance as the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents,
warrants and covenants that with respect to the Master Lease and each Schedule
executed hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary
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corporate action on the part of the Lessee, and the Master Lease and each
Schedule are not inconsistent with the Lessee's Articles of Incorporation or
Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and the Master Lease and each Schedule
constitute legal, valid and binding agreements of the Lessee, enforceable in
accordance with their terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and rules of law
concerning equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or, to
the knowledge of the Lessee, threatened against or affecting the Lessee in any
court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the Lessee
will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is a
party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipments operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. Indemnity.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due if
that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule or
the material inaccuracy of any representation or warranty made by the Lessee in
the Schedule or in any document or certificate furnished to the Lessor hereunder
if that failure or inaccuracy continues for ten (10) business days after written
notice; or
(c) As assignment by lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee
or the filing against Lessee of any petition under any bankruptcy or insolvency
law or for the appointment of a trustee or other officer with similar powers,
the adjudication of Lessee as insolvent, the liquidation of Lessee, or the
taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary Equipment
Schedule or other agreement between Lessee and Lessor or its Assignee or Secured
Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover the
present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees' agents' or representatives'
negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale, lease or other disposition of the Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs; or
(b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
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Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
14.1 BOARD ATTENDANCE. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meetings
and Lessee will give Lessor reasonable notice in advance of any special Board of
Directors meeting, which notice will provide an agenda of the subject matter to
be discussed at such board meetings. Lessee will provide Lessor with a
certified copy of the minutes of each Board of Directors meeting within thirty
(30) days following the date of such meeting held during the term of this Master
Lease.
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month
(and in any event within thirty (30) days), Lessee will provide to Lessor the
same information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at
the end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) the Lessee
will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the Assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any merger in which the
acquiring entity has a Moody's Bond rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representation, warranty or covenant
contained in this Master Lease or a Schedule. The waiver by Lessor or Lessee of
a breach of any provision of this Master Lease or a Schedule will not operate or
be construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the benefit
of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but not
limited to, those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular airmail to Lessor (to the attention of "the Comdisco Venture Group") or
Lessee, at the address set out in the Schedule, (3) one day after it is sent by
a courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master Lease
or any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that this closest to
the original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants
a security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked ""Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products
which will at all times remain the property of the owner of the Licensed
Products. A license from the owner may be required and it is Lessee's
responsibility to obtain any required license before the use of the Licensed
Products. Lessee agrees to treat the Licensed Products as confidential
information of the owner, to observe all copyright restrictions, and not to
reproduce or sell the Licensed Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master
Lease, provide Lessor with a secretary's certificate of incumbency and
authority. Upon the execution of each Schedule with a purchase price in excess
of $1,000,000, Lessee will provide Lessor with an opinion from Lessee's counsel
in a form acceptable to Lessor regarding the representations and warranties in
Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be
in a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby agrees
that Lessor shall not, by virtue of its entering into this Master Lease, be
required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS.
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution of
- -------
each Schedule.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights as
- --------
owner and Lessor of Equipment.
CASUALTY LOSS - means the irreparable loss or destruction of Equipment.
- -------------
CASUALTY VALUE - means the greater of the aggregate Rent remaining to be paid
- --------------
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value table is
attached to the relevant Schedule its terms will control.
COMMENCEMENT DATE - is defined in each Schedule.
- -----------------
DEFAULT COSTS - means reasonable attorney's fees and remarketing costs resulting
- -------------
from a Lessee default or Lessor's enforcement of its remedies.
DELIVERY DATE - means the date of delivery of inventory Equipment to Lessee's
- -------------
address.
EQUIPMENT - means the property described on a Summary Equipment Schedule and any
- ---------
replacement for that property required or permitted by this Master Lease or a
Schedule.
EVENT OF DEFAULT - means the events described in Subsection 13.1.
- ----------------
-3-
<PAGE>
FAIR MARKET VALUE - means the aggregate amount which would be obtainable in an
- -----------------
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the first
- ------------
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent intervals indicated on a Schedule.
INTERIM RENT - means the pro-rata portion of Rent due for the period from the
- ------------
Commencement Date through but not including the first day of the first full Rent
interval included in the Initial Term.
LATE CHARGE - means the lesser of five percent (5%) of the payment due or the
- -----------
maximum amount permitted by the law of the state where the Equipment is located.
LICENSED PRODUCTS - means any software or other licensed products attached to
- -----------------
the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the same
- --------------
model, type, configuration and manufacture as Equipment.
MERGER - means any consolidation or merger of the Lessee with or into any other
- ------
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
NOTICE PERIOD - means not less than ninety (90) days nor more than twelve (12)
- -------------
months prior to the expiration of the lease term.
OWNER - means the owner of Equipment.
- -----
RENT - means the rent Lessee will pay for each item of Equipment expressed in a
- ----
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
- -------------
Schedule.
SCHEDULE - means either an Equipment Schedule or a Licensed Products Schedule
- --------
which incorporates all of the terms and conditions of this Master Lease.
SECURED PARTY - means an entity to whom Lessor has granted a security interest
- -------------
for the purpose of securing a loan.
SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor summarizing
- --------------------------
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
CORSAIR COMMUNICATIONS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ John F. Scott By: /s/ illegible
-------------------------------- ----------------------------
Title: Vice President Title: illegible
----------------------------- -------------------------
9/5/96
-4-
<PAGE>
ADDENDUM TO THAT MASTER LEASE AGREEMENT
DATED AS OF AUGUST 31, 1995
BETWEEN CORSAIR COMMUNICATIONS, INC. AS LESSEE
AND COMDISCO, INC. AS LESSOR
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease Agreement are hereby modified and amended as follows:
1. Section 3, "Rent and Amount"
-----------------
Insert the following at the end of the second sentence after the word
"amount", "provided, however, that so long as payment is made within
three (3) days after the date such payment is due, no late charge will
be assessed for up to three (3) late payments under a particular
Summary Equipment Schedule."
In the penultimate line, delete the words "if Lessee is not then in
default" and replace with the following: "if no Event of Default under
such Schedule has occurred and is continuing. If an Event of Default
under such Schedule has occurred and is continuing, the Advance will
be credited against any obligation of Lessee to Lessor under such
Schedule as Lessor may determine."
2. Section 4, "Selection; Warranty and Disclaimer of Warranties"
-------------------------------------------------
Section 4.1, at the end of the sentence insert "concerning the
Equipment."
Subsection 4.2, first sentence, delete the phrase "Lessor will not
disturb", and replace with "neither Lessor, nor any Assignee or
Secured Party of Lessor will disturb"; last line, after the words
"negligent acts", add the words "or omissions".
3. Section 5, "Title; Relocation or Sublease; and Assignment"
-----------------------------------------------
Subsection 5.2, first paragraph, in the last line, after the word
"coverage", add the words "resulting directly from such relocation".
In the second paragraph, line 1, before the word "consent", delete the
word "reasonable"; after the words "Secured Party", add the words
"which shall not be unreasonably withheld or delayed". Second
sentence, insert the words "any Equipment" after the words "consent to
sublease".
Subsection 5.3, add the following to the end of the second sentence";
provided that Lessor shall have notified Lessee promptly in writing of
such sale, assignment, transfer or grant of security interest;".
<PAGE>
Paragraph (a), line 2, before the words "Secured Party", delete the
word "The" and replace with the words "Neither Assignee nor" and
delete the word "not" before the word "disturb"; in the last line,
after the words "Secured Party", add the words "or Assignee, to the
extent applicable."
Paragraph (b), at the beginning, insert the words "Upon receipt of
written instructions from Lessor or any Assignee or Secured Party
identified in Lessor's notice required under this Subsection 5.3,".
4. Section 6, "Net Lease: Taxes and Fees"
--------------------------
Subsection 6.2, line 5, after the words "governmental authority",
insert the phrase, "measured by rent received thereunder".
Last sentence, after the words "property taxes" insert "paid by Lessor
to which Lessor is entitled to be reimbursed pursuant to this Section
6.2".
5. Section 8, "Representations and Warranties of Lessee"
-----------------------------------------
Paragraph (b), line 4 delete "Articles" and insert "Certificate" and
after "Incorporation" insert the words "as amended"; sixth and seventh
lines, before the words "default", "indenture", "mortgage", "contract"
and "instrument", add the word "material".
Paragraph (e), line 3, after the words "set forth in the", insert
"most recent" and after the words "Financial Statements," insert the
words "delivered to Lessor pursuant to Section 14.2".
Delete Paragraphs (f) and (g) in their entirety.
6. Section 9, "Delivery and Return of Equipment"
---------------------------------
Add the following sentence between the third and fourth sentences,
"Notwithstanding the foregoing, in the event that Lessor has
immediately available warehouse space in the San Francisco bay area,
Lessee's costs of returning the Equipment shall be limited to the
costs of returning the Equipment to Lessor's warehouse in the San
Francisco bay area".
7. Section 10, "Labeling"
----------
To the end of this Section, add the words "adverse to Lessor's".
8. Section 12, "Risk of Loss"
-------------
Second paragraph, line 3, delete "and" and insert "whereupon".
<PAGE>
9. Section 13, "Default, Remedies and Mitigation"
----------------------------------
Paragraph (a), insert the following at the end thereof "from Lessor to
Lessee".
Paragraph (b), line 1, insert "applicable" before the word "Schedule".
Paragraph (c), insert the following at the end of the paragraph:
", provided, however, that in case of a filing against Lessee of any
petition under any bankruptcy or insolvency law or for the appointment
of a trustee or other officer with similar powers, if Lessee can
obtain the dismissal of such proceeding within sixty (60) days after
the commencement of any such proceeding or appointment, it shall not
constitute an Event of Default".
Paragraph (d), delete the words "or other agreement" and replace with
"or Warrant Agreement"; to the end, add the words "executed in
connection with this Master Lease".
Subsection 13.2, first paragraph, after the words "Events of Default",
add the words "under any Summary Equipment Schedule"; and paragraph
(c), delete "6%" and replace with "U.S. Treasuries of comparable
maturity.".
Subsection 13.3, to the end of this paragraph, add the words "under
Section 13.2 hereof with respect to the applicable Summary Equipment
Schedule."
10. Section 14, "Additional Provisions"
----------------------
Delete subsection 14.1 in its entirety.
Subsection 14.2, line 2, delete the phrase "the same information which
Lessee provides to its Board of Directors, but which will include not
less than"; line 4 insert the word "and" after "monthly income
statement", and delete the words "and statement of cash flows"; line
5, insert "and a monthly cash flow statement", after the words
"consistently applied".
Delete subsection 14.4 in its entirety and replace with the following:
"Lessee will notify Lessor of any Merger at least twenty (20) days
prior to the proposed consummation date of such proposed Merger. Upon
Lessor's consent (which shall not be unreasonably withheld or
delayed), Lessee shall have the right to assign the Summary Equipment
Schedules to the surviving entity or transferee of the assets or stock
transferred in such Merger; provided such surviving entity or
transferee (i) assumes Lessee's obligations under such Summary
Equipment Schedules pursuant to assignment documents reasonably
acceptable to Lessor; (ii) such entity or transferee has a net worth
equal to or greater than ten (10) times the present value of the
remaining Rent due or to become due under the Summary Equipment
Schedules, discounted at U.S. Treasury rate(s) of comparable maturity
to the remaining term and (iii)
<PAGE>
such entity or transferee has a net worth of at least $5,000,000. If
Lessor reasonably withholds its consent to such assignment, the
Summary Equipment Schedules shall be terminated, in which event Lessee
will pay Lessor all amounts then due and owing under such Summary
Equipment Schedules and a termination fee equal to the present value
discounted at the U.S. Treasury rate(s) of comparable maturity to the
remaining term(s) of remaining Rent for the balance of the Initial
Term(s) of all Summary Equipment Schedules, and will return the
Equipment in accordance with Section 9. Notwithstanding the
foregoing, if the Lessee merely reincorporates within the United
States, and the identity and composition of the investors is identical
both before and after the transaction, Lessor shall not unreasonably
withhold its consent."
Subsection 14.5, line 2, delete "other" and insert "prior".
Subsection 14.7, second sentence, add the phrase "Subject to Section
5.2 (with respect to subleases)" at the beginning thereof and to the
end of this sentence, add the words "without the prior written consent
of Lessor."
Subsection 14.8, add the following sentence to the end of this
subsection:
"Notwithstanding the foregoing, so long as the obligation to pay all
Rent and other amounts due and owing under this Master Lease, any
Schedule(s) and any Summary Equipment Schedules has been fully
satisfied, the obligations under Sections 3, 14.1, 14.2, 14.3 and 14.4
and the representations and warranties of Section 8 hereof shall not
survive the expiration or termination of this Master Lease."
Subsection 14.9, line 5, insert "applicable" prior to "Schedule".
Subsection 14.14, insert "request of Lessor following" after the words
"will upon".
Subsection 14.19 - Definition "Casualty Loss", delete this definition
and replace with the following:
"means, with respect to any unit of Equipment, the loss, theft,
destruction, irreparable damage or damage beyond economic repair of
such unit, in each case as determined by Lessee in accordance with its
customary practices."
<PAGE>
Definition "Casualty Value", after the word "means" insert ", with
respect to any item of Equipment,"
Definition "Default Costs", add the following at the end thereof,
"following an Event of Default.".
Definition "Secured Party", add the following at the end thereof, "to
Lessor".
CORSAIR COMMUNICATIONS, INC. COMDISCO, INC.
as LESSEE
By: /s/ John F. Scott By: illegible
------------------------- --------------------------
Title: Vice President Title: illegible
---------------------- -----------------------
Date: 8/31/95 Date: 9/5/95
----------------------- ---------------------------
<PAGE>
EQUIPMENT SCHEDULE VL-1
DATED AS OF AUGUST 31, 1995
TO MASTER LEASE AGREEMENT
DATED AS OF AUGUST 31, 1995 (THE "MASTER LEASE")
LESSEE: CORSAIR COMMUNICATIONS, INC. LESSOR: COMDISCO, INC.
Admin.Contact/Phone No.: Address for all Notices:
- ----------------------- -----------------------
Mr. John F. Scott
(415)856-2677 6111 North River Road
Rosemont, Illinois 60018
Attn.: Venture Group
Address for Notices:
- -------------------
3408 Hillview Ave.
Palo Alto, CA 94304
Attn.:
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No: _____________________
24 digits maximum)
Location of Equipment: Initial Term: Forty-two (42)
- --------------------- ------------
same as above (Number of Rent Intervals)
Attn.: Lease Rate Factor: 2.764%
-----------------
EQUIPMENT (as defined below): Advance: $27,640.00
-------
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period August 31, 1995 through September 1,
1996 ("Equipment Delivery Period"), for which Lessor receives vendor
invoices approved for payment, up to an aggregate purchase price of
$1,000,000.00 ("Commitment Amount"), excluding custom use equipment,
leasehold improvements, installation costs and delivery costs, rolling
stock, special tooling, "stand-alone" software, application software
bundled into computer hardware, hand held items, molds and fungible items.
<PAGE>
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in a value up to the Commitment
Amount referred to on the face of this Schedule. If the Equipment acquired is of
category (i), (ii) or (iii) below, the effectiveness of this Schedule as it
relates to those items of Equipment is contingent upon Lessee's acknowledgment
at the time Lessor acquires the Equipment that Lessee has either received or
approved the relevant purchase documentation between vendor and Lessor for that
Equipment.
Lessor will finance only the acquisition of individual items of Equipment
with a cost to Lessor of more than $500.00.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
specifically approved by Lessor.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than September 7,
1995. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any Sale-
Leaseback Equipment will be placed on lease subject to Lessor's
approval.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) INVENTORY EQUIPMENT. Upon Lessee's request, Lessor may supply new or
used Equipment from its inventory at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the date Lessee approves the vendor invoice. The Commencement
Date for Sale-Leaseback Equipment shall be the date Lessor tenders the purchase
price, and the Commencement Date for inventory Equipment shall be the Delivery
Date. Lessor will summarize all approved invoices, purchase documentation and
evidence of delivery, as applicable, received in the same calendar quarter into
a Summary Equipment Schedule in the form attached to this Schedule as Exhibit 1,
and the Initial Term will begin the first day of the calendar quarter
thereafter. Each Summary Equipment Schedule will contain the Equipment location,
description, serial number(s) and cost and will incorporate the terms and
conditions of the Master Lease and this Schedule and will constitute a separate
lease.
3. OPTION TO EXTEND
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event, the
rent to be paid during said extended period shall be mutually agreed upon and if
the parties cannot mutually agree, then the Summary Equipment Schedule shall
continue in full force and effect pursuant to the existing terms and conditions
until terminated in accordance with its terms. The Summary Equipment Schedule
will continue in effect following said extended period until terminated by
either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
4. PURCHASE OPTION
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term of the Summary Equipment Schedule to
purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 20% of the original Equipment it cost and upon
terms and conditions to be mutually agreed upon by the parties following Lessees
written notice, plus any sales taxes applicable at time of purchase. Said
purchase price shall be paid to Lessor at least thirty (30) days
<PAGE>
before the expiration date of the Initial Term or extended term. Title to the
Equipment shall automatically pass to Lessee upon payment in full of the
purchase price but, in no event, earlier than the expiration of the fixed
Initial Term or extended term, if applicable. If the parties are unable to
agree on the purchase price or the terms and conditions with respect to said
purchase, then the Summary Equipment Schedule with respect to this Equipment
shall remain in full force and effect until terminated in accordance with its
terms. Notwithstanding the exercise by Lessee of this option and payment of the
purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
5. SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
Section 14. Additional Provisions
Subsection 14.16 Landlord/Mortgage Waiver is deleted in its entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page l
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
CORSAIR COMMUNICATIONS, Inc. COMDISCO, INC.
as Lessee as Lessor
By: /s/ John F. Scott By: illegible
------------------------ ---------------------------
Title: Vice President Title: illegible
--------------------- ------------------------
Date: 8/31/95 Date: 9/5/95
---------------------- -------------------------
<PAGE>
18 SLXXXXX-XX
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. VL-1, dated as of August 31, 1995 to the Master Lease
Agreement dated as of August 31, 1995 between Comdisco, Inc. ("Lessor") and
Corsair Communications, Inc. ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- ------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
<PAGE>
EQUIPMENT SCHEDULE VL-2
DATED AS OF AUGUST 5, 1996
TO MASTER LEASE AGREEMENT
DATED AS OF AUGUST 31, 1995 (THE "MASTER LEASE")
LESSEE: CORSAIR COMMUNICATIONS, INC. LESSOR: COMDISCO, INC.
Admin.Contact/Phone No.: Address for all Notices:
- ----------------------- -----------------------
Mr. John F. Scott
(415)856-2677 6111 North River Road
Rosemont, Illinois 60018
Attn: Venture Group
Address for Notices:
- -------------------
3408 Hillview Ave.
Palo Alto, CA 94304
Attn.:
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No: _______________________
(24 digits maximum)
Location of Equipment: Initial Term: Forty-two (42)
- --------------------- ------------
same as above (Number of Rent Intervals)
Attn.: Lease Rate Factor: 2.742%
-----------------
EQUIPMENT (as defined below): Advance: $13,710
-------
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period August 6, 1996 through March 15, 1997
("Equipment Delivery Period"), for which Lessor receives vendor invoices
approved for payment, up to an aggregate purchase price of $500,000.00
("Commitment Amount"), excluding custom use equipment, leasehold
improvements, installation costs and delivery costs, rolling stock, special
tooling, "stand-alone" software, application software bundled into computer
hardware, hand held items, molds and fungible items.
<PAGE>
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in a value up to the Commitment
Amount referred to on the face of this Schedule. If the Equipment acquired is of
category (i), (ii) or (iii) below, the effectiveness of this Schedule as it
relates to those items of Equipment is contingent upon Lessee's acknowledgment
at the time Lessor acquires the Equipment that Lessee has either received or
approved the relevant purchase documentation between vendor and Lessor for that
Equipment.
Lessor will finance only the acquisition of individual items of Equipment
with a cost to Lessor of more than $500.00.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
specifically approved by Lessor.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than August 31,
1996*. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any sale-
leaseback Equipment will be placed on lease subject to Lessor's
approval.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) INVENTORY EQUIPMENT. Upon Lessee's request, Lessor may supply new or
used Equipment from its inventory at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the date Lessee approves the vendor invoice. The Commencement
Date for Sale-Leaseback Equipment shall be the date Lessor tenders the purchase
price, and the Commencement Date for inventory Equipment shall be the Delivery
Date. Lessor will summarize all approved invoices, purchase documentation and
evidence of delivery, as applicable, received in the same calendar quarter into
a Summary Equipment Schedule in the form attached to this Schedule as Exhibit 1,
and the Initial Term will begin the first day of the calendar quarter
thereafter. Each Summary Equipment Schedule will contain the Equipment location,
description, serial numbers and cost and will incorporate the terms and
conditions of the Master Lease and this Schedule and will constitute a separate
lease.
3. OPTION TO EXTEND
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event, the
rent to be paid during said extended period shall be mutually agreed upon and if
the parties cannot mutually agree, then the Summary Equipment Schedule shall
continue in full force and effect pursuant to the existing terms and conditions
until terminated in accordance with its terms. The Summary Equipment Schedule
will continue in effect following said extended period until terminated by
either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
4. PURCHASE OPTION
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term of the Summary Equipment Schedule to
purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 20% of the original Equipment cost and upon terms
and conditions to be mutually agreed upon by the parties following Lessee's
written notice, plus any sales taxes applicable at time of purchase. Said
purchase price shall be paid to Lessor at least thirty (30) days
<PAGE>
before the expiration date of the Initial Term or extended term. Title to the
Equipment shall automatically pass to Lessee upon payment in full of the
purchase price but, in no event, earlier than the expiration of the fixed
Initial Term or extended term, if applicable. If the parties are unable to agree
on the purchase price or the terms and conditions with respect to said purchase,
then the Summary Equipment Schedule with respect to this Equipment shall remain
in full force and effect until terminated in accordance with its terms.
Notwithstanding the exercise by Lessee of this option and payment of the
purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
5. SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
Section 14. Additional Provisions
Subsection 14.16 Landlord/Mortgage Waiver is deleted in its entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule, except that the representations of Lessee shall be deemed modified by
the Disclosure Schedule dated August 5, 1996, as provided by Lessee to Lessor.
The parties hereby reaffirm all of the terms and conditions of the Lease
(including, without limitation, the representations and warranties set forth in
Section 8) (except as modified by the Disclosure Schedule) except as modified
herein by this Schedule. This Schedule may not be amended or rescinded except by
a writing signed by both parties.
CORSAIR COMMUNICATIONS, Inc. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Martin J. Silver By:__________________________
-------------------------------
Title: Chief Financial Officer Title:_______________________
----------------------------
Date: 8/5/96 Date:________________________
-----------------------------
<PAGE>
EXHIBIT 10.16
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of August 31, 1995, is entered
into by and between Corsair Communications, Inc. a Delaware corporation having a
principal place of business at 3408 Hillview Avenue, Palo Alto, California 94304
(the "Borrower") and Comdisco, Inc., a Delaware corporation having a principal
place of business at 6111 North River Road, Rosemont, Illinois 60018 (the
"Lender"). In consideration of the mutual agreements contained herein, the
parties hereto agree as follows:
WHEREAS, Borrower desires to borrow from the Lender hereunder the amount of
$1,000,000.00 and Lender is willing to lend said amount to Borrower on August
31, 1995 (the "Funding Date");
NOW, THEREFORE, it is agreed:
SECTION 1. THE LOAN
1.1 Subject to the terms and conditions set forth herein, Lender shall
lend to Borrower the aggregate original principal amount of $1,000,000.00 (the
"Loan") with interest at the rate of nine percent (9%) per annum (the "Note" )
in the form attached hereto and made a part hereof as Exhibit A, dated August
31, 1995 and payable by Borrower to the Lender in monthly installments as set
forth in the amortization schedule attached to such Note.
1.2 Upon the occurrence of and during an Event of Default (as defined
herein) interest shall thereafter be calculated at a rate 3% (three percent) in
excess of the rate that would otherwise be applicable. All such interest shall
be due and payable in arrears, on the first day of the following month.
1.3 Notwithstanding any provision in this Agreement, the Note, or any
other "Loan Document" (as defined herein), it is not the parties' intent to
contract for, charge or receive interest at a rate that is greater than the
maximum rate permissible by law which a court of competent jurisdiction shall
deem applicable hereto (which under the laws of the State of Illinois shall be
deemed to be the laws relating to permissible rates of interest on commercial
loans) (the "Maximum Rate"). If the Borrower actually pays Lender an amount of
interest, chargeable on the total aggregate principal Obligations of Borrower
under this Agreement and the Note (as said rate is calculated over a period of
time that is the longer of (i) the time from the date of this Agreement through
the maturity time as set forth on the Note, or (ii) the entire period of time
that any principal is outstanding on the Note), which amount of interest exceeds
interest calculated at the Maximum Rate on said principal chargeable over said
period of time, then such excess interest actually paid by Borrower shall be
applied first, to the payment of principal outstanding on the Note; second,
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after all principal is repaid, to the payment of Lender's out of pocket costs,
expenses, and professional fees which are owed by Borrower to Lender under the
Agreement or the Loan Documents; and third, after all principal, costs,
expenses, and professional fees owed by Borrower to Lender are repaid, the
excess (if any) shall be refunded to Borrower.
1.4 In the event any interest is not paid when due hereunder, delinquent
interest shall be added to principal and shall bear interest on interest,
compounded at the rate set forth in section 1.1.
1.5 Upon and during the continuation of an Event of Default hereunder (as
defined herein), all Obligations, including principal, interest, compounded
interest, and reasonable professional fees, shall bear interest at a rate per
annum equal to the rate set forth in section 1.1 hereof, plus three percent (3%)
per annum.
1.6 Borrower shall have the option to prepay the outstanding principal of
the Note, in whole or in part, at any time after the date hereof by paying the
principal amount being prepaid together with all accrued and unpaid interest
with respect to such principal amount, as of the date of such prepayment.
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SECTION 2. SECURITY INTEREST
As security for the payment of all indebtedness ("Indebtedness") of
the Borrower to the Lender hereunder and under the Note, as the same may be
renewed, extended for any period or rearranged, and the performance by the
Borrower of its other obligations hereunder (the Indebtedness and such other
obligations being hereinafter sometimes collectively referred to as the
"Obligations"), the Borrower hereby assigns to the Lender, and grants to the
Lender a first priority security interest in, all the Borrower's right, title,
and interest in and to the following property ("Collateral"): (i) the equipment
and other property (the "Equipment") described in Exhibit B attached hereto; and
(ii) all proceeds, products, replacements, additions to, substitutions for and
accessions to any and all Equipment including, without limitation, the proceeds
applicable to the insurance referred to in Section 4 hereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that;
3.1 it has good title in and to the Equipment, free of all liens, security
interests, encumbrances and claims whatsoever, except for the interest of the
Lender therein;
3.2 it has the full power and authority to, and does hereby grant and
convey to the Lender, a valid first priority security interest in the Equipment
as security for the Obligations, free of all liens, security interests,
encumbrances and claims, and shall execute such Uniform Commercial Code ("UCC")
financing statements in connection herewith as the Lender may reasonably
request. No other lien, security interest, adverse claim or encumbrance has
been created by Borrower or is known by Borrower to exist with respect to any
Collateral;
3.3 it is a corporation duly organized, legally existing and in good
standing under the laws of the State of California, and is duly qualified as a
foreign corporation in all jurisdictions where the failure to so qualify would
have a material adverse effect on the collateral or the business of the Borrower
taken as a whole;
3.4 the execution, delivery and performance of the Note, this Agreement,
the Warrant Agreement dated August 31, 1995 pursuant to which Borrower granted
to Lender the right to purchase the number of shares o preferred stock as set
forth therein ("Warrant Agreement"), and all financing statements, certificates
and other documents required to be delivered or executed in connection herewith
(collectively the "Loan Documents") have been duly authorized by all necessary
corporate action of Borrower, the individual or individuals executing the
Documents were duly authorized to do so, the Equipment is personal property and
as used by the Borrower will not be or become fixtures under applicable law, and
the Loan Documents constitute legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization or other similar laws
generally affecting the enforcement of the rights of creditors;
3.5 it shall only relocate any item of the Equipment provided that: (a) it
shall have caused to be filed and/or delivered to the Lender all UCC financing
statements, certificates or other documents or instruments necessary to continue
in effect the first prior perfected security interest of the Lender in the
Collateral, and (b) it shall have given the Lender no less than fifteen (15)
days prior written notice of such relocation;
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3.6 the Loan Documents do not and will not violate any provisions of its
certificate of incorporation, bylaws or any contract, agreement, law,
regulation, order, injunction, judgment, decree or writ to which the Borrower is
subject, or result in the creation or imposition of any lien, security interest
or other encumbrance upon the Collateral, other than those created by this
Agreement;
3.7 the execution, delivery and performance of the Loan Documents do not
require the consent or approval of any other person or entity including, without
limitation, any regulatory authority or governmental body of the United States
or any state thereof or any political subdivision of the United States or any
state thereof.
SECTION 4. INSURANCE AND RISK OF LOSS
4.1 Risk of loss of, damage to or destruction of the Equipment shall be
borne by the Borrower and effective upon the Funding Date under the Note and
until the payment and performance in full of all Obligations, Borrower shall at
its own expense cause to be carried and maintained all risk casualty insurance
(covering risk of fire, theft and other such risks as the Lender may require,
including standard and extended coverage) with respect to each item of Equipment
in an amount no less than the "Casualty Value" applicable to such item of
Equipment during the term of this Agreement as set forth in the Casualty Value
Table attached hereto and made a part hereof as Exhibit C. All policies
evidencing such casualty insurance shall contain a standard mortgagee's
endorsement providing for payment of any loss to the Lender and shall provide
for at least thirty (30) days prior written notice by the underwriter or
insurance company to the Lender in the event of cancellation or expiration.
Borrower shall provide Lender with insurance certificates evidencing the
foregoing at time of closing.
4.2 If any item of Equipment is lost or rendered unusable as a result of
any physical damage to or destruction of such item of Equipment, Borrower shall
give to Lender prompt notice thereof. Borrower shall determine, within fifteen
(15) days after the date of occurrence of such loss, damage or destruction,
whether such item of Equipment can be repaired and restored to the condition in
which such item of Equipment was required to be maintained as of the date
immediately preceding such damage. If Borrower determines that such item of
Equipment can be repaired, Borrower, at its expense, shall cause such item of
Equipment to be promptly repaired. If Borrower determines that such item of
Equipment is lost or cannot be repaired, Borrower shall promptly notify the
Lender and such item of Equipment shall be deemed to have suffered a "Casualty
Loss" for purposes of this Section as of the date of the occurrence of such
loss. Within fifteen (15) days following the occurrence of any such loss,
damage or destruction, Borrower shall notify the Lender of the item(s) of
Equipment which has suffered such Casualty Loss ("Loss Item"), and within thirty
(30) days thereafter (the "Settlement Date"), Borrower shall either (a) replace
such item(s) of Equipment with equipment of the same model, type and feature
configuration, in an operating condition and repair no less than that required
hereunder of the damaged or lost equipment immediately prior to the date of such
damage or loss, and having a fair market value no less than the Casualty Value
applicable to such equipment as of the date immediately prior to such damage, in
which case such replacement equipment shall for all purposes hereunder become
part of the Collateral and (without limiting the preceding provisions) Borrower
shall grant to Lender a first lien and security interest in respect of such
replacement Equipment pursuant to the terms of this Agreement and Borrower shall
provide the Lender evidence satisfactory to the Lender of Borrower's good and
marketable title to such replacement Equipment (free of any liens, security
interests or encumbrances other than those created by this Agreement; and
Borrower shall be entitled to receive the amount of any insurance or other
recovery received
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by Lender up to cost of obtaining the replacement equipment; or (b) pay the
Lender the insurance proceeds payable pursuant to such insurance policies
("Insurance Proceeds") with respect to such Loss Items and the principal amount
of the Note (and interest accrued on the principal amount so prepayable) shall
become due and payable on the Settlement Date to the extent of the Casualty
Value for all such Loss Items. Monies so received shall be applied, on the date
of such receipt, as follows: first, to pay any accrued interest on the
outstanding principal amount of the Note on such date; second, to prepay, the
outstanding principal amount of the Note (to the extent of the fair market value
attributable to such Loss Items); third, to pay any other Indebtedness of
amounts then due and owing to the Lender hereunder; and fourth, so long as there
has occurred no Event of Default under Section 8 hereof and no event which with
the giving of notice or passage of time or both would constitute an Event of
Default, has occurred and is continuing, Borrower and Lender hereby agree that
the balance of any such Insurance Proceeds shall be paid promptly to the
Borrower.
On any date of partial prepayment of any Note, the Lender shall submit to
the Borrower a new schedule of principal and interest payment to provide for the
complete amortization of the remaining principal and interest payable on the
Note on the original maturity date of the Note.
4.3 Effective upon the Funding Date under the Note and while there are any
Obligations outstanding, Borrower shall cause to be carried and maintained
comprehensive general liability insurance with regard to each item of Equipment
against risks customarily insured against in the Borrower's business. Such
risks shall include, without limitation, the risks of death, bodily injury and
property damage associated with the Equipment. All policies evidencing such
insurance shall provide for at least thirty (30) days prior written notice by
the underwriter or insurance company to the Lender in the event of cancellation
or expiration.
4.4 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including without limitation such claims, costs,
expenses, damages and liabilities based on liability in tort including without
limitation strict liability in tort) including reasonable attorneys' fees,
arising out of Borrower's ownership, possession, operation, control, use,
maintenance, delivery, or other disposition of the Equipment. Notwithstanding
the foregoing, Borrower shall not be responsible under the terms of this Section
4.4 to a party indemnified hereunder for any claims, costs, expenses, damages
and liabilities occasioned by the negligence or willful misconduct of such
indemnified party.
SECTION 5. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Obligations remain outstanding:
5.1 Borrower shall maintain the Equipment in good operating order, repair,
condition and appearance and protect the Equipment from deterioration, other
than normal wear and tear. Borrower shall not use each of the Equipment or
permit its use for any purpose other than for which it was designed. Borrower's
obligation regarding the maintenance of the Equipment shall include, without
limitation, all maintenance, repair, refurbishment and replacement recommended
or advised either by the manufacturer, or that commonly performed by prudent
business and/or professional practice. Any exceptions or qualifications
expressed in this Agreement relating to normal or ordinary wear and tear shall
not be deemed to limit Borrower's obligations pursuant to the preceding
sentence.
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5.2 In the event Borrower adds or installs any Upgrade (as hereinafter
defined) on the Equipment, at the request of Lender, Borrower shall, upon the
occurrence of an Event of Default, remove any such Upgrade and restore the
Equipment to the condition in which such Equipment is required to be maintained
hereunder as if such Upgrade had never been attached thereto. Borrower will
not, without the prior written consent of Lender and subject to such conditions
as Lender may impose for its protection, affix the Equipment to any real
property if, as a result thereof, the Equipment could become a fixture under
applicable law.
For purposes hereof and all documents relating hereto, the term "Upgrade"
shall mean: (i) any accessory, equipment or device manufactured or sold by the
manufacturer of the Equipment for installation on the Equipment and installed in
compliance with said manufacturer's installation procedures (other than those
added by the manufacturer in order to maintain the Equipment at current
engineering levels), or (ii) any other accessory, equipment or device installed
on the Equipment so long as such item does not impair the original function or
use of the Equipment, capable of being removed without causing material damage
to the Equipment and does not decrease the fair market value of the Equipment.
An Upgrade shall not become an accession to the Equipment. For purposes hereof
and of all documents relating hereto, the term "Equipment" shall not be deemed
to include any such Upgrade.
5.3 Upon the request of Lender, Borrower shall, during business hours,
make the Equipment available to Lender for inspection at the place where it is
normally located and shall make Borrower's log and maintenance records
pertaining to the Equipment available to Lender for inspection. Borrower shall
take all action necessary to maintain such logs and maintenance records in a
correct and complete fashion.
5.4 Upon the request of Lender, Borrower shall cause the Equipment to be
plainly, permanently and conspicuously marked, by stenciling or by metal tag or
plate affixed thereto, indicating Lender's security interest in the Equipment.
Borrower shall replace any such stenciling, tag or plate which may be removed or
destroyed or become illegible. Borrower shall keep all Equipment free from any
marking or labeling which might be interpreted as a claim of ownership adverse
to Borrower's
5.5 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Equipment or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom. Borrower shall file on or before the due date therefor all personal
property tax returns in respect of the Equipment.
5.6 Borrower shall furnish to Lender the financial statements listed
hereinafter, prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within thirty (30) days) after
the end of each month, an internally prepared income statement, balance sheet,
and cash flow statement, provided, however, such cash flow statement shall not
be required to be prepared in accordance with generally accepted accounting
principles consistently applied, and
(b) as soon as practicable (and in any event within ninety (90) days) after
the end of each fiscal year, audited Financial Statements, setting forth in
comparative form the corresponding figures for the preceding fiscal year, and
accompanied by any audit report and opinion of the independent certified public
accountants selected by Borrower; and
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(c) promptly any additional information (including but not limited to tax
returns, income statements, balance sheets, and names of principal creditors) as
Lender reasonably believes necessary to evaluate Borrower's continuing ability
to meet financial obligations.
5.7 Notwithstanding the foregoing, after the effective date of the initial
registration statement covering a public offering of Borrower's securities, the
term "Financial Statements" shall be deemed to refer to only those statements
required by the Securities and Exchange Commission, to be provided no less
frequently than quarterly. Borrower will from time to time execute, deliver and
file, alone or with Lender, any financing statements, security agreements or
other documents; and take all further action that may be necessary, or that
Lender may reasonably request, to confirm, perfect, preserve and protect the
security interests intended to be granted hereby, and in addition, and for such
purposes only, Borrower hereby authorizes Lender to execute and deliver on
behalf of Borrower and to file such financing statements, security agreement and
other documents without the signature of Borrower either in Lender's name or in
the name of Borrower as agent and attorney-in-fact for Borrower.
5.8 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Equipment free and clear from
any attachment or levy, liens or encumbrances whatsoever (except any placed
thereon by Lender, or any liens arising by operation of law with respect to any
obligations not yet overdue or any other liens consented to in writing by
Lender) and shall give Lender immediate written notice thereof.
5.9 Upon the occurrence of an Event of Default, if Lender seeks to
foreclose on the Equipment, Borrower shall be liable for the full expense of
transportation and in-transit insurance to Lender's premises or, in the event
that Lender has immediately available warehouse space in the San Francisco bay
area, Borrower's liability for expense of transportation of the Equipment shall
be limited to the costs of transportation to such warehouse space. Borrower
will arrange for the deinstallation and audit of the Equipment, and will pack,
ship and send the Equipment to Lender in good operating order, repair, condition
and appearance, and in a condition required pursuant to subsection 5.1 hereof.
SECTION 6. CONDITIONS PRECEDENT TO LOAN
On or prior to the Funding Date, Borrower will provide to Lender the
following, in form and substance satisfactory to Lender:
6.1 Such documentation, including without limitation, a Bill of Sale, and
other documents as shall reasonably evidence Borrower's right, title and
interest in and to the Equipment;
6.2 A certified resolution or other certificate of corporate authority for
the execution and the delivery of, and the performance of all Obligations under
the Loan Documents and all related documentation;
6.3 Incumbency certificate evidencing the authority and facsimile
signatures of the individuals executing the Documents;
6.4 UCC financing statements as deemed appropriate by Lender to perfect
its security interest in the Equipment.
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6.5 Certified copies of the certificate of incorporation of Borrower;
6.6 Certificate of good standing for Borrower from its state of
incorporation and similar certificates from all jurisdictions in which it does
business and where the failure to be qualified would have a material adverse
effect on Borrower's business; and
6.7 Insurance certificates as required by Section 4 hereof.
SECTION 7. ASSIGNMENT BY LENDER
7.1 Borrower acknowledges and understands that Lender may sell and assign
all or a part of its interest hereunder and under the Note to any person or
entity (an "Assignee"). After such assignment the term Lender shall mean such
Assignee, and such Assignee shall be vested with all rights, powers and remedies
of Lender hereunder with respect to the interest so assigned; but with respect
to any such interest not so transferred, the Lender shall retain all rights,
powers and remedies hereby given. No such assignment by Lender shall relieve
Borrower of any of its obligations hereunder. Borrower shall acknowledge such
assignment or assignments as shall be designated by written notice given by
Lender to Borrower.
SECTION 8. DEFAULT
The occurrence of any one or more of the following events (herein called
"Events of Default") shall constitute a default hereunder and under the Note:
8.1 The Borrower defaults in the payment of any principal or interest
payable under the Note for more than five (5) days after the receipt of notice
of such an Event of Default from Lender;
8.2 The Borrower defaults in the payment or performance of any other
covenant or obligation of the Borrower hereunder or under the Note or any other
Loan Documents for more than thirty (30) days after the Lender has given notice
of such default to the Borrower;
8.3 Any representation or warranty made herein by the Borrower shall prove
to have been false or misleading in any material respect;
8.4 The making of an assignment by Borrower for the benefit of its
creditors or the admission by Borrower in writing of its inability to pay its
debts as they become due, or the insolvency of Borrower, or the filing by
Borrower of a voluntary petition in bankruptcy, or the adjudication of Borrower
as a bankrupt, or the filing by Borrower of any petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future statute, law or
regulation, or the filing of any answer by Borrower admitting, or the failure by
Borrower to deny, the material allegations of a petition filed against it for
any such relief, or the seeking or consenting by Borrower to, or acquiescence by
Borrower in, the appointment of any trustee, receiver or liquidator of Borrower
or of all or any substantial part of the properties of Borrower, or the
inability of Borrower to pay its debts when due, or the commission by Borrower
of any act of bankruptcy as defined in the Federal Bankruptcy Act, as amended;
8.5 The failure by Borrower, within sixty (60) days after the commencement
of any proceeding against Borrower seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, to obtain the dismissal of such
proceeding or, within sixty (60) days after the appointment, without the written
consent or acquiescence of Lender, of any
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trustee, receiver or liquidator of Borrower or of all or any substantial part of
the properties of Borrower, to vacate such appointment; or
SECTION 9. REMEDIES
Upon the occurrence of any one or more Events of Default, Lender, at its
option, may declare the Note to be accelerated and due and payable, whereupon
the unpaid principal of and accrued interest on such Note shall become
immediately due and payable, and the Lender may exercise all rights and remedies
with respect to the Collateral granted pursuant hereto for such Note, or
otherwise available to it under applicable law, including the right to release,
hold or otherwise dispose of all or any part of the Collateral.
Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonably
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere. Lender may require Borrower to assemble the Collateral and make it
available to Lender at a place designated by Lender which is reasonably
convenient to Lender and Borrower. The proceeds of any sale, disposition or
other realization upon all or any part of the Collateral shall be distributed by
Lender in the following order of priorities:
First, to Lender in an amount sufficient to pay in full Lender's reasonable
costs and professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Obligations in such order and priority as Lender may choose in its sole
discretion; and
Finally, upon payment in full of all of the Obligations, to Borrower or its
representatives or as a court of competent jurisdiction may direct.
The Lender shall return to the Borrower any surplus Collateral remaining after
payment of all Obligations.
SECTION 10. MISCELLANEOUS
10.1 Borrower shall remain liable to lender for any unpaid Obligations,
advances, costs, charges and expenses, together with interest thereon and shall
pay the same immediately to Lender at Lender's offices.
10.2 The powers conferred upon Lender by this Agreement are solely to
protect its interest in the Collateral and shall not impose any duty upon Lender
to exercise any such powers.
10.3 This is a continuing Agreement and the grant of a security interest
hereunder shall remain in full force and effect and all the rights, powers and
remedies of Lender hereunder shall continue to exist until the Obligations are
paid in full as the same become due and payable. When Borrower has paid in full
all Obligations, Lender will execute a written termination statement,
reassigning to Borrower, without recourse, the Collateral and all rights
conveyed hereby and return possession (if Lender has possession) of the
Collateral to Borrower. The rights, powers and remedies of Lender hereunder
shall be in addition to all rights, powers and remedies given by statute or rule
of law and are cumulative. The exercise of any one or more of the rights,
powers and remedies provided herein shall not be construed as a waiver of any
other rights, powers and remedies of Lender. Furthermore, regardless of whether
or not the Ucc is in effect in the jurisdiction where such rights,
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powers and remedies are asserted, Lender shall have the rights, powers and
remedies of a secured party under the UCC.
10.4 Upon payment in full of all Obligations, the Lender shall cancel the
Note, this Agreement and all UCC financing statements, if any, and shall
promptly deliver all such canceled documents to the Borrower.
10.5 GOVERNING LAW. This Agreement and the other Loan Documents have been
negotiated and delivered to Lender in the State of Illinois and shall not become
effective until accepted by Lender in the State of Illinois. Payment to Lender
by Borrower of the Obligations is due in the State of Illinois. This Agreement
shall be governed by, and construed and enforced in accordance with the laws of
the State of Illinois, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
10.6 CONSENT TO JURISDICTION AND VENUE. All judicial proceedings arising in
or under or related to this Agreement, the Note or any of the other Loan
Documents may be brought in any state or federal court of competent jurisdiction
located in the State of Illinois. By execution and delivery of this Agreement,
each party hereto generally and unconditionally: (a) consents to personal
jurisdiction in Cook County, State of Illinois; (b) waives any objection as to
jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement, the
Note an the other Loan Documents. Service of process on any party hereto in any
action arising out of or relating to this agreement shall be effective if given
in accordance with the requirements for notice set forth in subsection 10.8
below and shall be deemed effective and received as set forth in subsection 10.8
below. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of either party to bring
proceedings in the courts of any other jurisdiction.
10.7 Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective only to the extent and duration of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.8 Any notice required or given hereunder shall be deemed properly given
upon the earlier of: (i) the first business day after transmission by facsimile
or hand delivery or deposit with an overnight express service or overnight mail
delivery service; or (ii) three (3) days after mailed, postage prepaid, in each
case, addressed to the designated recipient at its address set forth herein or
such other address as such party may advise the other party by notice given in
accordance with this provision.
10.9 Lender and Borrower acknowledge that there are no agreements or
understandings, written or oral, between Lender and Borrower with respect to the
Loan, other than as set forth herein, in the Note and the other Loan Documents
and that this Agreement, the Note and the other Loan Documents contain the
entire agreement between Lender and Borrower with respect thereto. None of the
terms of this Agreement, the Note or the other Loan Documents may be amended
except by an instrument executed by each of the parties hereto.
10.10 No omission, or delay, by Lender at any time to enforce any right or
remedy reserved to it, or to require performance of any of the terms, covenants
or provisions hereof by Borrower at any time designated, shall be a waiver of
any such right or remedy to which Lender is entitled, nor shall it in any way
affect the right of Lender to enforce such provisions thereafter.
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10.11 All agreements, representations and warranties contained in this
Agreement or the Note, or in any Loan Documents delivered pursuant hereto or in
connection herewith shall be for the benefit of Lender and any Assignee and
shall survive the execution and delivery of this Agreement or the Note and the
expiration or other termination of this Agreement or the Note.
10.12 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument.
10.13 This Agreement shall be binding upon, and shall inure to the benefit
of, Borrower and its permitted assigns (if any). Borrower shall not assign its
Obligations under this Agreement, the Note or any of the other Loan Documents
without Lender's express written consent and any such attempted assignment shall
be void and of no effect. Any assignment by Borrower in connection with a
"Merger" (as defined below) shall be subject to Lender's prior consent (which
shall not be unreasonably withheld or delayed), provided such surviving entity
or transferee: (i) assumes Borrower's Obligations hereunder pursuant to
assignment documents reasonably acceptable to Lender; (ii) such entity or
transferee has a net worth equal to or greater than ten (10) times the
outstanding principal and accrued and unpaid interest and (iii) such entity or
transferee has a net worth of at least $5,000,000. If Lender reasonably
withholds its consent to such assignment in connection with a Merger, the
outstanding principal and accrued and unpaid interest shall be prepaid in whole.
Lender may assign, transfer or endorse its rights hereunder, under the Note
and under the other Loan Documents without prior notice to Borrower, and all of
such rights shall inure to the benefit of Lender's successors and assigns. The
Lender agrees that, in the event of any transfer by it of any of the Note, it
will endorse thereon a notation as to the portion of the principal of the Note
which shall have been paid at the time of such transfer and as to the date to
which interest shall have been last paid thereon.
For purposes of this Agreement, a "Merger" shall mean any consolidation or
merger of the Borrower with or into any other corporation or entity, any sale or
conveyance of an or substantially all of the assets or stock of the Borrower by
or to any other person or entity in which Borrower is not the surviving entity.
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and
delivered this Agreement as of the day and year first above written.
BORROWER: CORSAIR COMMUNICATION, INC.
By: /s/ John F. Scott
--------------------
Title: Vice President
-----------------
Date: 8/31/95
------------------
ACCEPTED IN ROSEMONT, ILLINOIS
LENDER: COMDISCO, INC
By: /s/ James Labe
-----------------
Title: illegible
------------
Date: 9/5/95
---------------
10
<PAGE>
EXHIBIT A
SECURED PROMISSORY NOTE
$l,000,000.00 Date: August 31, 1995
Due: March 1, 1999
For value received, Corsair Communications, Inc., (the "Borrower") promises
to pay to the order of Comdisco, Inc. (the "Lender") at P.O. Box 91744, Chicago,
IL 60693 (or such other address as the Lender shall designate to Borrower) the
principal amount of $1,000,000.00 together with interest at the rate of 9% per
annum, from the due date of this Note to maturity of each installment on the
principal hereof remaining from time to time unpaid, such principal and interest
to be paid in 48 equal monthly installments of $27,637.24 each, commencing
September 1, 1995 and on the same day of each month thereafter to and including
February 1, 1999 and a last installment of $150,000.00 to be paid on March 1,
1999, such installments to be applied first to accrued and unpaid interest and
the balance to unpaid principal. Interest shall be computed on the basis of a
year consisting of twelve months of thirty days each at a rate of nine percent
(9%) per annum.
The Borrower expressly waives demand and presentment for payment, notice of
protest, dishonor, and any other notice as permitted under the UCC or any
applicable law.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Loan and Security Agreement dated August 31, 1995
between the Borrower and the Lender, (as the same may from time to time be
amended, modified or supplemented in accordance with its terms, the "Loan
Agreement") and is entitled to the benefit and security of the Loan Agreement
and the other Loan Documents (as defined in the Loan Agreement), to which
reference is made for a statement of all of the terms and conditions thereof.
All terms defined in the Loan Agreement shall have the same definitions when
used herein, unless otherwise defined herein. The Borrower may prepay this
Note, in whole or in part, at any time but only in accordance with the
provisions of the Loan Agreement.
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and
enforced in accordance with the laws of the State of Illinois, excluding any
conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.
BORROWER: CORSAIR COMMUNICATIONS
Signature:________________________________________
Print Name:_______________________________________
Title:____________________________________________
Accepted in Rosemont, Illinois:
LENDER: COMDISCO, INC.
Signature:________________________________________
Print Name:_______________________________________
Title:____________________________________________
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS GOING WITH PHONEPRINT
HP 7550A 231 CMPTR PLOTTER GRPH 86/01/21 C0012235 2520A20644 1
APPLE MACPLUS 686 COMPUTER PERSONAL 87-03-16 C0014120 F7101K2M00 1 2,294.63 2,294.63
APPLE MACPLUS 551 COMPUTER PERSONAL 87-4-28 C0014342 F6050CM0200 1 1,837.45 1,837.45
APPLE MACPL US COMPUTER PERSONAL 87-6-15 C0014542 F7232M2M00 1 1,508.13 1,508.13
452
APPLE MAC PLUS 745 COMPUTER PERSONAL 87-5-10 C0016103 F819350M00 1 1,460.17 1,460.17
AST PREMIUM 286 COMPUTER PERSONAL -- C0017172 38521 1 0.00
APPLE MAC II 459 COMPUTER PERSONAL 87-7-26 C0017215 F926DEM56 1 3,827.87 3,827.87
APPLE ? CMPTR MONITOR COLOR ? C0017806 1 0.00 0.00
APPLE MAC II 547 COMPUTER PERSONAL 91-9-5 C0019273 F51245N576 1 4,560.80 3,624.93
APPLE M0402 189 CMPTR MONITOR, MONO 91-9-05 C0019285 PH1238K35M 1 1,561.19 1,240.84
APPLE M0402 188 CMPTR MONITOR, MONO 91-8-20 C0019290 PH1239USA1 1 1,561.74 1,255.54
APPLE MAC II 505 COMPUTER PERSONAL 91-8-20 C0019291 F51270UG76 1 4,208.20 3,376.66
APPLE MAC II 408 COMPUTER PERSONAL 91-11-11 C0019589 F113881XC5 1 3,403.30 2,653.23
RADIUS 168 218 CMPTR, MONITOR 91-11-19 C0019590 DCH1410A00 1 1,395.30 1,068.23
APPLE MAC II ? MAC 11C1 W/EXT KYBD ? C0019941 F11441A1716 1 4,327.13 3,285.73
RADIUS TPD/19 CMPTR MONITOR 92-4-1 C0020185 DCH2040A01 1 1,305.13 341.43
245
APPLE MACII 11044 COMPUTER, PERSONAL 92-5-7 C0020195 F12176F971 1 4,353.50 3,085.11
RADIUS TPD/19 COMPTR MONITOR 92-12-14 C0021173 DCH26/ 1 1,109.13 687.66
2DA04
APPLE CENTRIS 1342 COMPUTER PERSONAL 93-4-5 C0021600 F1311CLDOC 1 4,194.11 2,246.18
DELL 1351 COMPUTER COMPUTER PERSONAL 93-6-16 C0021988 2KY12 1 4,221.88 2,082.79
S466/M
DELL 1351 COMPUTER COMPUTER PERSONAL 93-6-16 C0021989 2KY16 1 4,221.88 2,082.79
S466/M
APPLE CENTRIS COMPUTER PERSONAL 93-6-8 C0021990 F1305DAYOC 1 6,040.86 2,940.16
1933
APPLE CENTRIS COMPUTER PERSONAL 93-6-8 C0021991 F13050QYOC 1 6,040.88 2,940.17
1933
RADIUS CMPTR MONITOR, COLOR 93-7-13 C0021992 WTB324A105 1 2,247.53 1,061.33
719 350
RADIUS CMPTR MONITOR, COLOR 93-7-13 C0021993 WTB324A100 1 2,247.56 1,0051.34
719 350
TEXAS INSTR 531 2559821 CMPTR PRINTER LASER 93-6-15 C0021994 321030674 1 1,660.56 819.21
APPLE QUADRA 449 CENTRIS 650 C0022026 CK327000CG7 1 4,263.01 1,914.06
APPLE CENTRIS 1243 COMPUTER PERSONAL 93-6-24 C0022035 F1321D3550C 1 3,884.73 1,916.44
APPLE CENTRIS 1243 COMPUTER PERSONAL 93-6-24 C0022037 F1321DN90C 1 3,884.73 1,916.44
APPLE CENTRIS 473 COMPUTER PERSONAL 93-8-4 C0022137 F23075WSCN 1 3,281.96 1,480.93
APPLE CENTRIS 473 COMPUTER PERSONAL 93-8-4 C0022138 F23075WWCN 1 3,281.96 1,480.53
APPLE CENTRIS (610) COMUTER PERSONAL 93-8-4 C0022139 F2331HXMCN 1 3,281.96 1,480.51
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022140 F2307KB3CN 1 1,780.56 807.74
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022141 F2307W66CN 1 1,780.56 807.74
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022142 F2307KB5CN 1 1,780.56 807.74
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022143 F23075NRCN 1 1,790.56 807.74
290
APPLE CENTRIS 573 COMPUTER PERSONAL 93-8-4 C0022145 F23073WUCN 1 1,790.56 807.74
RADIUS 770 348 CMPTR MONITOR COLOR 93-5-4 C0022145 HNC7190ADI 1 2,405.36 1,064.34
RADIUS 779 348 21" COLOR MONITOR 93-5-15 C0022146 HNC190ADI00A 1 2,463.40 1,099.15
APPLE PRO 630 814 CMPTR PTINER LASER 93-11-19 C0022147 F132614010 1 2,344.56 1,147.23
NCA 4542NT 717A CMPTR DRIVE DISK 94-3-11 C0022151 G9360753 1 1,406.17 634.32
NCA MXT1240S 660 CMPTR DRIVE DISK 94-3-1 C0022196 G93658772 1 1,234.67 584.04
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-21 C0022479 C03905VIC 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022480 CX3905VFI 1 3,236.95 1,255.22
(610)
</TABLE>
Page 1 of 10
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022481 CX371U8ZIC 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022482 CX337UZ1C 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022483 CX33725I1C 1 2,083.94 808.11
(610)
APPLE 504 QUADRA COMPUTER PERSONAL/21" CLR 93-11-9 C0022484 CX3371V21C 1 2,083.94 808.11
(610) MONITOR
RADIUS 448 381 CMPTR MONITOR COLOR 93-10-8 C0022485 SSG33ZA103 1 2,961.19 1,210.84
RADIUS 948 381 CMPTR MONITOR COLOR 93-10-5 C0022486 SSG33ZA103 1 2,961.19 1,210.84
DELL 1,269 COMPUTER COMPUTER PERSONAL 93-10-8 C0022528 30MW5 1 3,933.48 1,608.36
S466M
DELL 1,259 COMPUTER COMPUTER PERSONAL 93-10-8 C0022529 30MW6 1 3,933.50 1,606.37
S466M
CHAPLET SYS 1,627 COMPUTER PERSONAL LLPTR 2/OK C0022619 71263M347 1 5,068.67 1,872.50
NBD486T
SUN MICROSYS 10GXN-407 457 WORKSTATION 94-10-6 C0023073 35054623 1 14,621.40 4,873.50
SUN MICROSYS 10GXN-407,579 WORKSTATION 94-10-6 C0023074 35054632 1 14,469.30 4,795.38
SUN MICROSYS 4/1 5EC-32 177 WORKSTATION 94-10-6 C0023075 351F1078 1 5,656.06 1,385.36
SUN MICROSYS 4/1 5EC-32 177 WORKSTATION 94-1-6 C0023076 351F1068 1 5,656.06 1,385.36
SUN MICROSYS 4/10EC-8 199 WORKSTATION 94-10-6 C0023077 351F2559 1 2,837.55 975.38
SUN MICROSYS X547A-ST 9859 CMPTR DRIVE DISK 94-10-6 C0023078 35183300 1 4,439.00 1,476.53
SUN MICROSYS X547A-ST2 259 CMPTR, DRIVE DISK 94-10-6 C0023079 351U3356 1 2,961.53 1,416.53
</TABLE>
Page 2 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET# SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
APPLE 990 POWERBOOK COMPUTER PERSONAL LPTP 93-12-22 C0023101 PC3480MU44 1 3,094.63 1,134.70
APPLE 990 POWERBOOK COMPUTER PERSONAL LPTP 93-12-22 C0023102 PC347D0744 1 3,094.63 1,134.70
APPLE 990 POWERBOOK COMPUTER PERSONAL LPTP 93-12-72 C0023103 PC348DB444 1 3,094.63 1,134.70
APPLE 940 QUADRA COMPUTER PERSONAL 93-12-21 C0023104 PC3465LTIC 1 2,952.33 1,082.52
APPLE 940 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023105 PC3490QHIC 1 2,952.33 1,082.52
/OU
APPLE 445 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023106 PC3495C41C 1 2,952.33 1,082.52
/OU
APPLE 945 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023107 PC3495561C 1 2,952.33 1,082.52
/OU
APPLE 945 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023108 PC3490031C 1 2,952.33 1,082.52
/OU
APPLE 945 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023109 PC465NX1C 1 2,952.33 1,082.52
/OU
APPLE 945 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023110 PC49080IC 1 2,952.33 1,082.52
/OU
APPLE 945 QUADRA COMPUTER PERSONAL 93-12-21 C0023111 FC4504TIC 1 2,952.34 1,082.52
(610)
MICRONET SS-D16000 COMPUTER DRIVE TAPE DATE ? C0023115 5301768 1 1,749.32 734.72
486 COMPUTER - C0023197 1 2,919.93 724.73
HP 7550A 231 CMPTR, PLOTTER, GRPH - C0023308 2631A36846 1 2,080.04 534.68
DELL 1800 COMPUTER COMPUTER PERSONAL 94-3-4 C0023309 3DYPS 1 3,530.99 941.60
S486D
DELL 1800 COMPUTER COMPUTER PERSONAL 94-3-4 C0023310 3DYFM 1 3,530.99 941.60
S486D
DELL 1800 COMPUTER COMPUTER PERSONAL 94-3-4 C0023311 3DYRD 1 3,530.99 941.60
S486D
FR SYSTEMS COM-120A CMPTR, MONITOR 94-3-22 CC0023404 1686 1 3,201.89 3,520.50
6,733
IBM 800 425SX/SI COMPUTER PERSONAL 94-4-11 C0023529 FS02323KKP 1 1,367.70 365.80
IBM 744 425SX/SI COMPUTER PERSONAL 94-4-11 C0023530 PS02323KKI 1 1,457.46 351.95
APPLE 676 QUADRA COMPUTER PERSONAL 94-4-11 C0023531 PC3490E41C 1 5,949.25 1,224.36
APPLE 227 QUADRA COMPUTER PERSONAL 94-3-30 C0023532 PC406015U 1 2,404.99 641.33
APPLE ? QUADRA COMPUTER PERSONAL 94-3-30 C0023533 PC406006U 1 2,404.99 641.33
APPLE QUADRA COMPUTER PERSONAL --? C0023534 PC4060CXU 1 2,295.70 993.52
APPLE 1135 QUADRA COMPUTER PERSONAL 94-3-30 C0023535 PC40600HU 1 2,225.69 593.52
APPLE 1,135 QUADRA COMPUTER PERSONAL 94-3-30 C0023536 PC40600UU 1 2,225.70 593.52
APPLE 2,428 POWER MAC COMPUTER PERSONAL 94-4-14 C0023537 XB412CCNZQ 1 3,617.27 813.46
APPLE 2,428 POWER MAC COMPUTER PERSONAL 94-4-13 C0023538 XB412VDNZQ 1 3,617.28 815.46
APPLE 1,349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-21 C0023605 PC406SYI44 1 2,645.13 617.20
APPLE 1349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-21 C0023605 PC4065VY44 1 2,645.13 617.20
APPLE 1349 POWERMAC COMPUTER PERSONAL 94-4-21 C0023621 XB407LWP19 1 3,232.23 754.19
APPLE 1349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-28 C0023634 PC40458B44 1 2,938.53 676.17
APPLE 1349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-28 C0003635 PC404TBY4 1 2,938.51 676.17
APPLE 1227 QUADRA COMPUTER PERSONAL 94-4-18 C0023647 PC404074U 1 2,404.99 641.33
APPLE 1227 QUADRA COMPUTER PERSONAL 94-4-18 C0023648 PC40603UU 1 2,404.99 641.33
APPLE 1227 QUADRA COMPUTER PERSONAL 94-4-18 C0023649 PC40413RU 1 2,404.99 641.33
APPLE 504 QUADRA610 COMPTR-PERSON 94-6-10 C0023782 DCL4100A01 1 2,774.56 462.43
PERSONAL COMPUTER C0023783 1 5,164.32 660.75
APPLE 2,229 PB DUO POWERBOOK DUO 280c w17" DISP - C0023903 PC429HNT230 1 5,096.67 509.67
280/280C
1224 POWERBOOK DUO 280c w17" DISP - C0023904 1 5,096.67 509.67
APPLE 1,751 M3077 COMPUTER PERSONAL 94-8-14 C0023906 PC4230602Q 1 3,434.08 343.41
(POWERm)
? 17 COLOR MONITOR - C0023907 1 1,017.55 101.76
A
APPLE M2612 1043 CMPTR MONITOR, COLOR 20 94-8-18 C0023909 114130091X 1 2,045.93 204.50
- - ? POWERBOOK 180 - C0023924 1 2,960.76 288.75
- - ? POWERBOOK 180 - C0023925 1 2,960.76 288.75
APPLE 1,239 6100 CMPTR PERSONAL 94-9-6 C0023926 XB432IR217 1 3,257.81 223.86
(POWERMAC)
</TABLE>
Page 3 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET# SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
APPLE 1,239 6100 CMPTR PERSONAL 94-9-6 C0023927 XB43225A17 1 3,357.81 223.86
(POWERMAC)
APPLE 670 M2464 MONITOR-CMPTR 94-9-6 C0023935 PC41316598 1 3,291.03 219.40
POWERMAC
APPLE 1,049 C0-890 MONITOR,COLOR (20) 94-9-6 C0023936 544290841XY 1 2,055.92 137.05
APPLE 1,678 M2464 MONITOR CMPTR 94-7-96 C0023937 PC4112YIU 1 3,291.06 219.40
(POWERPC)
APPLE 1049 C0890 MONOTIR, COLOR 94-9-6 C0023938 S44S98MIXY 1 2,055.92 137.06
APPLE 4128 8100 CMPTR PERSONAL 94-9-6 C0023939 XB42UYP50 1 2,094.18 539.62
SPARC STAT - C0023964 1 1,103.83 0.00
5 GB TAPE - C0023965 1 1,250.29 0.00
SUN MICROS 41OFC2-1825 WORKSTATION 94-10-10 C0023869 441F1232 1 1,577.59 119.25
SUN MICROS 415FC2-2359 WORKSTATION,CLASSIC 94-10-20 30023970 440F1652 1 4,624.53 154.15
RADIUS C0507 MONITOR, COLOR 17" - C0023971 SS1428A162 1 1,095.00 36.50
APPLE 418 QUADRA 605 CMPTR PERSONAL 94-10-10 C0023972 XB43502K2D 1 2,393.28 79.78
APPLE 418 QUADRA 605 COMPUTER PERSONAL 94-10-10 C0029273 XB43500D 1 2,393.28 79.78
SPORTSTER NA 1,172 CMPTR. PERSONAL 94-10-19 C0023974 N/A 1 2,295.85 276.61
APPLE 3125 M2332 POWERBOOK 94-10-20 C0023991 PC433HB823 1 6,127.52 204.25
APPLE 3125 M2332 POWERBOOK 94-20-20 C0023992 PC438HR023 1 6,127.52 20.25
INTEL 486 DXL 486 COMPUTER CO023995 1 4,1588 138.20
APPLE 7100 PERSONAL COMPUTER C0023996 1 4,912.14 163.74
APPLE 7100 PERSONAL COMPUTER C0023997 1 4,912.14 163.74
COMPAQ PROLINEA FOR PAYROLL C0024046 1 2,336.54 0.00
APPLE POWERBOOK 520 FOR FINANCE C0024047 1 3,089.08 0.00
APPLE POWERBOOK 520 FOR FINANCE C0024048 1 3,029.08 0.00
APPLE 7100 PERSONAL COMPUTER C0024049 FC4410CR3YK 1 4,420.45 0.00
APPLE 7100 PERSONAL COMPUTER C0024050 FC4410DW3YK 1 4,420.46 0.00
2500 PENTIUM 90 MHZ FOR STODDARD C0024111 1 4,600.62 0.00
2500 PENTIUM 90 MHZ FOR STODDARD C0024112 1 4,600.62 0.00
1932 POWERBOOK 123 C0024113 1 3,086.21 0.00
TEXTRONIX 7A18N SCOPE PN, DUAL 74-5-2 C0004026 B054254 2 531.20 525.89
TEXTRONIX 7A18N SCOPE PN, DUAL CH 74-5-2 C0004028 B054271 2 531.20 525.89
TEXTRONIX 7704 SCOPE GP, MF 75-9-22 C0004208 B143141 2 3,211.80 3,179.68
HP 6267B PWR SUPP. DC 75-9-1 C0004227 1512A02235 2 750.87 743.36
TEXTRONIX 475DM43 SCOPEPORTABLE 75-8-26 C0004280 252551 2 3,421.74 3,387.52
POWER DESIG TP325 POWER SUPPLY, TRIPLE 76-4-1 C0004357 602113 2 430.00 425.70
TEXTRONIX 7A26 SCOPE PN, DUAL CH 76-4-14 C000440 B129107 2 1,220.20 1,208.00
TEXTRONIX 7B80 SCOPE PN, TIME BASES 77-3-1 C0004649 B041473 2 794.74 786.79
TEXTRONIX 7B53A SCOPE PN DUAL 77-7-1 C0004879 B124703 2 1,039.80 1,029.40
HP 6002A PWR SUPP. DC 78-5-28 C0005290 1802A01049 2 1,251.43 1,238.92
TEXTRONIX 7B53A SCOPE PN, TIME BASE 78-5-30 C0005319 B189223 2 1,134.91 1,121.56
KROHN-HITE 3202R FILTER, TUNABLE 78-6-13 C0005370 3396 2 1,071.23 1,060.62
HP 3964A RCRDR INSTRUMENT 78-7-15 C0005438 1821A0701 2 7,116.18 7,045.02
TEXTRONIX 7A26 SCOPE PN DUAL CH 78-7-28 C0005452 B189524 2 1,412.59 1,394.47
TEXTRONIX 7B85 SCOPE PN TIME BASE 78-12-13 C0005598 B064025 2 1,093.22 1,062.29
SD TIME CODE READER 8132 C0005825 2
HP 436A METER, POWER, MW 19-10-5 C0006519 1930A05680 2 2,350.21 2,326.71
HP 8656A GEN SIGNAL 82-1-29 C0007157 2142A01924 2 7,203.40 7,203.40
HP 197B CAMERA SCOPE 83-3-15 C0007573 1905A04498 2 1,544.41 1,544.41
HP 8970A METER NOISE 83-4-12 C0007647 2221A01029 2 9,948.28 9,948.28
TEXTRONIX 485 SCOPE PORTABLE 83-5-4 C0007725 B191464 2 8,196.25 8,196.25
HP 5335A COUNTER ELEC C0007925 2321A04740 2 4,081.58 4,081.58
BSG PROJ 5110 MODULE AMPL BIAS C00116025 2321A04740 2 4,081.58 4,081.58
TEXTRONIX 2445 SCOPE PORTABLE C0011887 2 2
TEXTRONIX 2465CTS O'SCOPE SNB052750 C0012315 BCG0280 2 4,140.80 4,140.80
HP 160G LOGIC ANALYZER C0012426 2 15,070.21 15,070.21
HP 6024A POWER SUPPLY C0012969 2526A04501 2 1,335.36 1,335.16
IBM 6180-002 CMP FTR PLOTTER CLR 87-2-6 C0013809 11448 2
HP 3335A GEN SYNTHESIZER 87-2-24 C0014059 2516A04099 2 11,401.92 11,401.92
HP 5385A COUNTER ELEC 91-8-9 C0017628 2710A04821 2 2,054,05 2,016.58
HP HP 6632A PWR SUPP. DC 91-5-14 C0019030 2708A00130 2 1,244.82 932.48
FLUKE MFG 6080A GEN SIGNAL 91-7-19 C0019122 53115701 2 21,309.88 17,261.02
</TABLE>
Page 4 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HP 6632A PWR SUPP DC 91-6-14 C0019126 3002A0439 2 1,760.15 1,439.11
HP 6632A PWR SUPP DC 91-6-14 C0019128 3002A0424 2 1,760.15 1,439.11
HP 5087A AMPL DISTR 93-3-10 C0021441 2208A0474 2 2,929.02 1,630.49
IFR SYSTEMS COM120A MONITOR COMMUNCATION 93-3-16 C0021580 485001182 2 12,870.00 7,207.20
IFR SYSTEMS 120A RECEIVER COMM 93-7-23 C0021984 485001135 2 13,949.08 6,587.07
NCA PERIPHERAL CHPTR DRIVE DISK 93-6-2 C0021985 G93657270 2 1,526.33 752.99
MXT
NCA PERIPHERAL CMPTR DRIVE DISK 93-6-2 C021986 G93657272 2 1,526.32 752.99
MXT
II INC 2PB36A-006 CCADSP 93-6-18 C0022048 97273 2 1,618.34 809.14
BURR-BROWN 2PB1007-001 CONVERTER A/D 93-6-18 C0022049 98777 2 6,489.39 3,244.79
NCA 4542NT CMPTR DRIVE DISK 94-3-11 C0022150 G93660752 2 1,406.17 634.32
DIGITAL EQ 400090 SYSTEM VAC 94-3-1 C0022191 930169345 2 30,255.88 12,171.25
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022197 2 1,294.67 584.04
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022198 2 1,294.67 584.04
STANFORD RE SR620 COUNTER UNIVERSAL 93-12-17 C0023118 1383 2 4,871.25 1,623.76
STANFORD RE FS700 FREQ STD LORAN 93-12-17 C0023119 405 2 5,737.25 1,912.42
LOW PHASE NOISE OSCL C0023196 2 3,412.95 1,023.75
PANASONIC KX-B8520 PRINT BOARD ELECTRONIC 9-4-11 C0023375 0733221A07 2 1,417.56 383.36
COMPBINET CB-400 BRIDGE ETHERNET 94-3-24 C0023433 A3-3127 2 2,319.91 611.65
NOISE COLM UFX7109 GEN NOISE PROGRAMMABLE 94-4-8 C0023434 2022 2 8,478.50 1,978.22
4MM TAPE DRIVE C0023551 2 1,369.96 319.66
HP 8560E ANAL SPECTRUM 94-7-26 C0023814 3425A01019 2 27,199.93 1,621.32
AUTOCAD SYSTEM C0023823 2 6,392.16 852.29
17 MONITOR C0023824 2 1,515.50 202.07
LASER PRINTER C0023825 2 4,912.02 654.93
2GB HD SCSI-II CABLE C0023963 2 1,216.73 81.12
4.2 GB MUL C0023966 2 3,196.77 0.00
4.2 GB MUL C0023967 2 3,196.77 0.00
4.2 GB MUL C0023963 2 3,196.77 0.00
CSC 1924EXT DRIVE DISK SCSI 94-10-10 C0023975 828315 2 1,093.30 36.44
CSC 1924EXT DRIVE DISK SCSI 94-10-10 C0023976 829405 2 1,093.30 36.44
RADIUS C0507 DRIVE DISK SCSI 94-10-10 C0023977 S91428A1E2 2 1,093.30 36.44
2 GB SCSI C0023978 2 1,093.30 36.44
2 GB SCSI C0023979 2 1,093.30 36.44
2 GB SCSI C0023980 2 1,093.30 36.44
2 GB SCSI C0023981 2 1,093.30 36.44
2 GB SCSI C0023982 2 1,093.30 36.44
2 GB SCSI C0023983 2 1,093.30 36.44
CSC 1924EXT DRIVE DISK SCSI C0023985 2 1,093.30 36.44
2 GB SCSI C0023986 2 1,093.30 36.44
19-2 GB HD & 13 TERMINATORS C0023987 2 1,093.30 36.44
2 GB SCSI C0023988 2 1,093.30 36.44
XYPLEX SERVER C0023999 2 2,209.19 0.00
SUN WORK STATION C0024096 2 7,035.93 0.00
PHONEMAID SIGNAL GENERATORS Self-Corrected 2 72,950.00 0.00
(2)
POWER DESIGN 3610ORF PWR SUPPLY DC 70-9-1 C0001464 810016 3
TEXTRONIX 2335 SCOPE PORTABLE 83-3-18 C0007583 8012536 3 2,715.75 2,715.79
TEXTRONIX 495P ANAL SPECT 83-6-23 C0007792 B010488 3 30,354.49 30,854.49
HP 6653A POWER SUPPLY 94-4-7 C0022979 3347A01177 3 3,076.98 717.57
HP 6653A POWER SUPPLY 94-4-7 C0022980 3347A01585 3 2,976.63 694.54
HP 6653A POWER SUPPLY 94-4-7 C0022981 3347A01182 3 2,976.62 694.56
HP 6653A POWER SUPPLY 94-4-15 C0022982 3345A00408 3 1,828.07 457.49
HP 6543A POWER SUPPLY 94-3-12 C0022983 3218400175 3 4,601.51 1,227.07
HP 6543A POWER SUPPLY 94-3-12 C0022984 3218A00139 3 1,828.07 4487.49
HP 6543A POWER SUPPLY 94-3-12 C0022985 3218A00172 3 1,828.07 487.49
HP 6543A POWER SUPPLY 94-3-12 C0022986 3218A00176 3 1,828.08 487.49
TEXTRONIX TA5475 SCOPE PORTABLE 94-3-22 C0023312 B011081 3 2,614.04 697.08
TEXTRONIX 2232 SCOPE PORTABLE 94-3-22 C0023314 B032127 3 6,748.34 1,789.56
HP 856B8 ANALSPECT 94-3-1 C0023405 2601A82551 3 19,903.88 4,641.24
HP 8482B SENSOR POWER 94-3-1 C0023406 2149A02159 3 18,943.75 5,681.16
</TABLE>
Page 5 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HP 8657B GEN SIGNAL 94-3-12 C0023407 3133002203 3 16,957.72 4,522.66
HP 437B METER POWER MW 94-3-15 C0023408 3125U10460 3 2,898.80 869.64
HP 5385A COUNTER ELEC 94-6-6 C0023473 3242A07945 3 2,992.81 988.08
POWER SUPPLY 94-6-6 C0023574 3 4,001.51 613.53
HP 5385A COUNTER ELEC 94-5-27 C00235704 2730406273 3 2,130.88 355.15
DRIVE CONTROL C0023784 3 5,358.38 893.07
DSP32C BOARD C0023874 3 3,085.13 0.00
1924EXT DRIVE DISK SCSI C0023984 87898 3 1,093.30 36.44
MACRONI SIGNAL GENERATOR C0024035 3 24,023.92 0.00
RUGGED COMPUTERS C0024109 3 4,054.25 135.14
RUGGED COMPUTERS C0024110 3 3,907.83 781.57
IBM SEL III TYPEWRITER C0006472 4555133 4
APPLE PRO 630 LASERWRITER PRO 630 C0022148 F132614H108 4 2,544.57 1,147.89
HP FAX 950 FAX-EXPENSED C0023902 IPA4403940 4
HP 451MX LASERJET PRINTER C0024045 USGD517900 4 4,364.48 0.00
HP 8591E ANALSPECT PORTABLE 94-7-21 C0023831 3412A0597 5 12,052.43 1,740.32
SUN MYCROSY X8522A STORAGE PACKAGE 94-9-30 C0023954 43804220 5 1,254.29 83.62
SUN MYCROSY X569A DRIVE DISK 420B 94-9-30 C0023955 43603607 5 2,146.95 209.36
SUN MYCROSY X569A DRIVE DISK 4.2GB 94-9-30 C0023956 43631603 5 3,147.80 209.86
SUN MYCROSY X569A DRIVE DISK 4.2GB 94-930 C0023957 43603341 5 3,147.82 2209.86
XYPLEX SERVER C0023958 5 2,288.19 0.00
1 SUN 4.2GB DISK PACKS C0024122 5 2,857.20 0.00
1 SUN 4.2GB DISK PACKS C0024123 5 2,857.20 0.00
1 SUN 4.2GB DISK PACKS C0024124 5 2,857.80 0.00
1 SUN 4.2GB DISK PACKS C0024125 5 2,857.80 0.00
1 SUN 4.2GB DISK PACKS C0024126 5 2,257.20 0.00
XPLEX SERVER C0024127 5 2,972.73 0.00
XPLEX SERVER C0024128 5 2,972.73 0.00
ENGINEE XB024-10 PLATFORM LIFTER C0023120 62834-02 6 1,254.08 376.22
ENGINEE XB024-10 PLATFORM LIFTER C0023121 62818-01 6 1,254.08 376.22
ENGINEE XB024-10 PLATFROM TRUCK/LIFT C0023160 63956.02 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023161 67966-03 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023162 63966-04 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023163 63956-01 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023164 63956-05 6 1,503.24 400.87
WORK BENCHES C0023539 6 4,799.63 959.93
WIRE SHELF CARTS C0023540 6 1,679.62 3335.93
FLOOR SCALE C0024036 6 2,803.68 0.00
INSTAPAK MODEL 750 PACKGING C0024129 6 3197.00 0.00
STOCKROOM SECURITY ENCODERS C0022850
HP 3100 C0023841 37,253.97 2.423.08
</TABLE>
* Does Not Include HP3100 Computer. Disposition of this unit is not yet
decided.
** Does not include rack units in cage (warehousing units) which may or may
not be removed when building is vacated. Disposition of this unit is not
yet decided.
Page 6 of 10
<PAGE>
<TABLE>
<CAPTION>
CORSAIR 1995 FIXED ASSET PURCHASES THROUGH 6/30/95
===========================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Computer Equipment (1600)
- -------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Acropolis 950606002, 950606001, 6017 AS171-42801 SCSI disk pedestal w/kit 3954 $10,207.98 5/26/95
- ---------------------------------------------------------------------------------------------------------------------------
Arcom 3C509B 3COM Ethink III 16bit 20 pack 3959 $ 1,643.19 6/8/95
- ---------------------------------------------------------------------------------------------------------------------------
Arcom 000655-0 USROBO Total Control 6Slot Hub 4289 $15,550.58 6/26/95
- ---------------------------------------------------------------------------------------------------------------------------
Aroma Tech - SNM30254569 M586-90/100 SIS 586 90/100MHz 3477 $ 3,145.22 4/11/95
- ---------------------------------------------------------------------------------------------------------------------------
Cabletron SEHI-24 Stack ethernet hub intel 24p 3680 $ 6,716.41 5/5/95
- ---------------------------------------------------------------------------------------------------------------------------
Cabletron SEH-24 Stackable ethernet hub-24 3680 $ 3,029.47 5/9/95
- ---------------------------------------------------------------------------------------------------------------------------
Cabletron SEHI-24 Stack ethernet hub intel 24p 4220 $ 2,693.75 5/30/95
- ---------------------------------------------------------------------------------------------------------------------------
Cablerock CR5-85 Spare 5 System w/kit 3335 $ 5,732.92 3/21/95
- ---------------------------------------------------------------------------------------------------------------------------
Central Design - S519F01YC SSFX185322P46 17"C 32MB 1GB TGX 85 3972 $ 8,640.63 5/22/95
- ---------------------------------------------------------------------------------------------------------------------------
Central Design S20FX16132P46 17"C TGX 61 32MB 1GB 3735 $35,140.10 6/8/95
- ---------------------------------------------------------------------------------------------------------------------------
Central Design - S513F04, S513F04WD, S4C7032P44 S4 70 MHz 20" c32mb535 3792 $31,485.41 6/16/95
S513F04KY, S513F031W
- ---------------------------------------------------------------------------------------------------------------------------
Central Design - 6016869 EXAXEXB-8505 8MM Tape Drive 3869 $ 1,472.89 6/23/95
- ---------------------------------------------------------------------------------------------------------------------------
Central Design model 70,110 CD-SS4-70, Sun 1, CD-SS5-85, Sun 5 4182 $21,259.88 6/28/95
- ---------------------------------------------------------------------------------------------------------------------------
Ceram 64MB Simm for SS20 3769 $ 7,902.00 5/9/95
- ---------------------------------------------------------------------------------------------------------------------------
Computerland HPCD-E2039 Laserjet 4M plus toner 3388 $ 2,089.24 3/29/95
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7 of 10
<PAGE>
<TABLE>
<CAPTION>
CORSAIR 1995 FIXED ASSET PURCHASES THROUGH 6/30/95
===========================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Computer Equipment (1600) cont'd
- --------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Computerland 755-C IBM Thinkpad 3603 $ 3,657.37 4/25/95
- ---------------------------------------------------------------------------------------------------------------------------
Computerland - XB5160N93YX APPL-A0848 PowerMac 8100/110C 16MB 2GB CD 3663 $ 6,768.51 5/2/95
- ---------------------------------------------------------------------------------------------------------------------------
Computerland - FC517361-446, APPL-A3642 Apple PowerMac 7100/80 16/700/cd 3975 $25,581.75 5/12/95
FC5173K2446,
FC5173P0446,FC5173LM446,
C5173KB446, FC51740T44H,
JPGK14205
- ---------------------------------------------------------------------------------------------------------------------------
Computerland -FC512HJ223L APPL-A0864 Powerbook 280C 4/320 w/monit. & pack 3740 4,758.19 5/12/95
- ---------------------------------------------------------------------------------------------------------------------------
Computerland - TF513DDT1Y5 APPL-H1485 Powerbook duo dock w/HD 3846 $ 825.40 5/16/95
- ---------------------------------------------------------------------------------------------------------------------------
Computerland 400012544503291, Patriot 2-Laptop 486/dx 3846 $ 5,314.75 5/26/95
40003244473172
- ---------------------------------------------------------------------------------------------------------------------------
Computerland RADI-C0504 Two page display / 20GS 3892 $ 3,523.17 6/23/95
DCL5090A0179
DCL5080A0048
DCL5090A0133
DCL5090A0173
- ---------------------------------------------------------------------------------------------------------------------------
Computerland King-B2320 20 MB module P/PB Duo 250 3975 $ 838.75 6/8/95
- ---------------------------------------------------------------------------------------------------------------------------
Computerland XB52200WT5PQ, APPL-A3642 PowerMac w/keyboard 3975 $33,743.60 6/12/95
XB5200WU5P0, XB5212EK5P0,
XB5212EX5P0, SB5212BJ5P0
- ---------------------------------------------------------------------------------------------------------------------------
Computerland APPL-A4273 (5) PowerMacs w/monit. & keybds. 4080 $14,873.82 6/21/95
- ---------------------------------------------------------------------------------------------------------------------------
DEL 90C/XPS Dimension Pentium-Mini tower base 3797 $ 3,245.41 6/16/95
- ---------------------------------------------------------------------------------------------------------------------------
ENS - SN25095490 CSCO-2501 Router package w/software 3033 $ 4,023.81 1/25/95
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 8 of 10
<PAGE>
CORSAIR 1995 FIXED ASSET PURCHASES THROUGH 6/30/95
<TABLE>
<CAPTION>
===================================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Computer Equipment (1600) cont'd
- ----------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
ENS USROB-000826- Analog modem w/fax 3033 $ 6,021.31 1/30/95
0
- -----------------------------------------------------------------------------------------------------------------------------------
ENS - SN50004214 CSCO-7010 Cisco 7010 router package 3445 $ 27,202.20 4/3/95
- -----------------------------------------------------------------------------------------------------------------------------------
HDS Pentium 586 computer system 3034 $ 4,281.29 1/5/95
- -----------------------------------------------------------------------------------------------------------------------------------
HDS Pentium 586 computer system 3034 $ 4,281.29 1/10/95
- -----------------------------------------------------------------------------------------------------------------------------------
HDS HD Victoria System 3850 $ 6,249.50 5/20/95
- -----------------------------------------------------------------------------------------------------------------------------------
NCA - SN454505410766, 2100S Quantum Empire 2100s hard disk 3311 $ 1,960.41 3/9/95
SNBDOE5021LNY, SN 4360015888,
SN466504640442
- -----------------------------------------------------------------------------------------------------------------------------------
NCA EXT 4-868 HP 35480 3311 $ 1,059.77 3/16/95
- -----------------------------------------------------------------------------------------------------------------------------------
Network Assoc. Asante 12 port ethernet hub 3111 $ 1,179.90 3/21/95
- -----------------------------------------------------------------------------------------------------------------------------------
PDC X827A/S-XBT- 4MM Autoloader 4006 $ 3,831.20 6/13/95
4TS
- -----------------------------------------------------------------------------------------------------------------------------------
Seque Sys. 90 Pentium System 4119 $ 3,755.00 6/23/95
- -----------------------------------------------------------------------------------------------------------------------------------
TEL-LAN MX-1600-002 Multi-access remote server 3042 $ 7,028.95 1/24/95
- -----------------------------------------------------------------------------------------------------------------------------------
UUNET Tech. - 25130134-3092 Cisco-2501 Router & CSU/DSU 3721 $ 1,922.00 5/4/95
- -----------------------------------------------------------------------------------------------------------------------------------
Vanstar - SN SFC439MT61XN APPL-A2805 Powerbook 520 4/160 3044 $ 2,970.76 1/5/95
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $335,607.58
===========
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 9 of 10
<PAGE>
<TABLE>
<CAPTION>
CORSAIR 1995 FIXED ASSET PURCHASERS THROUGH 6/30/95
===================================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Furniture Equipment (1640)
- ----------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/rack kit 4069 $ 2,507.86 6/14/95
- -----------------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/rack kits 3783 $ 5,794.24 6/16/95
- -----------------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/kit 41277 $ 3,090.05 6/21/95
- -----------------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/rack kit 3891 $ 8,336.62 6/23/95
- -----------------------------------------------------------------------------------------------------------------------------------
Art & Display Co. 1531 Legend kit w/LPCO3 capsule counter 3773 $ 4,595.54 6/15/95
- -----------------------------------------------------------------------------------------------------------------------------------
Audio Graphic Sys. B 70x70 MW DALITE 3960 $ 118.53 5/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
Audio Graphic Sys. BB44E-5 Bretford big base 44" cart 3960 $ 210.12 6/13/95
- -----------------------------------------------------------------------------------------------------------------------------------
Cabletron EPIM-X Enet port int. mod. dual in. w/kit 3791 $ 373.90 5/19/95
- -----------------------------------------------------------------------------------------------------------------------------------
Cabletron 9300044-15 Assy. Cbl, XCVR, 802.3 28 AWG 3791 $ 282.74 5/23/95
- -----------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus Furnish. 7488 Paramount desk chair; #61 pewter 4181 $ 318.94 6/1/95
- -----------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. 7488 Office master chair 3418 $ 8,510.00 4/28/95
- -----------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. 15WAL-BL VERSA Stacking chair 3470 $ 13,410.00 5/9/95
- -----------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. 7488 Paramount desk chairs: #61 pewter 3693 $ 27,849.16 6/6/95
- -----------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. M211-1142 23 Office chairs; MB Sync, pneu, poly shell 4243 $ 8,624.31 6/26/95
- -----------------------------------------------------------------------------------------------------------------------------------
Lightwave Comm. 5000 Serverswitch w/cables 4194 $ 6,583.50 6/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
Lindsay-Ferrari Tackable acoust. panels, worksurfaces 3576 $ 64,323.00 5/17/95
- -----------------------------------------------------------------------------------------------------------------------------------
Lindsay-Ferrari Lindelve File-lateral, rec hdwd., 2drwr 3854 $ 1,082.89 5/23/95
- -----------------------------------------------------------------------------------------------------------------------------------
Perimeter Install. of card render on lobby door 4136 $ 595.00 6/29/95
- -----------------------------------------------------------------------------------------------------------------------------------
Perimeter Install. of sec. system 4156 $ 34,555.00 6/29/95
- -----------------------------------------------------------------------------------------------------------------------------------
Pure Valley Water HTT-45RO Hydrotech w/tank & dispenser 4011 $ 1,403.61 6/27/95
- -----------------------------------------------------------------------------------------------------------------------------------
Voice Pro SRX Phone system - Deliv. pymt. 4028 $ 17,443.06 6/29/95
- -----------------------------------------------------------------------------------------------------------------------------------
VoicePro SRX/VMX 200S Telephone, call processing system 3426 $ 17,433.06 5/1/95
- -----------------------------------------------------------------------------------------------------------------------------------
VoicePro SRX Phone system - Deliv. pymt. 4028 $ 52,042.79 6/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
VoicePro SRX Phone system -n Deliv. pymt. 4028 $ 12,887.93 6/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $292,371.85
===================================================================================================================================
</TABLE>
Page 10 of 10
<PAGE>
EXHIBIT C
Not attached to original
<PAGE>
EXHIBIT 10.17
SECURED PROMISSORY NOTE
$l,000,000.00 Date: August 31, 1995
Due: March 1, 1999
For value received, Corsair Communications, Inc., (the "Borrower") promises
to pay to the order of Comdisco, Inc. (the "Lender") at P.O. Box 91744, Chicago,
IL 60693 (or such other address as the Lender shall designate to Borrower) the
principal amount of $1,000,000.00 together with interest at the rate of 9% per
annum, from the due date of this Note to maturity of each installment on the
principal hereof remaining from time to time unpaid, such principal and interest
to be paid in 48 equal monthly installments of $27,637.24 each, commencing
September 1, 1995 and on the same day of each month thereafter to and including
February 1, 1999 and a last installment of $150,000.00 to be paid on March 1,
1999, such installments to be applied first to accrued and unpaid interest and
the balance to unpaid principal. Interest shall be computed on the basis of a
year consisting of twelve months of thirty days each at a rate of nine percent
(9%) per annum.
The Borrower expressly waives demand and presentment for payment, notice of
protest, dishonor, and any other notice as permitted under the UCC or any
applicable law.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Loan and Security Agreement dated August 31, 1995
between the Borrower and the Lender, (as the same may from time to time be
amended, modified or supplemented in accordance with its terms, the "Loan
Agreement") and is entitled to the benefit and security of the Loan Agreement
and the other Loan Documents (as defined in the Loan Agreement), to which
reference is made for a statement of all of the terms and conditions thereof.
All terms defined in the Loan Agreement shall have the same definitions when
used herein, unless otherwise defined herein. The Borrower may prepay this
Note, in whole or in part, at any time but only in accordance with the
provisions of the Loan Agreement.
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and
enforced in accordance with the laws of the State of Illinois, excluding any
conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.
BORROWER: CORSAIR COMMUNICATIONS
Signature:/s/ John F. Scott
-------------------------
Print Name: John F. Scott
------------------------
Title: Vice President
-----------------------------
Accepted in Rosemont, Illinois:
LENDER: COMDISCO, INC.
Signature:/s/ James Labe
-------------------------
Print Name: James Labe
------------------------
Title: illegible
-----------------------------
9/5/95
<PAGE>
EXHIBIT 10.18
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY
BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series B Preferred Stock of
Corsair Communications, Inc.
Dated as of August 31, 1995 (the "Effective Date")
WHEREAS, Corsair Communications, Inc., a Delaware corporation (the
"Company") has entered into a Master Lease Agreement dated as of August 31,
1995, Equipment Schedule No. VL-1 dated as of August 31, 1995, and related
Summary Equipment Schedules (collectively, the "Leases") and the Loan and
Security Agreement dated as of August 31, 1995 (the "Loan Agreement") and a
Secured Promissory Note dated August 31, 1995 (the "Note") with Comdisco, Inc.,
a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder in consideration for
such Leases, Loan Agreement and Note, the right to purchase shares of its Series
B Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases, Loan Agreement and Note and in consideration of mutual
covenants and agreements contained herein, the Company and Warrantholder agree
as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
For value received, the Company hereby grants to the Warrantholder, and the
Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from the Company that
number of fully paid and non-assessable shares of the Company's Series B
Preferred Stock ("Preferred Stock") equal to $160,000.00 divided by the exercise
price ("Exercise Price"). The Exercise Price shall be equal to the sum of $2.00
plus the product of (a) the difference between the price per share of the next
round of equity financing (the "Next Round Price") and $2.00, multiplied by (b)
the fraction resulting from dividing (x) eight (8) by (y) the number of months
from December, 1994 to the date of the closing of the Next Round; provided,
however, if the Next Round is not successfully completed by March 1, 1996, then
all references to Series B Preferred Stock and Preferred Stock in this Warrant
shall automatically be amended to refer to the Company's Series A Preferred
Stock and this Warrant shall be deemed to be exercisable solely for 80,000
shares of the Company's Series A Preferred Stock the Exercise Price of which
shall be equal to $2.00 per share. The number and purchase price of such shares
are subject to adjustment as provided in Section 8 hereof.
-1-
<PAGE>
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
shall commence on the Effective Date; the right to purchase Preferred Stock
hereunder shall commence on March 1, 1996 or such earlier date as the Company
shall designate shares of its Series B Preferred Stock and shall be exercisable
for a period of (i) ten (10) years or (ii) five (5) years from the effective
date of the Company's initial public offering, whichever is longer.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be exercised
under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering of
the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall
be deemed to be the product of (x) the average of the closing
-2-
<PAGE>
prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise; or
(b) if actively traded over-the-counter, the fair market value shall
be deemed to be the product of (x) the average of the closing bid and
asked prices quoted on the NASDAQ system (or similar system) over the
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be determined in good
faith by the Company's Board of Directors and (y) the number of shares of
Common Stock into which each share of Preferred Stock is convertible at the
time of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Common Stock shall
be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term which this
---------------------------------------
Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for the
exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon conversion, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered, listed or approved for listing on such domestic securities exchange,
as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
-3-
<PAGE>
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, that the Warrantholder would have been
entitled to had the Warrantholder exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent reasonably possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
-4-
<PAGE>
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution.
The Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to the
--------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit III (the "Charter") and the
Company shall provide Warrantholder with the same notices provided to holders of
Preferred Stock as set forth therein.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
----------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) there shall be any Merger Event; (iii) there shall be an
initial public offering; or (iv) there shall be any voluntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder: (A) at least twenty (20)
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution, (specifying
the date on which the holders of Preferred Stock shall be entitled thereto) or
for determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, at least twenty (20) days' prior written
notice of the date when the same shall take place (and specifying the date on
which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such Merger
Event, dissolution, liquidation or winding up); and (C) in the case of a public
offering, the Company shall give the Warrantholder at least twenty (20) days
written notice prior to the effective date hereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall
begin on the date Warrantholder actually receives a written notice containing
all the information specified above.
-5-
<PAGE>
9. REPRESENTATIONS WARRANTIES AND COVENANTS OF THE COMPANY.
-------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights shall, prior to March 1, 1996, be duly
and validly reserved and when issued in accordance with the provisions of this
Warrant Agreement, will be validly issued, fully paid and non-assessable, and
will be free of any taxes, liens, charges or encumbrances of any nature
whatsoever; provided, however, that the Preferred Stock issuable pursuant to
this Warrant Agreement may be subject restrictions on transfer under state
and/or Federal securities laws. The Company has made available to the
Warrantholder true, correct and complete copies of its Charter and Bylaws, as
amended, and minutes of all Board of Directors (including all committees of the
Board of Directors, if any) and Shareholder meetings from the date of the
Company's inception through N/A , 19__. The issuance of certificates
------------
for shares of Preferred Stock upon Exercise of the Warrant Agreement shall be
made without charge to the Warrantholder for any issuance tax in respect
thereof, or other cost incurred by the Company in connection with such exercise
and the related issuance of shares of Preferred Stock. The Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
and the issuance and delivery of any certificate in a name other than that of
the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
--------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and this Warrant Agreement is not
inconsistent with the Company's Charter or Bylaws, does not contravene any law
or governmental rule, regulation or order applicable to it, does not and will
not contravene any provision of, or constitute a default under, any material
indenture, mortgage, contract or other instrument to which it is a party or by
which it is bound, and this Warrant Agreement constitutes a legal, valid and
binding agreement of the Company, enforceable in accordance with its terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
-----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A)
10,150,000 shares of Common Stock, none of which are issued and outstanding, and
(B) 8,120,000 shares of Series A Preferred Stock, of which 8,120,000 shares are
issued and outstanding and are convertible into 8,120,000 shares of Common
Stock.
-6-
<PAGE>
(ii) The Company has reserved 2,030,000 shares of Common Stock for
issuance pursuant to a stock option plan or agreement or restricted stock plan
or agreement as shall be approved by the Board of Directors of the Company.
(iii) Except as set forth above and except for (A) the conversion
privileges of the Series A Preferred Stock currently outstanding, (B) the rights
provided in the Investors' Rights Agreement dated December 10, 1994,
("Investors' Rights Agreement") and (C) the rights of the Warrantholder
hereunder, no shareholder of the Company has preemptive rights to purchase new
issuances of the Company's capital stock.
(e) Insurance. The company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant Lo the terms of any other contract or
agreement.
(f) Other Commitments to Resister Securities. Except as set forth in this
----------------------------------------
Warrant Agreement and the Investor Rights Agreement, the Company is not,
pursuant to the terms of any other agreement currently in existence, under any
obligation to register under the 1933 Act any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the
------------------------
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
-------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities law on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
-7-
<PAGE>
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
--------------
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
------------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
-8-
<PAGE>
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
---------
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
California.
(d) Counterparts. This Warrant Agreement may be executed in two or more
-------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or three (3) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: Venture Group, cc:
Legal Department, attn: General Counsel, (and/or, if by facsimile, (708) 518-
5466 and (708)518-5088) and (ii) to the Company at 3408 Hillview Avenue, Palo
Alto, California, 94304, attention: (and/or if by facsimile, (415) 493-3588) or
at such other address as any such party may subsequently designate by written
notice to the other party.
(f) Remedies. In the event of any default hereunder, the nondefaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all
-9-
<PAGE>
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.
(g) Survival. The representations, warranties, covenants and conditions
--------
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(h) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(i) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(j) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers "hereunto duly authorized as of the Effective
Date.
Company: CORSAIR COMMUNICATIONS, INC.
By: /s/ John F. Scott
----------------------------------
Title: 8/31/95
-------------------------------
Warrantholder: COMDISCO INC.
By: /s/ illegible
----------------------------------
Title: illegible
-------------------------------
9/5/95
-11-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: ______________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series ____ Preferred Stock of ______________________, pursuant to the
terms of the Warrant Agreement dated the _____ day of _______________, 19_
(the "Warrant Agreement") between ____________________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series ___ Preferred Stock of
_______________________________________, the undersigned hereby confirms
and acknowledges the investment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ____ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
________________________________
(Name)
________________________________
(Address)
Warrantholder: COMDISCO, INC.
By:_____________________________
Title:__________________________
Date:___________________________
-12-
<PAGE>
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
________________________________________________________________________________
(Please Print)
whose address is________________________________________________________________
________________________________________________________________________________
Dated ______________________________________
Holder's Signature__________________________
Holder's Address____________________________
____________________________________________
Signature Guaranteed: ____________________________________
NOTE: The signature to this Transfer Notice must correspond
with the name as it appears on the face of the Warrant
Agreement, without alteration or enlargement or any
change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the
foregoing warrant Agreement.
-13-
<PAGE>
EXHIBIT III
CERTIFICATE OF INCORPORATION
OF PHONEPRINT, INC.,
a Delaware corporation
ARTICLE I
The name of this corporation is PhonePrint, Inc..
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Series A
Preferred Stock." The total number of shares which the corporation is
authorized to issue is Eighteen Million Two Hundred Seventy Thousand
(18,270,000) shares. Ten Million One Hundred Fifty Thousand (10,150,000) shares
shall be Common Stock, $.001 par value per share, and Eight Million One Hundred
Twenty Thousand (8,120,000) shares shall be Series A Preferred Stock, $.001 par
value per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Series A Preferred
Stock are as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this
<PAGE>
corporation) on the Common Stock of this corporation, at the rate of $0.10 per
share (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) per annum payable when, as and if
declared by the Board of Directors. Such dividends shall not be cumulative.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
A Preferred Stock were the holders of the number of shares of Common Stock of
this corporation into which their respective shares of Series A Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of this corporation entitled to receive such distribution.
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $2.00 for each outstanding share of Series A Preferred Stock (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series A Issue
Price") and (ii) an amount equal to declared but unpaid dividends on such share.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Series A Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then, the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to shareholders shall be distributed among the holders of Series A
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A Preferred
Stock).
c. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement), shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2.
-2-
<PAGE>
3. Redemption.
----------
a. On or at any time after November 30, 2001, this corporation
may at any time it may lawfully do so, at the option of the Board of Directors,
redeem in whole or in part the Series A Preferred Stock by paying in cash
therefor a sum per share equal to the Original Series A Issue Price together
with all dividends declared, but unpaid, with respect to such share to the
Redemption Date (such total amount is hereinafter referred to as the "Series A
Redemption Price").
b. Within thirty (30) days after the receipt by this
corporation of the written request of the holders of not less than sixty-six and
two-thirds percent (66 2/3%) of the then outstanding Series A Preferred Stock,
this corporation shall redeem the percentage of the Series A Preferred Stock
specified in such request (or, if less, the maximum amount it may lawfully
redeem) by paying in cash therefor a sum per share equal to the Series A
Redemption Price.
c. i) In the event of any redemption of only a part of the
then outstanding Series A Preferred Stock, this corporation shall effect such
redemption pro rata according to the number of shares held by each holder
thereof.
ii) At least 30 (or, in the case of a redemption pursuant to
subsection 3(b), 20) but no more than 60 days prior to the date fixed for any
redemption of Series A Preferred Stock (the "Redemption Date"), written notice
shall be mailed, first class postage prepaid, to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of the Series A Preferred Stock to be redeemed, at the address last shown
on the records of this corporation for such holder or given by the holder to
this corporation for the purpose of notice or, if no such address appears or is
given, at the place where the principal executive office of this corporation is
located, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and the date on
which such holder's Conversion Rights (as hereinafter defined) as to such shares
terminate and calling upon such holder to surrender to this corporation, in the
manner and at the place designated, his certificate or certificates representing
the shares to be redeemed (the "Redemption Notice"). Except as provided in
subsection 3(c)(iii), on or after the Redemption Date, each holder of Series A
Preferred Stock to be redeemed shall surrender to this corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
iii) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
such shares as holders of Series A Preferred Stock (except the right to receive
the
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<PAGE>
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the corporation legally
available for redemption of shares of Series A Preferred Stock on any Redemption
Date are insufficient to redeem the total number of shares of Series A Preferred
Stock to be redeemed on such date, those funds which are legally available will
be used to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed. The shares of Series A Preferred Stock
not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of
the Company are legally available for the redemption of shares of Series A
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Company has become obligated to redeem on any Redemption
Date but which it has not redeemed.
4. Conversion. The holders of the Series A Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
a. Right to Convert.
----------------
i) Subject to subsection (c), each share of Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share and prior to the close of
business on any Redemption Date as may have been fixed in any Redemption Notice
with respect to such share, at the office of this corporation or any transfer
agent for the Series A Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Series A Issue Price plus all declared but unpaid dividends thereon for each
share of Series A Preferred Stock, by the Conversion Price at the time in effect
for such share. The initial Conversion Price per share for shares of Series A
Preferred Stock shall be the Original Series A Issue Price; provided, however,
that the Conversion Price for the Series A Preferred Stock shall be subject to
adjustment as set forth in subsection 4(c).
ii) In the event of a call for redemption of any shares of
Series A Preferred Stock pursuant to Section 3 hereof, the Conversion Rights
shall terminate as to the shares designated for redemption at the close of
business on the Redemption Date, unless default is made in payment of the
Redemption Price in which case the Conversion Rights shall terminate on the date
such Redemption Price is paid.
iii) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such Series A Preferred Stock immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $7,500,000 in the aggregate or
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<PAGE>
(B) the date upon which the corporation obtains the consent of the holders of a
majority of the then outstanding shares of Series A Preferred Stock.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice by mail, postage
prepaid, to this corporation at its principal corporate office, of the election
to convert the same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. This
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offer of securities registered
pursuant to the Securities Act, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock, shall not be
deemed to have converted such Series A Preferred Stock until immediately prior
to the closing of such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Price of the Series A Preferred Stock shall be subject to adjustment
from time to time as follows:
i) A. If the corporation shall issue any Additional Stock
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for the Series A Preferred Stock in effect immediately
prior to the issuance of such Additional Stock, the Conversion Price for the
Series A Preferred Stock in effect immediately prior to each such issuance shall
forthwith (except as otherwise provided in this clause (i)) be adjusted to a
price equal to the quotient obtained by dividing the total computed under clause
(x) below by the total computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock sold pursuant to the agreements
pursuant to which shares of Series A Preferred Stock are first issued
(the "Stock Purchase Agreement"), plus
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<PAGE>
(2) the aggregate consideration, if
any, received by the corporation for all Additional Stock issued on or
after the date of the Stock Purchase Agreement (the "Purchase Date")
other than shares of Common Stock issued or issuable with respect to
the Series A Preferred Stock issued pursuant to the Stock Purchase
Agreement;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock sold pursuant to the Stock Purchase
Agreement divided by the Conversion Price for such shares in effect at
the Purchase Date (or such higher or lower Conversion Price for such
series as results from the application of subsections 4(c)(iii) and
(iv) and assuming that this Certificate was in effect as of the
Purchase Date) plus
(2) the number of shares of Additional
Stock issued since the Purchase Date (increased or decreased to the
extent that the number of such shares of Additional Stock shall have
been increased or decreased as the result of the application of
subsections 4(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the
Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections
(E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this
subsection 4(c)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by this corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
D. In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before,
on or after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or
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<PAGE>
options to purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
subsection 4(c)(i) and subsection 4(c)(ii):
1. The aggregate maximum number of shares
of Common Stock deliverable upon exercise of such options to purchase
or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subsections 4(c)(i)(C) and (c)(i)(D)), if any, received by
the corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
2. The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 4(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number
of shares of Common Stock deliverable or in the consideration payable
to this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series A
Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such consideration
upon the exercise of any such options or rights or the conversion or
exchange of such securities.
4. Upon the expiration of any such options
or rights, the termination of any such rights to convert or exchange
or the expiration of any options or rights related to such convertible
or exchangeable securities, the Conversion Price of the Series A
Preferred
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<PAGE>
Stock, to the extent in any way affected by or computed using such
options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the exercise
of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to
such securities.
5. The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant to
subsections 4(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 4(c)(i)(E)(3) or (4).
ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(c)(i)(E))
by this corporation before, on or after the Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 4(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
the Series A Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly or
pursuant to a stock option plan or agreement or restricted stock plan
or agreement approved by the Board of Directors of this corporation at
any time when the total number of shares of Common Stock so issuable
or issued (and not repurchased at cost by the corporation in
connection with the termination of employment or service) does not
exceed 2,030,000 (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations) since the
date of incorporation, or
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock will be converted to Common Stock
or (II) upon exercise of warrants or rights granted to underwriters in
connection with such a public offering.
iii) In the event the corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any
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<PAGE>
consideration by such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Price of the Series A Preferred Stock then in effect
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock then in
effect shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(c)(iii), then,
in each such case for the purpose of this subsection 4(d), the holders of the
Series A Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4) provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series A Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A Preferred Stock after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Conversion Price then
in effect and the number of shares purchasable upon conversion of the Series A
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in
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<PAGE>
good faith assist in the carrying out of all the provisions of this Section 4
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Series A Preferred Stock
against impairment.
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
i) No fractional shares shall be issued upon conversion of
the Series A Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock pursuant to this Section 4,
this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, this corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
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its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
5. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Series A Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the by-laws of
this corporation, and shall be entitled to vote, together as a single class with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be Five (5). Notwithstanding 5(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock and Common Stock, voting together on an as converted basis,
shall be entitled to elect one (1) director of the corporation. At any meeting
held for the purpose of electing directors, the presence in person or by proxy
of the holders of a majority of the Series A Preferred Stock then outstanding
shall constitute a quorum of the Series A Preferred Stock for the election of
directors to be elected solely by the holders of Series A Preferred Stock. At
any meeting held for the purpose of electing directors, the presence in person
or by proxy of the holders of a majority of the Series A Preferred Stock and
Common Stock then outstanding, on an as converted basis, shall constitute a
quorum of the Series A Preferred Stock and Common Stock for the election of
directors to be elected solely by the holders of the Series A Preferred Stock
and Common Stock, voting together on an as converted basis. A vacancy in any
directorship elected by the holders of Series A Preferred Stock shall be filled
only by vote of the holders of Series A Preferred Stock; and a vacancy in any
directorship elected by the holders of Series A Preferred Stock and Common Stock
voting together shall be filled only by the vote of the holders of Series A
Preferred Stock and Common Stock voting together as provided above.
6. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock are outstanding, this corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of a
majority of the then outstanding shares of Series A Preferred Stock:
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a. sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares;
c. increase the authorized number of shares of Series A
Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock with
respect to voting, dividends or upon liquidation, or (ii) having rights similar
to any of the rights of the Series A Preferred Stock under this Section 6; or
e. change authorized number of directors from five (5).
7. Status of Converted or Redeemed Stock. In the event any shares
-------------------------------------
of Series A Preferred Stock shall be redeemed or converted pursuant to Section 3
or Section 4 hereof, the shares so converted or redeemed shall be cancelled and
shall not be issuable by the corporation. The Certificate of Incorporation of
this corporation shall be appropriately amended to effect the corresponding
reduction in the corporation's authorized capital stock.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the By-laws of this corporation, and shall be
entitled to vote upon such matters and in such manner as may be provided by law.
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<PAGE>
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of
--------------------------------
any of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The name and mailing address of the incorporator is Kevin Compton, 2750
Sand Hill Road, Menlo Park, CA 94025.
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the bylaws of the corporation.
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<PAGE>
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the corporation.
ARTICLE IX
The corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation as of this 22nd day of November, 1994.
/s/ Kevin Compton
----------------------------------------
Kevin Compton, Incorporator
[SIGNATURE PAGE TO CERTIFICATE OF INCORPORATION]
<PAGE>
EXHIBIT 10.19
CORSAIR COMMUNICATIONS, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
_____________________
October 31, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Stock............................................ 1
1.1 Sale and Issuance of Series B Preferred Stock................... 1
1.2 Closing......................................................... 1
1.3 Subsequent Sale of Series A Preferred Stock..................... 1
2. Representations and Warranties of the Company......................... 2
2.1 Organization, Good Standing and Qualification................... 2
2.2 Capitalization and Voting Rights................................ 2
2.3 Subsidiaries.................................................... 3
2.4 Authorization................................................... 3
2.5 Valid Issuance of Preferred and Common Stock.................... 3
2.6 Governmental Consents........................................... 3
2.7 Litigation...................................................... 3
2.8 Compliance with Other Instruments............................... 4
2.9 Agreements; Action.............................................. 4
2.10 Related-Party Transactions...................................... 5
2.11 Permits......................................................... 5
2.12 Disclosure...................................................... 5
2.13 Minute Books.................................................... 5
2.14 Labor Agreements and Actions.................................... 6
2.15 Registration Rights............................................. 6
2.16 Returns and Complaints.......................................... 6
2.17 Offering........................................................ 6
2.18 Title to Property and Assets; Leases............................ 6
2.19 Financial Statements............................................ 7
2.20 Changes......................................................... 7
2.21 Patents and Trademarks.......................................... 8
2.22 Manufacturing and Marketing Rights.............................. 9
2.23 Proprietary Information and Inventions Agreements............... 9
2.24 Tax Returns, Payments, and Elections............................ 9
2.25 Insurance....................................................... 10
2.26 Environmental and Safety Laws................................... 10
2.27 Section 83(b) Elections......................................... 10
3. Representations and Warranties of the Investor........................ 10
3.1 Authorization................................................... 10
3.2 Purchase Entirely for Own Account............................... 10
3.3 Disclosure of Information....................................... 10
3.4 Investment Experience........................................... 11
3.5 Accredited Investor............................................. 11
3.6 Restricted Securities........................................... 11
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
3.7 Further Limitations on Disposition................................ 11
3.8 Legends........................................................... 12
4. California Commissioner of Corporations................................. 12
4.1 Corporate Securities Law.......................................... 12
5. Conditions of Investor's Obligations at Closing......................... 12
5.1 Representations and Warranties.................................... 12
5.2 Performance....................................................... 13
5.3 Compliance Certificate............................................ 13
5.4 Qualifications.................................................... 13
5.5 Proceedings and Documents......................................... 13
5.6 Opinion of Company Counsel........................................ 13
5.7 Investors' Rights Agreement....................................... 13
6. Conditions of the Company's Obligations at Closing...................... 13
6.1 Representations and Warranties.................................... 13
6.2 Payment of Purchase Price......................................... 13
6.3 Qualifications.................................................... 13
7. Miscellaneous........................................................... 14
7.1 Survival of Warranties............................................ 14
7.2 Successors and Assigns............................................ 14
7.3 Governing Law..................................................... 14
7.4 Counterparts...................................................... 14
7.5 Titles and Subtitles.............................................. 14
7.6 Notices........................................................... 14
7.7 Finder's Fee...................................................... 14
7.8 Expenses.......................................................... 15
7.9 Amendments and Waivers............................................ 15
7.10 Severability...................................................... 15
7.11 Aggregation of Stock.............................................. 15
7.12 Entire Agreement.................................................. 15
</TABLE>
SCHEDULE A - Schedule of Investors
EXHIBIT A - Certificate of Incorporation
EXHIBIT B - Investors' Rights Agreement
Schedule of Exceptions
(ii)
<PAGE>
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of the 31st day
of October, 1995, by and between Corsair Communications, Inc., a Delaware
corporation (the "Company") and the investors listed on Schedule A hereto, each
----------
of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Issuance of Series B Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) the Amended and Restated
Certificate of Incorporation in the form attached hereto as Exhibit A.
---------
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally, to purchase at the Closing and the Company agrees to
sell and issue to each Investor at the Closing, that number of shares of the
Company's Series B Preferred Stock set forth opposite each Investor's name on
Schedule A hereto for the purchase price set forth thereon. Such purchase shall
- ----------
be payable by Investor by delivery to Company by Investor of a check in the
amount of the purchase price set forth opposite such Investor's name on Schedule
--------
A payable to the Company's order or by wire transfer of funds in such amount to
- -
the Company's designated bank account.
1.2 Closing. The purchase and sale of the Series B Preferred Stock
-------
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1200, San Diego, California at 11:00 A.M., on October 27, 1995, or
at such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series B Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to each
Investor a certificate representing the Series B Preferred Stock which such
Investor is purchasing against delivery to the Company by such Investor of the
purchase price in the form as set forth above in Section 1.1(b).
1.3 Subsequent Sale of Series B Preferred Stock. The Company may sell
-------------------------------------------
up to 56,434 additional shares of Series B Preferred Stock at a price not less
than $4.43 per share to such other purchaser(s) as the Company's Board of
Directors shall select. Any purchaser in a subsequent closing occurring within
sixty (60) days following the Closing shall execute a counterpart signature page
to this Agreement and Amendment No. 2 to the Investors' Rights Agreement (as
defined below) and any additional sales of Series B Preferred Stock shall be
deemed to be made hereunder. The sale of any additional shares of Series B
Preferred Stock under this Section 1.3
<PAGE>
occurring within sixty (60) days following the Closing shall not be subject to
the Investor's right of first offer contained in Section 2.4 of the Investor
Rights Agreement, as amended.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions attached hereto, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
--------------------------------
Company consists, or will consist prior to the Closing, of:
(i) Preferred Stock. 10,247,410 shares of Preferred Stock (the
---------------
"Preferred Stock"), of which 8,120,000 shares have been designated Series A
Preferred Stock and all of which are issued and outstanding and 2,127,410 shares
of which have been designated Series B Preferred Stock, up to 2,050,000 of which
will be sold pursuant to this Agreement. The rights, privileges and preferences
of the Series B Preferred Stock will be as stated in the Company's Amended and
Restated Certificate of Incorporation attached hereto as Exhibit A.
---------
(ii) Common Stock. 18,000,000 shares of common stock ("Common
------------
Stock") 76,125 of which are currently issued and outstanding.
(iii) Except for (A) the conversion privileges of the Series A
Preferred Stock and the Series B Preferred Stock to be issued under this
Agreement, (B) the rights provided in Section 2.4 of the Investors' Rights
Agreement dated December 10, 1994 by and among the Company and certain investors
in the Company's Series A Preferred Stock (the "Investors' Rights Agreement"),
as amended, and (C) a warrant to purchase up to 80,000 shares of Series B
Preferred Stock dated August 31, 1995, there are not outstanding any options,
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from the Company of any shares of its capital stock;
provided that the Company has reserved 2,030,000 shares for issuance to
employees, consultants or directors of the Company pursuant to equity incentive
agreements approved by the Board of Directors. The Company is not a party or
subject to any agreement or understanding, and, to the Company's knowledge,
there is no agreement or understanding between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security or by a director of the Company.
-2-
<PAGE>
2.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, Amendment No. 2 to the Investors'
Rights Agreement, Amendment No. 1 to First Refusal Agreement dated December 14,
1994 by and among the Company and certain investors in the Company's Series A
Preferred Stock (the "First Refusal Agreement") and any other agreement to which
the Company is a party, the execution and delivery of which is contemplated
hereby (the "Ancillary Agreements"), the performance of all obligations of the
Company hereunder and thereunder and the authorization, issuance (or reservation
for issuance) and delivery of the Series B Preferred Stock being sold hereunder
and the Common Stock issuable upon conversion of the Series B Preferred Stock
has been taken or will be taken prior to the Closing, and this Agreement, the
Investors' Rights Agreement, as amended, and any Ancillary Agreements constitute
valid and legally binding obligations of the Company, enforceable in accordance
with their respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement, as amended, may be limited by
applicable federal or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series B
--------------------------------------------
Preferred Stock which is being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and, based in part upon the representations of the Investors in
this Agreement, will be issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion of the Series
B Preferred Stock purchased under this Agreement has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Amended and Restated Certificate of Incorporation, shall be duly and validly
issued, fully paid and nonassessable, and issued in compliance with all
applicable securities laws, as presently in effect, of the United States and
each of the states whose securities laws govern the issuance of any of the
Series B Preferred Stock hereunder.
2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, which filing will be effected within 15 days of the
sale of the Series B Preferred Stock hereunder.
-3-
<PAGE>
2.7 Litigation. There is no action, suit, proceeding or
----------
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, the Investors' Rights Agreement, as
amended, or any Ancillary Agreements, or the right of the Company to enter into
any of them, or to consummate the transactions contemplated hereby or thereby,
or which might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing.
The Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
2.8 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default of any provisions of its Amended and Restated Certificate
of Incorporation or Bylaws or of any instrument, judgment, order, writ, decree
or contract to which it is a party or by which it is bound or, to its knowledge,
of any provision of federal or state statute, rule or regulation applicable to
the Company. The execution, delivery and performance of this Agreement,
Amendment No. 2 to the Investors' Rights Agreement or any Ancillary Agreements
and the consummation of the transactions contemplated hereby and thereby will
not result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event which results in the creation of any lien, charge or encumbrance upon any
assets of the Company or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations or any of its assets or
properties.
2.9 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement, as amended, and any Ancillary Agreements, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, affiliates, or any affiliate thereof.
(b) The Company is not a party to any contract, agreement, lease,
commitment or proposed transaction, written or oral, absolute or contingent,
other than (i) contracts for the purchase of supplies and services that were
entered into in the ordinary course of business and that do not involve more
than $50,000, and do not extend for more than one (1) year beyond the date
hereof, (ii) sales contracts entered into in the ordinary course of business,
and (iii) contracts terminable at will by the Company on no more than thirty
(30) days notice without cost or liability to the Company and that do not
involve any employment or consulting arrangement and are not material to the
conduct of the Company's business. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and license
agreements and any other agreements relating to the acquisition or disposition
of
-4-
<PAGE>
the Company's technology, shall not be considered to be contracts entered into
in the ordinary course of business.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess of
$150,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
2.10 Related-Party Transactions. No employee, officer, or director of
--------------------------
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any material contract
with the Company.
2.11 Permits. The Company has all franchises, permits, licenses, and
-------
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.12 Disclosure. The Company has fully provided each Investor with
----------
all the information which such Investor has requested for deciding whether to
purchase the Series B Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, Amendment No. 2 to the Investors' Rights Agreement and
any Ancillary Agreements, nor any other statements, certificates or documents
made or delivered in connection herewith or therewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
-5-
<PAGE>
2.13 Minute Books. The minute books of the Company provided to the
------------
Investors contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
2.14 Labor Agreements and Actions. The Company is not bound by or
----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
2.15 Registration Rights. Except as provided in the Investors' Rights
-------------------
Agreement, as amended, the Company is not obligated to register under the
Securities Act of 1933 ("Securities Act") any of its presently outstanding
securities or any of its securities that may subsequently be issued.
2.16 Returns and Complaints. The Company has received no customer
----------------------
complaints concerning alleged defects in the design of its products that, if
true, would materially adversely affect the operations or financial condition of
the Company.
2.17 Offering. Subject in part to the truth and accuracy of each
--------
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series B Preferred Stock as contemplated by this Agreement is
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.18 Title to Property and Assets; Leases. Except (a) as reflected in
------------------------------------
the Financial Statements (defined in paragraph 2.19), (b) for liens for current
taxes not yet delinquent, (c) for liens imposed by law and incurred in the
ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (d) for liens in respect of
pledges or deposits under workers' compensation laws or similar legislation, or
(e) for minor defects in title, none of which, individually or in the aggregate
materially interferes with the use of such property, the Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances. With respect to the property and assets it leases, the Company is
in compliance with
-6-
<PAGE>
such leases and, to the best of its knowledge, holds a valid leasehold interest
free of any liens, claims or encumbrances, subject to clauses (a)-(e) above.
2.19 Financial Statements. The Company has delivered to each Investor
--------------------
its unaudited financial statements (balance sheet and profit and loss statement
including notes thereto) as at and for the nine-month period ended September 30,
1995 (the "Financial Statements"). The Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other, except
that the Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments. Except as set forth in the Financial Statements, the Company has
no material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to September 30, 1995 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company. Except as disclosed in the Financial Statements, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.20 Changes. To the best of the Company's knowledge, since September
-------
30, 1995, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse.
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
-7-
<PAGE>
(e) any material change to a material contract or arrangement by
which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director, or stockholder;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(m) any other event or condition of any character that might
materially and adversely affect the business, properties, prospects or financial
condition of the Company (as such business is presently conducted and as it is
proposed to be conducted); or
(n) any agreement or commitment by the Company to do any of the
things described in this Section 2.20.
2.21 Patents and Trademarks. To the best of its knowledge (but
----------------------
without having conducted any special investigation or patent search) the Company
owns or possesses sufficient legal rights to all patents, trademarks,
servicemarks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes necessary for its business as now conducted and
as proposed to be conducted without any conflict with or infringement of the
rights of others. The Schedule of Exceptions contains a complete list of
patents and pending patent applications of the Company. Except for agreements
with its own employees or consultants, substantially in the form referenced in
paragraph 2.24 below, there are no outstanding options, licenses, or agreements
of any
-8-
<PAGE>
kind relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, trade secrets or
other proprietary rights of any other person or entity nor is the Company aware
of any basis therefor. The Company is not aware that any of it employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the best of the Company's knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any
of such employees is now obligated. The Company does not believe it is or will
be necessary to use any inventions of any of its employees (or persons it
currently intends to hire) made prior to their employment by the Company.
2.22 Manufacturing and Marketing Rights. The Company has not granted
----------------------------------
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
2.23 Proprietary Information and Inventions Agreements. Each employee
-------------------------------------------------
and officer of the Company has executed a Proprietary Information and Inventions
Agreement substantially in the form or forms that have been delivered to special
counsel for the Investors.
2.24 Tax Returns, Payments, and Elections. The Company has filed all
------------------------------------
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The provision for
taxes of the Company as shown in the Financial Statements is adequate for taxes
due or accrued as of the date thereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended ("Code"), to be treated as an S
corporation or a collapsible corporation pursuant to Section 341(f) of Section
1362(a) of the Code, nor has it made any other elections pursuant to the Code
(other than elections which relate solely to methods of accounting, depreciation
or amortization) which would have a material effect on the business, properties,
prospects or financial condition of the Company. The Company has never had any
tax deficiency proposed or assessed against it and has not executed any waiver
of any statute of limitations on the assessment or collection of any tax or
governmental charge. None of the Company's federal income tax returns and none
of its state income or franchise tax or sales or use tax returns has ever been
audited by
-9-
<PAGE>
governmental authorities. Since the date of the Financial Statements, the
Company has made adequate provisions on its books of account for all taxes,
assessments and governmental charges with respect to its business, properties
and operations for such period. The Company has withheld or collected from each
payment made to each of its employees, the amount of all taxes (including, but
not limited to, federal income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes) required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or
authorized depositaries.
2.25 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability insurance in amounts customary for companies similarly
situated.
2.26 Environmental and Safety Laws. To the best of its knowledge, the
-----------------------------
Company is not in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law, or regulation.
2.27 Section 83(b) Elections. To the best of the Company's knowledge,
-----------------------
all individuals who have purchased shares of the Company's Common Stock have
timely filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
3. Representations and Warranties of the Investor. Each Investor hereby
----------------------------------------------
represents and warrants that:
3.1 Authorization. This Agreement constitutes its valid and legally
-------------
binding obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series B Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has
full power and authority to enter into this Agreement.
-10-
<PAGE>
3.3 Disclosure of Information. It believes it has received all the
-------------------------
information it considers necessary or appropriate for deciding whether to
purchase the Series B Preferred Stock. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series B Preferred
Stock. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.4 Investment Experience. Each Investor is an investor in
---------------------
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series B
Preferred Stock. If other than an individual, Investor also represents it has
not been organized for the purpose of acquiring the Series B Preferred Stock.
3.5 Accredited Investor. Each Investor is an "accredited investor"
-------------------
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 Restricted Securities. It understands that the shares of Series
---------------------
B Preferred Stock it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act, only in certain limited circumstances. In this
connection, each Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series B Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3.7, provided and to the extent such section is then applicable and
Investors' Rights Agreement, as amended, and any applicable Ancillary Agreement
and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require
-11-
<PAGE>
opinions of counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
-------
Series B Preferred Stock (and the Common Stock issuable upon conversion thereof)
may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by the laws of the State of Delaware or
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the Code.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. Conditions of Investor's Obligations at Closing. The obligations of
-----------------------------------------------
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
-12-
<PAGE>
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The Chairman of the Board of the Company
----------------------
shall deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since the
date of the Business Plan.
5.4 Qualifications. The Commissioner of Corporations of the State of
--------------
California shall have issued a permit qualifying the offer and sale of the
Series B Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification.
5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 Opinion of Company Counsel. Each Investor shall have received
--------------------------
from Brobeck, Phleger & Harrison, counsel for the Company, an opinion, dated as
of the Closing, in form and substance satisfactory to special counsel to the
Investors.
5.7 Investors' Rights Agreement. The Company and each Investor shall
---------------------------
have entered into Amendment No. 2 to the Investors' Rights Agreement, in the
form attached hereto as Exhibit B.
---------
6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
purchase price specified in Section 1.2.
-13-
<PAGE>
6.3 Qualifications. The Commissioner of Corporations of the State of
--------------
California shall have issued a permit qualifying the offer and sale to the
Investor of the Series B Preferred Stock and the Common Stock issuable upon the
conversion thereof or such offer and sale shall be exempt from such
qualification.
7. Miscellaneous.
-------------
7.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Series B Preferred Stock sold hereunder or any
Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and
-14-
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Investor or any of its officers, partners, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless each Investor
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected, the
--------
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of special counsel for the Investors (not to exceed $15,000) and shall,
upon receipt of a bill therefor, reimburse the out of pocket expenses of such
counsel. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement or the Amended and Restated Certificate of
Incorporation, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the Series
B Preferred Stock issued pursuant hereto. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company; provided, however, that no condition set
forth in Section 5 hereof may be waived with respect to any Investor who does
not consent thereto.
7.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Aggregation of Stock. All shares of the Series B Preferred Stock
--------------------
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
7.12 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORSAIR COMMUNICATIONS, INC., a Delaware
corporation
By: /S/ Mary Ann Byrnes
-----------------------------------
Mary Ann Byrnes, President
Address: 3408 Hillview Avenue
Palo Alto, California 94304
INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII
By: /s/ Kevin Compton
-----------------------------------
Address: 2750 Sand Hill Road
Menlo Park, California 94025
KPCB VII FOUNDERS FUND
By: /s/ Kevin Compton
-----------------------------------
Address: 2750 Sand Hill Road
Menlo Park, California 94025
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II
By: /s/ Kevin Compton
-----------------------------------
Address: 2750 Sand Hill Road
Menlo Park, California 94025
[SIGNATURE PAGE TO
SERIES B PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By: /s/ illegible
----------------------------
General Partner
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
NORWEST EQUITY PARTNERS, V,
a Minnesota Limited Liability Partnership
By: Itasca Partners V, L.L.P.
Its: General Partner
By: /s/ Promod Haque, Partner
----------------------------
Address: 3000 Sand Hill Rd., Bldg. 3, Suite 105
Menlo Park, CA 94025
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management
Partners, L.P.
By: /s/ John Michaelson
----------------------------
Address: 400 Park Avenue
New York, NY 10022
[SIGNATURE PAGE TO SERIES B
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
NEEDHAM EMERGING GROWTH PARTNERS
By: /s/ Raj Rajaratnam
-----------------------------------
Address: 400 Park Avenue
New York, NY 10022
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its: General Partner
By: /s/ G. Carter Sednaoui
----------------------------
General Partner
Address: c/o Accel Partners
One Embarcadero Center, Suite 3820
San Francisco, CA 94111
Attn: James W. Breyer
ACCEL INVESTORS '95 L.P.
By: /s/ G. Carter Sednaoui
---------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
[SIGNATURE PAGE TO SERIES B
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
ACCEL KEIRETSU L.P.
By: Accel Partners & Co. Inc.
Its: General Partner
By: /s/ G. Carter Sednaoui
-----------------------------
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ELLMORE C. PATTERSON PARTNERS
By: /s/ illegible
-----------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
TECHNOLOGY CROSSOVER VENTURES, L.P.
By: /s/ Robert C. Bensky
-------------------------------------
Title: Chief Financial Officer
----------------------------------
Technology Crossover Mgmt LLC
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
[SIGNATURE PAGE TO SERIES B
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
TECHNOLOGY CROSSOVER VENTURES, C.V.
By: /s/ Robert S. Bensky
-------------------------------------
Title: Chief Financial Officer
----------------------------------
Technology Crossover Mgmt, LLC
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
Its: General Partner
By: /s/ illegible
------------------------------
its General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
INTEGRAL CAPITAL PARTNERS
INTERNATIONAL II, C.V.
By: Integral Capital Management II, L.P.
Its: Investment General Partner
By: /s/ illegible
-----------------------------
its General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
/s/ David H. Ring
-----------------------------------------
DAVID H. RING
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO SERIES B
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
UMB BANK, N.A. as Trustee for Brobeck,
Phleger & Harrison Retirement Savings
Trust F/B/O John A. Denniston
By: /s/ M. Diane Summers
-----------------------------------
Title: Vice President
---------------------------------
Address: UMB Bank, N.A.
P. O. Box 419692
Kansas City, MO 64141-6692
/s/ Michael S. Kagnoff
-----------------------------------------
MICHAEL S. KAGNOFF
Address: 8121 Camino del Sol, #301
La Jolla, CA 91037
/s/ Jennifer Gill Roberts
-----------------------------------------
JENNIFER GILL ROBERTS
Address: 550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
[SIGNATURE PAGE TO SERIES B
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
---------------------
<TABLE>
<CAPTION>
Cash Purchase No. of
Name and Address Price Shares
- ----------------------------------------- ------------- ---------
<S> <C> <C>
Kleiner Perkins Caufield & Byers VII $1,414,051.57 319,199
2750 Sand Hill Road
Menlo Park, CA 94025
KPCB VII Founders Fund $ 153,450.77 34,639
2750 Sand Hill Road
Menlo Park, CA 94025
KPCB Information Sciences Zaibatsu $ 82,499.89 18,623
Fund II
2750 Sand Hill Road
Menlo Park, CA 94025
Sevin Rosen Fund IV L.P. $ 250,002.62 56,434
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
Norwest Equity Partners, V $1,100,000.01 248,307
3000 Sand Hill Road
Building 3, Suite 105
Menlo Park, CA 94025
Needham Capital SBIC, L.P. $ 125,001.31 28,217
400 Park Avenue
New York, NY 10022
Needham Emerging Growth Partners $ 125,001.31 28,217
400 Park Avenue
New York, NY 10022
Accel IV L.P. $3,205,999.86 723,702
c/o Accel Partners
One Embarcadero Center, Suite 3820
San Francisco, CA 94111
Accel Keiretsu L.P. $ 66,498.73 15,011
c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Accel Investors '95 L.P. $ 150,500.39 33,973
c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Ellmore C. Patterson Partners $ 77,002.26 17,382
c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Technology Crossover Ventures, L.P. $ 926,623.10 209,170
575 High Street, Suite 400
Palo Alto, CA 94301
Technology Crossover Ventures, C.V. $ 73,378.52 16,564
575 High Street, Suite 400
Palo Alto, CA 94301
Integral Capital Partners II, L.P. $ 738,303.80 166,660
2750 Sand Hill Road
Menlo Park, CA 94025
Integral Capital Partners International $ 261,697.82 59,074
II, C.V.
2750 Sand Hill Road
Menlo Park, CA 94025
UMB Bank, N.A. as Trustee for $ 10,002.94 2,258
Brobeck, Phleger & Harrison
Retirement Savings Trust F/B/O John
A. Denniston
UMB Bank, N.A.
P.O. Box 419692
Kansas City, MO 64141-6692
Michael S. Kagnoff $ 10,002.94 2,258
8121 Camino Del Sol
La Jolla, CA 92037
David H. Ring $ 50,001.41 11,287
4140 23rd Street
San Francisco, CA 94114
Jennifer Gill Roberts $ 5,001.47 1,129
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
CLOSING TOTALS: $8,825,020.72 1,992,104
</TABLE>
SCHEDULE A-2
<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------------
A-1
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
Corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995. The original name was Phoneprint, Inc.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of a majority
of the outstanding shares in accordance with Section 228 thereof, and written
notice having been given in accordance with the requirements of such Section.
The Amended and Restated Certificate of Incorporation restates, integrates and
amends the provisions of the Certificate of Incorporation of this corporation.
3. The Certificate of Incorporation of the corporation is hereby amended
and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Corsair Communications, Inc..
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
<PAGE>
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
Twenty-Eight Million Two Hundred Forty-Seven Thousand Four Hundred and Ten
(28,247,410) shares. Eighteen Million (18,000,000) shares shall be Common
Stock, $.001 par value per share, and Ten Million Two Hundred Forty-Seven
Thousand Four Hundred and Ten (10,247,410) shares shall be Preferred Stock,
$.001 par value per share, of which Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock and Two Million One Hundred
Twenty-Seven Thousand Four Hundred and Ten (2,127,410) shares shall be Series B
Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock and
Series B Preferred Stock shall be entitled to receive dividends, out of any
assets legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this corporation) on the
Common Stock of this corporation, at the rate of $0.10 per share of Series A
Preferred Stock per annum and $0.22 per share of Series B Preferred Stock per
annum (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) payable when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative. No cash dividend
shall be declared or paid with respect to the Series A Preferred Stock or Series
B Preferred Stock unless at the same time a like proportionate cash dividend for
the same dividend period, ratably in proportion to the respective annual
dividend rates set forth above, is declared and paid with respect to the Series
A Preferred Stock and the Series B Preferred Stock.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to a
-2-
<PAGE>
proportionate share of any such distribution as though the holders of the Series
A Preferred Stock and Series B Preferred Stock were the holders of the number of
shares of Common Stock of this corporation into which their respective shares of
Series A Preferred Stock and Series B Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of this
corporation entitled to receive such distribution.
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock and Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to the sum of (i) $2.00 for each outstanding share of Series A
Preferred Stock, (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations and hereafter referred to as
the "Original Series A Issue Price"), (ii) $4.43 for each outstanding share of
Series B Preferred Stock (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations and hereafter referred
to as the "Original Series B Issue Price"), and (iii) an amount equal to
declared but unpaid dividends on such share of Series A Preferred Stock or
Series B Preferred Stock, as applicable. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series A
Preferred Stock and the Series B Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then,
the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and the Series B Preferred Stock in proportion to the aggregate
liquidation preferences of the respective series, and ratably among the holders
of that series in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Series A Preferred Stock and Series B Preferred Stock).
c. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement and the issuance of Series B Preferred Stock
pursuant to the Series B Preferred Stock Purchase Agreement), shall be deemed to
be a liquidation, dissolution or winding up within the meaning of this Section
2.
-3-
<PAGE>
3. Conversion. The holders of the Series A Preferred Stock and
----------
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
a. Right to Convert.
----------------
(i) Subject to subsection (c), each share of Series A
Preferred Stock and Series B Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of this corporation or any transfer agent for the particular series
of Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (A) the Original Series A Issue Price
for each share of Series A Preferred Stock and (B) the Original Series B Issue
Price for each share of Series B Preferred Stock, plus all declared but unpaid
dividends thereon for each share of Series A Preferred Stock or Series B
Preferred Stock, by the Conversion Price at the time in effect for such share.
The initial Conversion Price per share for shares of Series A Preferred Stock
shall be the Original Series A Issue Price and the initial Conversion Price per
share for shares of Series B Preferred Stock shall be the Original Series B
Issue Price; provided, however, that the Conversion Price for the Series A
Preferred Stock and Series B Preferred Stock shall be subject to adjustment as
set forth in subsection 3(c).
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $7,500,000 in the aggregate or (B) the date upon which
the corporation obtains the consent of the holders of a majority of the then
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a single class on an as converted basis.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock or Series B Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the particular series of Preferred Stock, and shall give
written notice by mail, postage prepaid, to this corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock and/or Series B Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Series A Preferred Stock and/or
Series B Preferred Stock to be converted, and
-4-
<PAGE>
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offer of securities registered pursuant to the
Securities Act, the conversion may, at the option of any holder tendering Series
A Preferred Stock and/or Series B Preferred Stock for conversion, be conditioned
upon the closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock and/or Series B
Preferred Stock shall not be deemed to have converted such Series A Preferred
Stock and/or Series B Preferred Stock until immediately prior to the closing of
such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Prices of the Series A Preferred Stock and Series B Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) A. If the corporation shall issue any Additional Stock
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for the Series A Preferred Stock or the Conversion
Price for the Series B Preferred Stock in effect immediately prior to the
issuance of such Additional Stock, the Conversion Price for the Series A
Preferred Stock or Series B Preferred Stock, as the case may be, in effect
immediately prior to each such issuance shall forthwith (except as otherwise
provided in this clause (i)) be adjusted to a price equal to the quotient
obtained by dividing the total computed under clause (x) below by the total
computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock or Series B Preferred Stock
sold pursuant to the applicable agreements pursuant to which such
shares of Series A Preferred Stock or Series B Preferred Stock, as the
case may be, are first issued (the "Stock Purchase Agreements"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the dates of the applicable Stock Purchase Agreements (the
"Purchase Date") other than shares of Common Stock issued or issuable
with respect to the Series A Preferred Stock or Series B Preferred
Stock;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock or Series B Preferred Stock sold
pursuant to the applicable Stock Purchase Agreements divided by the
applicable Conversion Price for such shares in effect at the
applicable
-5-
<PAGE>
Purchase Date (or such higher or lower Conversion Price for such
series as results from the application of subsections 3(c)(iii) and
(iv) and assuming that this Certificate was in effect as of the
applicable Purchase Date) plus
(2) the number of shares of Additional
Stock issued since the applicable Purchase Date (increased or
decreased to the extent that the number of such shares of Additional
Stock shall have been increased or decreased as the result of the
application of subsections 3(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the
Series A Preferred Stock or Series B Preferred Stock shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to 3
years from the date of the event giving rise to the adjustment being carried
forward, or shall be made at the end of 3 years from the date of the event
giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections (E)(3) and (E)(4), no adjustment of such
Conversion Price pursuant to this subsection 3(c)(i) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
C. In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by this corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
D. In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before,
on or after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subsections 3(c)(i)(C) and (c)(i)(D)), if any, received by
the
-6-
<PAGE>
corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 3(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the applicable Conversion Price of
the Series A Preferred Stock and Series B Preferred Stock, as
applicable, and to the extent in any way affected by or computed using
such options, rights or securities, shall be recomputed to reflect
such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or exchange
of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the Series
A Preferred Stock and Series B Preferred Stock, as applicable, to the
extent in any way affected by or computed using such options, rights
or securities or options or rights related to such securities, shall
be recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the
exercise of the options or rights related to such securities.
-7-
<PAGE>
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 3(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 3(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E)) by this
corporation before, on or after the applicable Purchase Date other than
A. shares of Common Stock issued pursuant to a transaction
described in subsection 3(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of shares
of Series A Preferred Stock or Series B Preferred Stock,
C. shares of Common Stock issuable or issued to employees,
consultants, or directors of this corporation directly or pursuant to
a stock option plan or agreement or restricted stock plan or agreement
approved by the Board of Directors of this corporation,
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock and Series B Preferred Stock will
be converted to Common Stock or (II) upon exercise of warrants or
rights granted to underwriters in connection with such a public
offering, or
E. shares of Series B Preferred Stock issued or issuable to
Comdisco, Inc. pursuant to a Warrant dated August 31, 1995.
(iii) In the event the corporation should at any time or from
time to time after the applicable Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of the Series A Preferred Stock and Series B
Preferred Stock then in effect shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to
-8-
<PAGE>
such increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at
any time after the applicable Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock
and Series B Preferred Stock then in effect shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be decreased in proportion to such decrease in outstanding
shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock and Series B Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the corporation into which their shares
of Series A Preferred Stock and Series B Preferred Stock are convertible as of
the record date fixed for the determination of the holders of Common Stock of
the corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3) provision shall be made so that the holders of the Series A
Preferred Stock and Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock and Series B Preferred
Stock, respectively, the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
Series A Preferred Stock and Series B Preferred Stock after the recapitalization
to the end that the provisions of this Section 3 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment
-------------
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
-9-
<PAGE>
Conversion Rights of the holders of the Series A Preferred Stock and Series B
Preferred Stock against impairment.
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon conversion
of the Series A Preferred Stock and Series B Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded up to the nearest whole
share. Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of shares of Series A Preferred
Stock and Series B Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock and Series B
Preferred Stock pursuant to this Section 3, this corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series A Preferred Stock
and Series B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock or Series B Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price at the time in
effect, and (C) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of a
share of Series A Preferred Stock or Series B Preferred Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock and Series B
Preferred Stock at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock and Series B Preferred
Stock such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series A
Preferred Stock and Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of
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<PAGE>
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock and Series B Preferred Stock,
in addition to such other remedies as shall be available to the holder of such
Series A Preferred Stock or Series B Preferred Stock, this corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock or
Series B Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of this corporation.
4. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock and Series B Preferred Stock shall have the right to one vote
for each share of Common Stock into which such Series A Preferred Stock and
Series B Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote, together as a single class with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors of
---------------------
this Corporation shall be five (5). Notwithstanding 5(a) above, the holders of
Series A Preferred Stock, voting as a separate class, shall be entitled to elect
four (4) directors of the corporation; and the holders of the Series A Preferred
Stock, Series B Preferred Stock and Common Stock, voting together as a single
class on an as converted basis, shall be entitled to elect one (1) director of
the corporation. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of the Series A
Preferred Stock then outstanding shall constitute a quorum of the Series A
Preferred Stock for the election of directors to be elected solely by the
holders of Series A Preferred Stock. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock and Common
Stock then outstanding, on an as converted basis, shall constitute a quorum of
the Series A Preferred Stock, Series B Preferred Stock and Common Stock for the
election of directors to be elected solely by the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock; and a vacancy in any directorship elected
by the holders of Series A Preferred Stock, Series B Preferred Stock and
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<PAGE>
Common Stock voting together shall be filled only by the vote of the holders of
Series A Preferred Stock, Series B Preferred Stock and Common Stock voting
together as provided above.
5. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock and/or Series B Preferred Stock are outstanding, this corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of a majority of the then outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, voting together as a
single class on an as converted basis:
a. sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock or Series B Preferred Stock so as to affect
adversely the shares;
c. increase the authorized number of shares of Series A
Preferred Stock, Series B Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock or
Series B Preferred Stock with respect to voting, dividends, conversion rights or
upon liquidation, or (ii) having rights similar to any of the rights of the
Series A Preferred Stock and Series B Preferred Stock under this Section 5; or
e. change authorized number of directors from five (5).
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
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<PAGE>
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The corporation shall have a perpetual existence.
ARTICLE VII
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<PAGE>
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the Bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been signed under the seal of this corporation as of this 24th day of
October, 1995.
CORSAIR COMMUNICATIONS, INC.
By:__________________________
Mary Ann Byrnes, President
ATTEST:
_____________________________
Kevin Compton, Secretary
<PAGE>
EXHIBIT B
AMENDMENT NO. 2 TO THE INVESTORS' RIGHTS AGREEMENT
--------------------------------------------------
B-1
<PAGE>
CORSAIR COMMUNICATIONS, INC.
AMENDMENT NO. 2 TO THE INVESTORS' RIGHTS AGREEMENT
This Amendment No. 2 ("Amendment") to the Investors' Rights Agreement dated
December 10, 1994 (the "Agreement") is made as of this 31st day of October, 1995
by and among Corsair Communications, Inc., a Delaware corporation (the
"Company"), each of the individuals and entities listed on Schedule A to the
----------
Agreement, as amended, (the "Existing Investors") and each of the individuals
and entities listed as New Investors on the signature page to this Amendment
(the "New Investors"). Capitalized terms used herein which are not defined
herein shall have the definition ascribed to them in the Agreement.
RECITALS
--------
The Company desires to sell and issue to the New Investors and the New
Investors desire to purchase from the Company, shares of the Company's Series B
Preferred Stock pursuant to that certain Series B Preferred Stock Purchase
Agreement of even date herewith (the "Series B Agreement").
The Existing Investors desire for the New Investors to invest in the
Company and, as a condition thereof and to induce such investment, the Existing
Investors and the Company are willing to enter into this Amendment to permit the
New Investors to become a party to the Agreement, as amended.
In consideration of the foregoing and the promises and covenants contained
herein and other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. ADDITIONAL PARTIES TO THE AGREEMENT.
-----------------------------------
The New Investors hereby enter into and become parties to the
Agreement. Schedule A to the Agreement is amended to include the New Investors.
----------
2. AMENDMENTS TO AGREEMENT.
-----------------------
2.1 The New Investors and the Existing Investors are collectively
referred to as "Investors" for the purposes of the Agreement, as amended.
2.2 Section 1.1(c) of the Agreement is amended in its entirety to
read as follows:
"(c) The term "Registrable Securities" means (1) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock
<PAGE>
and Series B Preferred Stock and (2) any Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, such Series A
Preferred Stock, Series B Preferred Stock or Common Stock, excluding in all
cases, however, any Registrable Securities sold by a party in a transaction
in which its rights under this Section 1 are not assigned;"
2.3 Section 2.4 of the Agreement is amended in its entirety to read
as follows:
"2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to
future sales by the Company of its Shares (as hereinafter defined). For
purposes of this Section 2.4, a Major Investor shall mean (a) any Investor
who holds at least (i) 10% of the original investment such Investor makes
in the Company pursuant to the Series A Agreement or (ii) 10% of the
original investment such Investor makes in the Company pursuant to the
Series B Agreement, and (b) any person who acquires at least (i) 10% of the
Series A Preferred Stock (or the common stock issued upon conversion
thereof) issued pursuant to the Series A Agreement, or (ii) 10% of the
Series B Preferred Stock (or common stock issued upon conversion thereof)
issued pursuant to the Series B Agreement. For purposes of this Section
2.4, an Investor includes any general partners and affiliates of an
Investor. An Investor shall be entitled to apportion the right of first
offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares
to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to
offer such Shares, (ii) the number of such Shares to be offered, and (iii)
the price and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, each
Major Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which
equals the proportion that the number of shares of common stock issued and
held, or issuable upon conversion of the Series A Preferred Stock and
Series B Preferred Stock then held, by such Major Investor bears to the
total number of shares of common stock of the Company then outstanding
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<PAGE>
(assuming full conversion and exercise of all convertible or exercisable
securities). The Company shall promptly, in writing, inform each Major
Investor which purchases all the shares available to it ("Fully-Exercising
Investor") of any other Major Investor's failure to do likewise. During
the ten-day period commencing after receipt of such information is given,
each Fully-Exercising Investor shall be entitled to obtain that portion of
the Shares not subscribed for by the Major Investors which is equal to the
proportion that the number of shares of common stock issued and held, or
issuable upon conversion of Series A Preferred Stock and Series B Preferred
Stock then held, by such Fully-Exercising Investor bears to the total
number of shares of common stock issued and held, or issuable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock
then held, by all Fully-Exercising Investors who wish to purchase some of
the unsubscribed shares.
(c) If all Shares that Investors are entitled to obtain pursuant
to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 60-day period
following the expiration of the period provided in subsection 2.4(b)
hereof, offer the remaining unsubscribed portion of such Shares to any
person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the
Company does not enter into an agreement for the sale of the Shares within
such period, or if such agreement is not consummated within 60 days of the
execution thereof, the right provided hereunder shall be deemed to be
revived and such Shares shall not be offered unless first reoffered to the
Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable: (i) to the issuance or sale of common stock (or options
therefor) to employees, consultants and directors, directly or pursuant to
a stock option plan or agreement or restricted stock plan or agreement
approved by the Board of Directors of this Company, provided each employee
executes an agreement containing the provisions set forth in Section 2.5(b)
hereof, (ii) to or after consummation of a bona fide, firmly underwritten
public offering of shares of common stock, registered under the Act
pursuant to a registration statement on Form S-1, at an offering price of
at least $10.00 per share (appropriately adjusted for any stock split,
dividend, combination or other recapitalization) and $7,500,000 in the
aggregate, (iii) to the issuance of securities pursuant to the conversion
or exercise of convertible or exercisable securities, (iv) to the issuance
of securities in connection with a bona fide business acquisition of or by
the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise or (v) to the issuance of stock, warrants or
other securities or rights to persons or entities with which the Company
has
-3-
<PAGE>
business relationships, provided such issuances are for other than
primarily equity financing purposes."
3. WAIVER AND CONSENT.
------------------
Each Existing Investor, pursuant to any rights such Existing Investor
may have under the Agreement, hereby, on behalf of himself and the other
Investors under the Agreement, (a) waives all rights under, and any notice
required by, Section 2.4 of the Agreement relating to any rights to purchase or
rights of first offer with respect to the sale of the shares of Series B
Preferred Stock, (b) consents to adding the New Investors as parties to the
Agreement, and (c) consents to the registration rights hereby provided the New
Investors, which consent is given pursuant to Section 1.14 of the Agreement.
4. EFFECT OF AMENDMENT.
-------------------
Except as amended and set forth above, the Agreement shall continue in full
force and effect.
5. COUNTERPARTS.
------------
This Amendment may be executed in any number of counterparts, each which
will be deemed an original, and all of which together shall constitute one
instrument.
6. SEVERABILITY.
------------
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from this
Amendment and the balance of the Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7. ENTIRE AGREEMENT.
----------------
This Amendment, together with the Agreement, constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
8. GOVERNING LAW.
-------------
This Amendment shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
-4-
<PAGE>
This Amendment is hereby executed as of the date first above written.
CORSAIR COMMUNICATIONS, INC., a Delaware
corporation
By:_________________________________________
Mary Ann Byrnes, President
Address:3408 Hillview Avenue
Palo Alto, California 94304
EXISTING INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII
By:_________________________________________
Address:2750 Sand Hill Road
Menlo Park, California 94025
KPCB VII FOUNDERS FUND
By:_______________________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By:_________________________________________
General Partner
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO THE
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
By:_______________________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
NORWEST EQUITY PARTNERS IV, a
Minnesota Limited Partnership
By: Itasca Partners
Its: General Partner
By:_________________________________________
Address: 3000 Sand Hill Road
Building 3, Suite 105
Menlo Park, California 94025
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
By:_________________________________________
Address: 400 Park Avenue
New York, New York 10022
NEEDHAM EMERGING GROWTH PARTNERS
By:_______________________________________________
Address: 400 Park Avenue
New York, New York 10022
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO THE
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
TRW INC.
By:_______________________________________________
Address: ___________________________________
___________________________________
NEW INVESTORS:
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its: General Partner
By: _______________________________________
General Partner
Address: c/o Accel Partners
One Embarcadero Center,
Suite 3820
San Francisco, CA 94111
Attn: James W. Breyer
ACCEL INVESTORS '95 L.P.
By: ____________________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO THE
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ACCEL KEIRETSU L.P.
By: Accel Partners & Co. Inc.
Its: General Partner
By: _______________________________________
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ELLMORE C. PATTERSON PARTNERS
By: ____________________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
TECHNOLOGY CROSSOVER VENTURES, L.P.
By:_______________________________________________
Address: 575 High Street
Suite 400
Palo Alto, California 94301
TECHNOLOGY CROSSOVER VENTURES, C.V.
By:_______________________________________________
Address: 575 High Street
Suite 400
Palo Alto, California 94301
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO THE
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
Its: General Partner
By:_________________________________________
its General Partner
Address: 2750 Sand Hill Road
Menlo Park, California 94025
INTEGRAL CAPITAL PARTNERS INTERNATIONAL, C.V.
By: Integral Capital Management II, L.P.
Its: Investment General Partner
By:_________________________________________
its General Partner
Address: 2750 Sand Hill Road
Menlo Park, California 94025
KPCB INFORMATION SCIENCES ZAIBATSU FUND II
By:_______________________________________________
Address: 2750 Sand Hill Road
Menlo Park, California 94025
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO THE
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
NORWEST EQUITY PARTNERS, V, a Minnesota Limited
Liability Partnership
By: Itasca Partners V, L.L.P.
Its: General Partner
By:_________________________________________
Address: 3000 Sand Hill Road
Building 3, Suite 105
Menlo Park, California 94025
__________________________________________________
David H. Ring
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO AMENDMENT NO. 2 TO THE
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE OF EXCEPTIONS
----------------------
The following matters are exceptions to the representations and warranties
of Corsair Communications, Inc., a Delaware corporation (the "Company") as set
forth in Section 2 of the Series B Preferred Stock Purchase Agreement (the
"Agreement"). The section numbers in this Schedule of Exceptions correspond to
the section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would
otherwise be appropriate. Where the terms of a contract or other disclosure
item have been summarized or described in this Schedule of Exceptions, such
summary or description does not purport to be a complete statement of the
material terms of such contract or other item. Any terms defined in the
Agreement shall have the same meaning when used in this Schedule of Exceptions
as when used in the Agreement unless the context otherwise requires.
<PAGE>
EXHIBIT 10.20
CORSAIR COMMUNICATIONS, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE I
GENERAL PROVISIONS
------------------
1. PURPOSE
This 1996 Stock Option/Stock Issuance Plan ("Plan") is intended to
promote the interests of Corsair Communications, Inc., a Delaware corporation
(the "Corporation"), by providing individuals who render valuable services to
the Corporation (or any Parent or Subsidiary) with the opportunity to acquire
ownership interests in the Corporation so as to encourage them to continue to
render services to the Corporation (or any Parent or Subsidiary).
2. STRUCTURE OF THE PLAN; TERMINOLOGY
This Plan has two separate components: the Option Grant Program set
forth in Article II and the Stock Issuance Program set forth in Article III.
For the purposes of this Plan, any capitalized term shall have the meaning
assigned under Article IV, Section 8 hereof.
3. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by either the Board or a committee
of two (2) or more Board members appointed by the Board to which the Board has
delegated administrative functions under the Plan (the "Plan Administrator").
Members of any committee to which the Board has delegated any administrative
functions shall serve for such terms as the Board shall determine and subject to
the Board's right of removal. All delegations of authority to any committee
shall be and remain revocable by the Board.
B. The Plan Administrator shall have full power and authority to
implement, interpret and administer the Plan, to establish all such rules and
regulations as it deems appropriate, and to make such determinations under the
Plan and any outstanding option grants or share issuances as it deems necessary
or advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any outstanding option or share
issuance.
<PAGE>
4. SELECTION OF OPTIONEES AND PARTICIPANTS
A. The persons eligible to receive share issuances under the Stock
Issuance Program and/or option grants pursuant to the Option Grant Program are
limited to Employees; non-employee members of the Board of the Corporation (or
of any Parent or Subsidiary); and consultants and other independent contractors
who provide valuable services to the Corporation (or to any Parent or
Subsidiary).
B. The Plan Administrator shall have the absolute discretion and
authority to determine, subject to the provisions of this Plan, the terms of any
option grant or share issuance. In addition to any other matters over which the
Plan Administrator has discretion hereunder, the Plan Administrator shall
determine which, if any, eligible individuals will be granted options in
accordance with Article II of the Plan and which will be issued shares in
accordance with Article III of the Plan. With respect to option grants made
under the Plan, the Plan Administrator will determine the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable, the vesting schedule (if any)
applicable to shares issued pursuant to the granted options, and the maximum
term for which the option may remain outstanding. With respect to share
issuances under the Stock Issuance Program, in addition to other matters over
which the Plan Administrator has discretion hereunder, the Plan Administrator
will determine the number of shares to be issued to each issuee, the vesting
schedule (if any) applicable to the issued shares, and the consideration to be
paid by the individual for such shares. Notwithstanding the above, the Plan
Administrator may not impose a vesting schedule upon any option grant or any
shares of Common Stock subject to the option which is more restrictive than
twenty percent (20%) per year vesting.
C. Common Stock issuable under the Plan, whether under the Option
Grant Program or the Stock Issuance Program, may be subject to such restrictions
on transfer, repurchase rights or other restrictions as may be imposed by the
Plan Administrator and set forth in the documents governing such option or
issuance.
5. STOCK SUBJECT TO THE PLAN
A. Authorized but unissued or reacquired Common Stock of the
Corporation will be issued under the Plan. The maximum number of shares of
Common Stock which may be issued over the term of the Plan shall not exceed
2,750,000 shares reduced by the number of shares issued or reserved for issuance
under the Company's 1995 Stock Option/ Stock Issuance Plan (the "Prior Plan"),
subject to adjustment from time to time in accordance with the provisions of
this Section 5 of Article I.
B. Shares reserved for issuance under granted options but not in fact
issued pursuant to options granted under the Plan or under the Prior Plan due to
the expiration or termination of the option or the cancellation of any option
(including the
-2-
<PAGE>
cancellation of any option in accordance with Section 3 of Article II or its
counterpart in the Prior Plan) will remain available for issuance under the
Plan. Shares actually issued under the Plan, whether pursuant to the exercise
of an option under the Option Grant Program or a stock issuance pursuant to the
Stock Issuance Program, which are subsequently repurchased by the Corporation
will not become available for future issuance.
C. In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock dividend, stock split, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments shall be
made to (i) the aggregate number and/or class of shares issuable under the Plan
and (ii) the aggregate number and/or class of shares and the option price per
share in effect under each outstanding option in order to prevent the dilution
or enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
6. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the rights and obligations of
an optionee with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any issuee with respect to Common Stock issued
under the Plan prior to such action unless such optionee or issuee consents to
such amendment. In addition, the Board shall not, without the approval of the
Corporation's shareholders, amend the Plan so as to (i) increase the maximum
number of shares issuable under the Plan (except for adjustments required under
Article I, Section 5.C), (ii) materially increase the benefits accruing to
individuals who participate in the Plan, or (iii) materially modify the
eligibility requirements for participation in the Plan.
B. Options to purchase shares of Common Stock may be granted under
the Option Grant Program and shares of Common Stock may be issued under the
Stock Issuance Program, which are in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
--------
issued under the Option Grant Program or the Stock Issuance Program are held in
escrow until shareholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan is
obtained. If such approval is not obtained within twelve (12) months after the
date the initial excess issuances are made, then (I) any unexercised options
representing such excess shall terminate and cease to be exercisable and (II)
the Corporation shall promptly refund to the optionees and issuees the option or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
-3-
<PAGE>
7. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board.
Options to purchase shares of Common Stock may be granted under the Option Grant
Program and shares of Common Stock may be issued under the Stock Issuance
Program from and after the effective date, provided any shares actually issued
--------
under the Plan are held in escrow until shareholder approval of the Plan is
obtained. If such approval is not obtained within twelve (12) months after the
effective date, then (I) all options shall terminate and cease to be
exercisable, (II) the Corporation shall promptly refund to the optionees and
issuees the option or purchase price paid for any shares issued under the Plan,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding, and (III) this Plan shall
terminate in its entirety.
B. Unless sooner terminated by reason of Section 7A of this Article
I, the Plan shall terminate upon the earlier of (i) May 31, 2006, or (ii) the
-------
date on which all shares available for issuance under the Plan have been issued
pursuant to the exercise of options granted under Article II or the issuance of
shares under Article III. The termination of the Plan shall have no effect on
any outstanding options under or shares issued and outstanding under the Plan,
and such securities shall thereafter continue to have force and effect in
accordance with the provisions of the agreements evidencing such options and
issuances.
C. No additional options shall be granted or shares issued under the
Prior Plan (other than issuances pursuant to already outstanding options) after
the date on which this Plan has been adopted by the Board, provided that options
may be granted or shares issued under the Prior Plan if shareholder approval is
not obtained as set forth in paragraph A hereof.
8. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon any person 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)
or of the optionee or the issuee, which rights are hereby expressly reserved by
each, to terminate Service of the optionee or issuee at any time for any reason
whatsoever, with or without cause or to engage in any Corporate Transaction.
ARTICLE II
OPTION GRANT PROGRAM
--------------------
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive
-4-
<PAGE>
Options or Non-Statutory Options except that individuals who are not Employees
may only be granted Non-Statutory Options. Each granted option shall be
evidenced by one or more instruments in the form approved by the Plan
Administrator; provided, however, that each such instrument shall comply with
--------
the terms and conditions of Sections 1 and 3 of this Article II and each
instrument evidencing an Incentive Option shall, in addition, comply with the
provisions of Section 2 of this Article II.
A. OPTION PRICE.
------------
(I) The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than eighty-five percent (85%) of the Fair Market Value of a share of Common
Stock on the date of the option grant, and provided that the option price per
share for any 10% Shareholder shall not be less than 100% of the fair market
value of the stock on the date of grant.
(II) The option price per share shall be immediately due
upon exercise of the option and shall, subject to the provisions of Article IV,
Section 1 and the agreement evidencing such grant, be payable in cash or check
drawn to the Corporation's order. Notwithstanding the above, should the
Corporation's outstanding Common Stock be registered under Section 12(g) of the
1934 Act, at the time the option is exercised, then the option price may also be
paid as follows:
- in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value; or
- through a special sale and remittance procedure pursuant
to which the optionee provides irrevocable written instructions (I) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, an amount sufficient to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and
State income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (II) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
Except to the extent such sale and remittance procedure is utilized, payment of
the option price must occur at the time the option is exercised.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
----------------------------
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement evidencing such option. However, no option
granted under the Plan shall have a term in excess of ten (10) years from the
grant date.
-5-
<PAGE>
C. NO ASSIGNMENT. During the lifetime of the Optionee, the option
-------------
shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death. However, a Non-Statutory Option may be assigned
in accordance with the terms of a Qualified Domestic Relations Order. The
assigned option may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to such Qualified Domestic Relations
Order. The terms applicable to the assigned option (or portion thereof) shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
D. TERMINATION OF SERVICE. The following provisions shall govern
----------------------
the exercise period applicable to any options held by the optionee at the time
of cessation of Service or death:
(I) Should the optionee cease to remain in Service for any
reason other than death or Permanent Disability, then the period during which
each outstanding option held by such optionee is to remain exercisable shall be
limited to the three (3)-month period following the date of such cessation of
Service.
(II) Should such Service terminate by reason of Permanent
Disability or should the optionee die while holding one or more outstanding
options, then the period during which each such option is to remain exercisable
shall be limited to the twelve (12)-month period following the date of the
optionee's cessation of Service or death. During the limited exercise period
following the optionee's death, the option may be exercised by the personal
representative of the optionee's estate or by the person or persons to whom the
option is transferred pursuant to the optionee's will or in accordance with the
laws of descent and distribution.
(III) The Plan Administrator shall have full power and
authority to extend (either at the time the option is granted or at any time
while the option remains outstanding) the period of time for which the option is
to remain exercisable following the optionee's cessation of Service, from the
limited period otherwise applicable under subsection 1C of this Article II, to
such greater period of time as the Plan Administrator may deem appropriate under
the circumstances.
(IV) Notwithstanding the above no option shall be
exercisable after the specified expiration date of the option term.
(V) Each such option shall, during the applicable limited
exercise period, be exercisable only with respect to the shares for which the
option was exercisable on the date of the optionee's cessation of Service.
-6-
<PAGE>
E. SHAREHOLDER RIGHTS. An optionee shall not have rights as a
------------------
shareholder with respect to any shares subject to an option until such optionee
shall have exercised the option and paid the option price.
F. UNVESTED SHARES. The Plan Administrator shall have the
---------------
discretion to grant options which are exercisable for unvested shares of Common
Stock under the Plan. Should the Optionee cease Service while holding such
unvested shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, all or (at the discretion of the Corporation and
with the consent of the Optionee) any of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
2. INCENTIVE OPTIONS
All provisions of the Plan shall be applicable to Incentive Options
granted hereunder and, in addition, the terms and conditions specified in this
Section 2 shall be applicable to Incentive Options granted under the Plan.
Options which are specifically designated as Non-Statutory Options when issued
under the Plan shall not be subject to such terms and conditions set forth
---
herein.
A. OPTION PRICE.
------------
(I) The option price per share of the Common Stock subject
to an Incentive Option shall in no event be less than one hundred percent (100%)
of the Fair Market Value of a share of Common Stock on the grant date.
(II) If the individual to whom the option is granted is a
10% Shareholder, then the option price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value of the Common Stock on the
date of the option grant.
B. DOLLAR LIMITATION. The aggregate Fair Market Value (determined
-----------------
as of the date or dates of grant) of Common Stock which first becomes
exercisable during any one calendar year under Incentive Options granted to any
Employee under any option plan of the Corporation (or any parent or subsidiary
corporation) shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds options which become exercisable
in the same calendar year, the foregoing limitation on such options shall be
applied on the basis of the order in which such options are granted. Any
options in excess of such limitation shall automatically be treated as Non-
statutory Options.
C. TERM OF OPTION FOR 10% SHAREHOLDERS. No option granted to a 10%
-----------------------------------
Shareholder shall have a term in excess of five (5) years from the grant date.
-7-
<PAGE>
3. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or a
different numbers of shares of Common Stock but having an option price per share
established at the time of such cancellation and regrant in accordance with the
provisions of this Plan.
4. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with such
Corporate Transaction. In addition, all outstanding repurchase rights under the
Plan shall terminate automatically in the event of any Corporate Transaction,
except to the extent the repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
--------
securities shall remain the same.
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
ARTICLE III
STOCK ISSUANCE PROGRAM
----------------------
1. STOCK ISSUANCES
Shares of Common Stock shall be issuable under the Stock Issuance
Program through direct and immediate issuances without any intervening stock
option grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") in a form acceptable to the Plan Administrator,
which form shall be in compliance with the provisions of the Plan.
-8-
<PAGE>
2. ISSUE PRICE
The purchase price per share shall be fixed by the Plan Administrator,
but in no event shall it be less than eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock at the time of issuance, and provided
that the issue price per share for any 10% Shareholder shall not be less than
100% of the fair market value of the stock on the date of grant.
3. PAYMENT OF ISSUE PRICE
Except as provided in Article IV, Section 1, shares shall be issued
only in exchange for cash, a check payable to the Corporation, for services
previously rendered to the Corporation (or any Parent or Subsidiary) or such
other lawful consideration as may be acceptable to the Plan Administrator.
ARTICLE IV
MISCELLANEOUS
-------------
1. LOANS
A. The Plan Administrator may assist any optionee or issuee (other
than a non-employee director) in the exercise of one or more options granted to
such optionee under the Option Grant Program or the purchase of one or more
shares to be issued to such issuee under the Stock Issuance Program, including
the satisfaction of any Federal and State income and employment tax obligations
arising therefrom, by (i) authorizing the extension of a loan from the
Corporation to such optionee or issuee, or (ii) permitting the optionee or
issuee to pay the option price or purchase price for the purchased Common Stock
in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
authorized with or without security or collateral. However, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events the maximum credit
available to each optionee or issuee may not exceed the sum of (i) the aggregate
---
option price or purchase price payable for the purchased shares plus (ii) any
Federal and State income and employment tax liability incurred by the optionee
or issuee in connection with such exercise or purchase.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.
-9-
<PAGE>
2. VESTING OF SHARES AND REPURCHASE RIGHTS
A. The Plan Administrator, in its absolute discretion, may issue
fully and immediately vested shares of Common Stock, or the Plan Administrator
may impose such vesting requirements as it deems appropriate with the
Corporation retaining a right to repurchase any unvested shares. The terms of
the vesting schedule and of the Corporation's repurchase rights shall be as
determined by the Plan Administrator and set forth in the agreement governing
such issuance. Notwithstanding the above, the Plan Administrator may not impose
a vesting schedule upon any option grant or any shares of Common Stock subject
to the option which is more restrictive than twenty percent (20%) per year
vesting.
B. Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash dividend) which the
holder of unvested Common Stock may have the right to receive by reason of a
stock dividend, stock split, reclassification or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting and repurchase
limitations applicable to the unvested Common Stock with respect to which it was
paid or arose, and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.
C. No person to whom shares of Common Stock have been issued
pursuant to the Plan may transfer any such shares which have not vested.
Notwithstanding the above, the issuee shall have the right to make a gift of
unvested shares acquired under the Plan to his/her spouse, parents or issue or
to a trust established for such spouse, parents or issue, provided the
transferee of such shares delivers to the Corporation a written agreement to be
bound by all the provisions of the Plan and the Issuance or Stock Purchase
Agreement executed by the issuee at the time of his/her acquisition of the
gifted shares.
3. MARKET STAND-OFF AGREEMENTS
The Plan Administrator may require each person to whom any shares are
issued under this Plan to enter into an agreement which restricts or prohibits
the sale of any stock of the Corporation by such person for a reasonable period
of time following a public offering of any shares of stock by the Corporation.
4. RIGHT OF FIRST REFUSAL
Until such time as the Corporation's outstanding shares of Common
Stock are first registered under Section 12(g) of the 1934 Act, the Plan
Administrator may subject any shares issued pursuant to the Plan to a right of
first refusal with respect to any proposed disposition of such shares other than
a transfer permitted by Section 2.C of this Article IV. Such right of first
refusal shall be exercisable by the Corporation (or its
-10-
<PAGE>
assignees) in accordance with the terms and conditions specified in the
instrument governing the issuance of such shares.
5. SECURITIES LAWS; LEGENDS
A. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until the Corporation shall have determined
that there has been full and adequate compliance with all applicable
requirements of the Federal and state securities laws and all other applicable
legal and regulatory requirements.
B. Shares issued under the Plan shall bear such legends as the Plan
Administrator deems necessary or appropriate, including such restrictive legends
as the Plan Administrator shall require to reflect the terms of any agreement
between the issuee and the Corporation.
6. SHAREHOLDER RIGHTS
Subject to the rights of the Corporation set forth herein or in any
other agreement entered into between the Corporation and an issuee of shares
under the Plan, each person to whom shares of Common Stock have been issued
under the Plan shall have all the rights of a shareholder with respect to those
shares whether or not his/her interest in such shares is vested. Accordingly,
the issuee shall have the right to vote such shares and to receive any cash
dividends or other distributions paid or made with respect to such shares.
7. ACCELERATION
The Plan Administrator may, in its discretion, provide for the
automatic acceleration upon a Change of Control and\or Corporate Transaction of
the time at which any option will become exercisable or for the lapse of any
repurchase right tied to vesting by including a provision to such effect in the
documents evidencing the rights of the optionee or issuee.
8. DEFINITIONS
The following definitions shall be in effect under this Plan:
A. BOARD shall mean the Board of Directors of the Corporation.
-----
B. COMMON STOCK shall mean the common stock of the Corporation.
------------
C. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
-11-
<PAGE>
(i) any transaction or series of related transactions
(including, without limitation, any reorganization, merger or
consolidation) in which more than fifty percent (50%) of the Corporation's
outstanding voting stock is transferred to a person or persons different
from those who held the stock immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
D. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation or any Parent or Subsidiary, 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.
E. FAIR MARKET VALUE per share of Common Stock on any relevant date
-----------------
under the Plan shall be the value determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any Stock Exchange but is traded on the NASDAQ
National Market System, the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers through the
NASDAQ National Market System or any successor system. If there is no
closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed or admitted
to trading on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on the NASDAQ National
Market System, then such Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
-12-
<PAGE>
F. INCENTIVE OPTION shall mean a stock option which satisfies the
----------------
requirements of Internal Revenue Code Section 422.
G. NON-STATUTORY OPTION shall mean a stock option not intended to
--------------------
meet the requirements of Code Section 422.
H. PARENT shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
I. PERMANENT DISABILITY shall have the meaning assigned to such term
--------------------
in Code Section 22(e)(3).
J. SERVICE shall mean the provision of services to the Corporation
-------
or any Parent or Subsidiary by an individual in the capacity of an Employee, a
non-employee member of the Board or a consultant or independent contractor.
K. SUBSIDIARY shall mean each corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
L. 10% STOCKHOLDER shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation.
9. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
10. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any options granted under Article II or the purchase of any shares issued under
Article III shall be subject to the satisfaction of all applicable Federal,
State and local income and employment tax withholding requirements.
-13-
<PAGE>
11. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the
Option Grant Program, the issuance of any shares under the Stock Issuance
Program, and the issuance of Common Stock upon the exercise of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
12. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under the
Plan, unless such individual is a key Employee whose duties in connection with
the Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.
-14-
<PAGE>
EXHIBIT 10.21
CORSAIR COMMUNICATIONS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") pursuant to the 1996 STOCK OPTION/STOCK ISSUANCE PLAN (the "Plan") to
purchase shares of the Common Stock of Corsair Communications, Inc. (the
"Corporation"):
Optionee: ________________________________________
--------
Grant Date: ______________________________________
----------
Grant Number: _____ Option Price: $_____ per share
------------ ------------
Vesting Commencement Date: ______________________
-------------------------
Number of Option Shares: __________________ shares
-----------------------
Expiration Date: _________________________________
---------------
Type of Option: _____ Incentive Stock Option
--------------
_____ Non-Statutory Stock Option
Date Exercisable:
----------------
The Option shall be immediately exercisable for all vested and
unvested shares.
Vesting Schedule
----------------
The Option Shares shall be vest in accordance with the following
vesting schedule:
(i) No Option Shares shall vest unless and until the Optionee
has completed twelve (12) months of Service (as defined in the Plan)
measured from the Vesting Commencement Date.
(ii) Upon the completion of the twelve (12) month service period
specified in subparagraph (i) above, 25% of the Option Shares shall become
vested.
(iii) The Remaining Option 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 (i) above.
<PAGE>
Optionee understands that the Option is granted pursuant to the
Corporation's Plan. By signing below, optionee agrees to be bound by the terms
and conditions of the Plan and the terms and conditions of the Option as set
forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee
understands that any Option Shares purchased under the Option will be subject to
the terms and conditions set forth in the Stock Purchase Agreement attached
hereto as Exhibit B.
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
-----------------
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO REPURCHASE RIGHTS
AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS UPON
ANY PROPOSED SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER DISPOSITION OF THE
CORPORATION'S SHARES. THE TERMS AND CONDITIONS OF SUCH RIGHTS ARE SPECIFIED IN
THE STOCK PURCHASE AGREEMENT.
No Employment or Service Contract. Nothing in this Agreement or in
---------------------------------
the Plan shall confer upon the Optionee any right to continue in the Service of
the Corporation for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation or the Optionee,
which rights are hereby expressly reserved by each, to terminate Optionee's
Service at any time for any reason whatsoever, with or without cause.
________________________, 199__
Date
Corsair Communications, Inc.
By:_________________________________________
Title:______________________________________
____________________________________________
Optionee
Address:
____________________________________________
____________________________________________
-2-
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
A-1
<PAGE>
CORSAIR COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
--------
A. The Board of Directors of the Corporation has adopted the Corsair
Communications, Inc. 1996 Stock Option/Stock Issuance Plan (the "Plan") for the
purpose of attracting and retaining the services of persons who contribute to
the growth and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and this
Agreement is executed pursuant to and is intended to carry out the purposes of
the Plan.
AGREEMENT
---------
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 Corporation hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that number
of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
-----------
years measured from the Grant Date and shall expire at the close of business on
the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
-----------------------
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
-----------------
in part at any time prior to the time the Plan is approved by the Corporation's
shareholders in accordance with Paragraph 17. Provided such shareholder
approval is obtained, this option shall thereupon become exercisable for the
Option Shares in one or more installments as is specified in the Grant Notice.
As the option becomes exercisable in one or more installments, the installments
shall accumulate and the option shall remain exercisable for such installments
until the Expiration Date or the sooner termination of the option term under
Paragraph 5 or Paragraph 6 of this Agreement.
<PAGE>
5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified
--------------------------------------
in Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced to
a three (3)-month period commencing with the date of such cessation of
Service, but in no event shall this option be exercisable at any time after
the Expiration Date. Upon the expiration of such three (3)-month period or
(if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(ii) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the law of descent and distribution shall have the
right to exercise this option. Such right shall lapse and this option shall
cease to be exercisable upon the earlier of (A) the expiration of the
-------
twelve (12) month period measured from the date of Optionee's death or (B)
the Expiration Date. Upon the expiration of such twelve (12) month period
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service while this option is outstanding, then
the Optionee shall have a period of twelve (12) months (commencing with the
date of such cessation of Service) during which to exercise this option,
but in no event shall this option be exercisable at any time after the
Expiration Date. Optionee shall be deemed to be permanently disabled if
Optionee is unable to engage in any substantial gainful activity for the
Corporation or the parent or subsidiary corporation retaining his/her
services by reason of any medically determinable physical or mental
impairment, which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than twelve
(12) months. Upon the expiration of such limited period of exercisability
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iv) During the limited period of exercisability applicable under
subparagraph (i), (ii) or (iii) above, this option may be exercised for any
or all of the Option Shares for which this option is, at the time of the
Optionee's cessation of Service, exercisable in accordance with the
exercise schedule specified in the Grant Notice and the provisions of
Paragraph 6 of this Agreement.
-2-
<PAGE>
(v) For purposes of this Paragraph 5 and for all other purposes
under this Agreement:
A. 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.
B. The Optionee shall be deemed to be an EMPLOYEE of the
Corporation and to continue in the Corporation's employ for so long as the
Optionee remains in the employ of the Corporation or one or more of its
parent or subsidiary corporations, 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.
C. A corporation shall be considered to be a SUBSIDIARY
corporation of the Corporation if it is a member of an unbroken chain of
corporations beginning with the Corporation, provided each such corporation
in the chain (other than the last corporation) owns, at the time of
determination, stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
D. A corporation shall be considered to be a PARENT corporation
of the Corporation if it is a member of an unbroken chain ending with the
Corporation, provided each such corporation in the chain (other than the
Corporation) owns, at the time of determination, stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
6. SPECIAL TERMINATION OF OPTION.
-----------------------------
A. This Option, to the extent not previously exercised, shall
terminate and cease to be exercisable upon the consummation of one or more of
the following shareholder-approved transactions (a "Corporate Transaction")
unless this Option is expressly assumed by the successor corporation or parent
thereof:
(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
-3-
<PAGE>
concert acquire, in the aggregate, more than 50% of the outstanding shares
of the stock of the Corporation.
B. 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.
7. ADJUSTMENT IN OPTION SHARES.
---------------------------
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the total number of Option Shares subject to this option,
(ii) the number of Option Shares for which this option is to be exercisable from
and after each installment date specified in the Grant Notice and (iii) the
Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, 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.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
----------------------------
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
---------------------------
A. In order to exercise this option with respect to all or any part
of the Option 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 Corporation a
stock purchase agreement (the "Purchase Agreement") in substantially the
form of Exhibit B to the Grant Notice.
(ii) Pay the aggregate Option Price for the purchased shares in
one or more forms approved under the Plan.
-4-
<PAGE>
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option, if other than Optionee, have
the right to exercise this option.
B. Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
(i) in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at fair market value on the
Exercise Date; or
(ii) through a special sale and remittance procedure pursuant to
which the Optionee is to provide irrevocable written instructions (a) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation by
reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to effect the sale transaction.
C. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ National Market
System, the fair market value shall be the closing selling price of one
share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers through its NASDAQ system or
any successor system. If there is no closing selling price for the Common
Stock on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of
fair market value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock
-5-
<PAGE>
on such exchange on the date in question, then the fair market value shall be
the closing selling price on the exchange on the last preceding date for which
such quotation exists.
(iii) If the Common Stock at the time is neither listed nor admitted
to trading on any stock exchange nor traded in the over-the-counter market, or
if the Plan Administrator determines that the value determined pursuant to
subparagraphs (i) and (ii) above does not accurately reflect the fair market
value of the Common Stock, then such fair market value shall be determined by
the Plan Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
D. As soon after the Exercise Date as practical, the Corporation
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, with the appropriate legends affixed thereto.
E. In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
------------------------------------
A. The exercise of this option and the issuance of Option Shares
upon such exercise shall be subject to compliance by the Corporation 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
Corporation's Common Stock may be listed at the time of such exercise and
issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
----------------------
in Paragraph 3 or 6, 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
Corporation.
12. LIABILITY OF CORPORATION.
------------------------
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
-6-
<PAGE>
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
13. NOTICES. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal 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 the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
14. LOANS. The Plan Administrator may, in its absolute discretion
-----
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. GOVERNING LAW. The interpretation, performance, and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. The grant of this option is subject to
--------------------
approval of the Plan by the Corporation's shareholders within twelve (12) months
after the adoption of the Plan by the Board of Directors. Notwithstanding any
-------------------
provision of this Agreement to the contrary, this option may not be exercised in
- --------------------------------------------------------------------------------
whole or in part until such shareholder approval is obtained. In the event that
- ------------------------------------------------------------
such shareholder approval is not obtained, then this option shall thereupon
terminate in its entirety and the Optionee shall have no further rights to
acquire any Option Shares hereunder.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
-------------------------------------------------- ------
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
-7-
<PAGE>
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
B. Should this option be designated as immediately exercisable in
the Grant Notice, then this option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
C. Should this option be designated as exercisable in installments
in the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Corporation's Common Stock for which
such installment first becomes exercisable hereunder will, when added to the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any parent or subsidiary
corporation) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
19. WITHHOLDING. Optionee hereby agrees to make appropriate
-----------
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
-8-
<PAGE>
FIRST AMENDMENT TO
OPTION AGREEMENT
THIS FIRST AMENDMENT TO 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, Optionee has an option to purchase shares of the Corporation in
accordance with a Notice of Grant dated ____________, _____;
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:
1. The Stock Option Agreement attached to the Notice of Grant as Exhibit
A (the "Option Agreement") is hereby amended by redesignating paragraph 6.B
thereof as paragraph 6.C, and adding the following as a new paragraph 6.B:
"B. If the Option is assumed by the successor corporation in
connection with a Corporate Transaction, Optionee shall vest in 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 or Participant, 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 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, Participant or
other person in the Service of the Corporation (or any Parent or
Subsidiary).
2. The Stock Purchase Agreement attached to the Notice of Grant as
Exhibit B (the "Purchase Agreement") is hereby amended by adding the following
as a new Section 5.7 thereof:
"5.7 CORPORATE TRANSACTION.
---------------------
"A. Immediately prior to the consummation of any of the
following shareholder-approved transactions (a "Corporate Transaction"):
"(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 Purchased
Shares in consummation of the Corporate Transaction, but only to the extent
the Purchased 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 or Participant, 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 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, Participant 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."
3. Notwithstanding the provisions of Sections 1 or 2 hereof, no
acceleration of vesting shall occur under paragraph 6.B of the Option Agreement
as herein amended and no lapse of Repurchase Rights shall occur under Section
5.7 of the Purchase Agreement with respect to any Corporate Transaction
occurring within six (6) months of the date of this First Amendment.
4. Except as expressly set forth herein, the option shall continue to be
governed by the terms of the original Notice of Grant including the Exhibits
thereto.
[Remainder of this page left intentionally blank]
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
Corsair Communications, INC.
By:______________________________________
Title:___________________________________
Address: _________________________________________
_________________________________________
_________________________________________
Optionee
Address: _________________________________________
_________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, 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: _________________________________________
_________________________________________
EXHIBIT B
STOCK PURCHASE AGREEMENT
B-1
<PAGE>
IMMEDIATELY EXERCISABLE
REPURCHASE RIGHT
RIGHT OF FIRST REFUSAL
----------------------
CORSAIR COMMUNICATIONS, INC.
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made as of this ___ day of _________, 19__, by and among
Corsair Communications, Inc., a Delaware corporation (the "Corporation"),
_________________________, the holder of a stock option (the "Optionee") under
the Corporation's 1996 Stock Option/Stock Issuance Plan and
_______________________, the Optionee's spouse.
I. EXERCISE OF OPTION
------------------
1.1 EXERCISE. Optionee hereby purchases _____________ shares
--------
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on _____________, 19___
("Grant Date") to purchase up to ____________ shares of the Common Stock ("Total
Purchasable Shares") under the Corporation's 1996 Stock Option/Stock Issuance
Plan (the "Plan") at an option price of $__________ per share ("Option Price").
1.2 PAYMENT. Concurrently with the delivery of this Agreement to the
-------
Corporate Secretary of the Corporation, Optionee shall pay the Option Price for
the Purchased Shares in accordance with the provisions of the agreement between
the Corporation and Optionee evidencing the Option (the "Option Agreement") and
shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise, together with a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
1.3 DELIVERY OF CERTIFICATES. The certificates representing the
------------------------
Purchased Shares hereunder shall be held in escrow by the Corporate Secretary of
the Corporation in accordance with the provisions of Article VII.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation actually
------------------
exercises its repurchase right, rights of first refusal or special purchase
right under this Agreement, Optionee (or any successor in interest) shall have
all the rights of a shareholder (including voting and dividend rights) with
respect to the Purchased Shares, including the Purchased Shares held in escrow
under Article VII, subject, however, to the transfer restrictions of Article IV.
II. SECURITIES LAW COMPLIANCE
-------------------------
<PAGE>
2.1 EXEMPTION FROM REGISTRATION. The Purchased Shares have not been
---------------------------
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form of Exhibit C to the Notice of Grant of Stock Option (the "Grant
Notice") accompanying the Option Agreement.
2.2 RESTRICTED SECURITIES.
---------------------
A. Optionee hereby confirms that Optionee has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchased Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is prepared
to hold the Purchased Shares for an indefinite period and that Optionee is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period immediately
following the date on which the Corporation first becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Purchased Shares, to the extent vested under Article V, may
be sold (without registration) pursuant to the applicable requirements of Rule
144. If Optionee is at the time of such sale an affiliate of the Corporation
for purposes of Rule 144 or was such an affiliate during the preceding three (3)
months, then the sale must comply with all the requirements of Rule 144
(including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two (2)-year holding period requirement
of the Rule will not be applicable. If Optionee is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will be
applicable to the sale.
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation (nor was such an affiliate during the
preceding three (3) months), sell the Purchased Shares (without registration)
pursuant to paragraph (k) of Rule 144 after the Purchased Shares have been held
for a period of three (3) years following the payment in cash of the Option
Price for such shares.
2.3 DISPOSITION OF SHARES. Optionee hereby agrees that Optionee
---------------------
shall make no disposition of the Purchased Shares (other than a permitted
transfer under paragraph 4.1) unless and until there is compliance with all of
the following requirements:
-2-
<PAGE>
(a) Optionee shall have notified the Corporation of the proposed
disposition and provided a written summary of the terms and conditions of
the proposed disposition.
(b) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (i)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
(d) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Purchased Shares pursuant to the provisions
of the Commissioner Rules identified in paragraph 2.5.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Article II nor (ii) to treat as the owner of the Purchased
---
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
2.4 RESTRICTIVE LEGENDS. In order to reflect the restrictions on
-------------------
disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or more of the
following legends:
(i) "The shares represented by this certificate have not
been registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action' letter of the Securities and
Exchange Commission with respect to such sale or offer, or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
(ii) "The shares represented by this certificate are
unvested and accordingly may not be sold, assigned, transferred, encumbered, or
in any manner disposed of except in conformity with the terms of a written
agreement dated ____________, 19___ between the Corporation and the registered
holder of the shares (or the predecessor in interest to the shares). Such
agreement grants certain repurchase rights and rights of first refusal to the
Corporation (or its assignees) upon the sale, assignment, transfer, encumbrance
or other disposition of the Corporation's shares or upon termination of service
-3-
<PAGE>
with the Corporation. The Corporation will upon written request furnish a copy
of such agreement to the holder hereof without charge."
III. SPECIAL TAX ELECTION
--------------------
3.1 SECTION 83(B) ELECTION APPLICABLE TO THE EXERCISE OF A
------------------------------------------------------
NON-STATUTORY STOCK OPTION. If the Purchased Shares are acquired hereunder
- --------------------------
pursuant to the exercise of a non-statutory stock option, as specified in the
--------------------------
Grant Notice, then the Optionee understands that under Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), the excess of the fair
market value of the Purchased Shares on the date any forfeiture restrictions
applicable to such shares lapse over the Option Price paid for such shares will
be reportable as ordinary income on such lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. Optionee understands that he/she may elect under Section
83(b) of the Code to be taxed at the time the Purchased Shares are acquired
hereunder, rather than when and as such Purchased Shares cease to be subject to
such forfeiture restrictions. Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement. Even
if the fair market value of the Purchased Shares at the date of this Agreement
equals the Option Price paid (and thus no tax is payable), the election must be
made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT II HERETO. OPTIONEE UNDERSTANDS THAT FAILURE TO
MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE RESTRICTIONS
LAPSE.
3.2 CONDITIONAL SECTION 83(B) ELECTION APPLICABLE TO THE EXERCISE OF
----------------------------------------------------------------
AN INCENTIVE STOCK OPTION. If the Purchased Shares are acquired hereunder
- -------------------------
pursuant to the exercise of an incentive stock option under the Federal tax
----------------------
laws, as specified in the Grant Notice, then the following tax principles shall
be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
B. The excess of (i) the fair market value of the Purchased
Shares on the date the Option is exercised or (if later) on the date any
forfeiture restrictions applicable to the Purchased Shares lapse over (ii)
the Option Price paid for the Purchased Shares will be includible in the
Optionee's taxable income for alternative minimum tax purposes.
C. If the Optionee makes a disqualifying disposition of the
Purchased Shares, then the Optionee will recognize ordinary income in the
year of such disposition equal in amount to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised or
(if later) on the date any forfeiture restrictions applicable to the
Purchased Shares
-4-
<PAGE>
lapse over (ii) the Option Price paid for the Purchased Shares. Any
additional gain recognized upon the disqualifying disposition will be
either short-term or long-term capital gain depending upon the period for
which the Purchased Shares are held prior to the disposition.
D. For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase the
Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. The term "disqualifying disposition" means any sale or
other disposition /1/ of the Purchased Shares within two (2) years after
-
the Grant Date or within one (1) year after the execution date of this
Agreement.
E. In the absence of final Treasury Regulations relating to
incentive stock options, it is not certain whether the Optionee may, in
connection with the exercise of the Option for any Purchased Shares at the
time subject to forfeiture restrictions, file a protective election under
Section 83(b) of the Code which would limit (I) the Optionee's alternative
minimum taxable income upon exercise and (II) the Optionee's ordinary
income upon a disqualifying disposition, to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised
over (ii) the Option Price paid for the Purchased Shares. THE APPROPRIATE
FORM FOR MAKING SUCH A PROTECTIVE ELECTION IS ATTACHED AS EXHIBIT II TO
THIS AGREEMENT AND MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN
THIRTY (30) DAYS AFTER THE DATE OF THIS AGREEMENT. HOWEVER, SUCH ELECTION
----------------------
IF PROPERLY FILED WILL ONLY BE ALLOWED TO THE EXTENT THE FINAL TREASURY
-----------------------------------------------------------------------
REGULATIONS PERMIT SUCH A PROTECTIVE ELECTION.
---------------------------------------------
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY,
AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(B), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS/HER BEHALF. This filing should be made by registered or certified mail,
return receipt requested, and Optionee must retain two (2) copies of the
completed form for filing with his or her State and Federal tax returns for the
current tax year and an additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
---------------------
_________________________
/1/ Generally, a disposition of shares purchased under an incentive stock
-
option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
-5-
<PAGE>
4.1 RESTRICTION ON TRANSFER. Optionee shall not transfer, assign,
-----------------------
encumber or otherwise dispose of any of the Purchased Shares which are subject
to the Corporation's Repurchase Right under Article V. In addition, Purchased
Shares which are released from the Repurchase Right shall not be transferred,
assigned, encumbered or otherwise made the subject of disposition in
contravention of the Corporation's First Refusal Right under Article VI. Such
restrictions on transfer, however, shall not be applicable to (i) a gratuitous
---
transfer of the Purchased Shares made to the Optionee's spouse or issue,
including adopted children, or to a trust for the exclusive benefit of the
Optionee or the Optionee's spouse or issue, provided and only if the Optionee
--------------------
obtains the Corporation's prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by the
Optionee in connection with the acquisition of the Purchased Shares.
4.2 TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
----------------------
to whom the Purchased Shares are transferred by means of one of the permitted
transfers specified in paragraph 4.1 must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Corporation that such
person is bound by the provisions of this Agreement and that the transferred
shares are subject to (i) both the Corporation's Repurchase Right and the
Corporation's First Refusal Right granted hereunder and (ii) the market stand-
off provisions of paragraph 4.4, to the same extent such shares would be so
subject if retained by the Optionee.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI and VII
-------------------
of this Agreement, the term "Owner" shall include the Optionee and all
subsequent holders of the Purchased Shares who derive their chain of ownership
through a permitted transfer from the Optionee in accordance with paragraph 4.1.
4.4 MARKET STAND-OFF PROVISIONS.
---------------------------
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Corporation or such underwriters; provided, however,
--------
that in no event shall such period exceed one hundred-eighty (180) days. The
limitations of this paragraph 4.4 shall remain in effect for the two-year period
immediately following the effective date of the Corporation's initial public
offering and shall thereafter terminate and cease to have any force or effect.
-6-
<PAGE>
B. Owner shall be subject to the market stand-off provisions of this
paragraph 4.4 provided and only if the officers and directors of the Corporation
--------------------
are also subject to similar arrangements.
C. In the event of any stock dividend, stock split, recapitalization
or other change affecting the Corporation's outstanding Common Stock effected as
a class without receipt of consideration, then any new, substituted or
additional securities distributed with respect to the Purchased Shares shall be
immediately subject to the provisions of this paragraph 4.4, to the same extent
the Purchased Shares are at such time covered by such provisions.
D. In order to enforce the limitations of this paragraph 4.4, the
Corporation may impose stop-transfer instructions with respect to the Purchased
Shares until the end of the applicable stand-off period.
V. REPURCHASE RIGHT
----------------
5.1 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 Purchased
Shares in which the Optionee has not acquired a vested interest in accordance
with the vesting provisions of paragraph 5.3 (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.
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable sixty (60)-day period specified in
paragraph 5.1. 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. To the extent one
or more certificates representing Unvested Shares may have been previously
delivered out of escrow to the Owner, then 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
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), 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.
-7-
<PAGE>
5.3 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 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right lapses shall, however, continue to be subject to (i) the First Refusal
Right of the Corporation and its assignees under Article VI, (ii) the market
stand-off provisions of paragraph 4.4 and (iii) the Special Purchase Right under
Article VIII.
5.4 AGGREGATE VESTING LIMITATION. If the Option is exercised in more
----------------------------
than one increment so that the Optionee is a party to one or more other Stock
Purchase Agreements ("Prior Purchase Agreements") which are executed prior to
the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which the Optionee would otherwise at the time
be vested, in accordance with the vesting provisions of paragraph 5.3, had all
the Purchased Shares been acquired exclusively under this Agreement.
5.5 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 5.3) 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.
5.6 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 Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased 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 Purchased 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.
-8-
<PAGE>
VI. RIGHT OF FIRST REFUSAL
----------------------
6.1 GRANT. The Corporation is hereby granted rights of first refusal
-----
(the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner desires
------------------------------
to accept a bona fide third-party offer for the transfer of any or all of the
Purchased Shares (the shares subject to such offer to be hereinafter called the
"Target Shares"), Owner shall promptly (i) deliver to the Corporate Secretary of
the Corporation written notice (the "Disposition Notice") of the terms and
conditions of the offer, including the purchase price and the identity of the
third-party offeror, and (ii) provide satisfactory proof that the disposition of
the Target Shares to such third-party offeror would not be in contravention of
the provisions set forth in Articles II and IV of this Agreement.
6.3 EXERCISE OF RIGHT. The Corporation shall, for a period of forty-
-----------------
five (45) days following receipt of the Disposition Notice, have the right to
repurchase any or all of the Target Shares specified in the Disposition Notice
upon the same terms and conditions specified therein or upon terms and
conditions which do not materially vary from those specified therein. Such
right shall be exercisable by delivery of written notice (the "Exercise Notice")
to Owner prior to the expiration of the forty-five (45)-day exercise period. If
such right is exercised with respect to all the Target Shares specified in the
Disposition Notice, then the Corporation (or its assignees) shall effect the
repurchase of the Target Shares, including payment of the purchase price, not
more than ten (10) business days after delivery of the Exercise Notice; and at
such time Owner shall deliver to the Corporation the certificates representing
the Target Shares to be repurchased, each certificate to be properly endorsed
for transfer. To the extent any of the Target Shares are at the time held in
escrow under Article VII, the certificates for such shares shall automatically
be released from escrow and delivered to the Corporation for purchase. Should
the purchase price specified in the Disposition Notice be payable in property
other than cash or evidences of indebtedness, the Corporation (or its assignees)
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If the Owner and the Corporation (or its
assignees) cannot agree on such cash value within ten (10) days after the
Corporation's receipt of the Disposition Notice, the valuation shall be made by
an appraiser of recognized standing selected by the Owner and the Corporation
(or its assignees) or, if they cannot agree on an appraiser within twenty (20)
days after the Corporation's receipt of the Disposition Notice, each shall
select an appraiser of recognized standing and the two appraisers shall
designate a third appraiser of recognized standing, whose appraisal shall be
determinative of such value. The cost of such appraisal shall be shared equally
by the Owner and the Corporation. The closing shall then be held on the
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<PAGE>
later of (i) the tenth business day following delivery of the Exercise Notice or
- -----
(ii) the tenth business day after such cash valuation shall have been made.
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is not
---------------------
given to Owner within forty-five (45) days following the date of the
Corporation's receipt of the Disposition Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; provided,
--------
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of paragraph 2.2(a) and
(ii) the market stand-off provisions of paragraph 4.4. In the event Owner does
not effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the Corporation's First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation (or its
-------------------------
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within thirty (30) days after the date of the Disposition Notice, to
effect the sale of the Target Shares pursuant to one of the following
alternatives:
(i) sale or other disposition of all the Target Shares to
the third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of paragraph 6.4, as if the Corporation
did not exercise the First Refusal Right hereunder; or
(ii) sale to the Corporation (or its assignees) of the
portion of the Target Shares which the Corporation (or its assignees) has
elected to purchase, such sale to be effected in substantial conformity
with the provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
-----------------------
-10-
<PAGE>
(a) In the event of any stock dividend, stock split, recapitalization
or other transaction 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 which is by reason of such transaction
distributed with respect to the Purchased Shares shall be immediately subject to
the Corporation's First Refusal Right hereunder, but only to the extent the
Purchased Shares are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation in which the Corporation is not
the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to person or persons other
than those who held such securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the State in
which the Corporation is incorporated, or to create a holding company
structure,
the Corporation's First Refusal Right shall remain in full force
and effect and shall apply to the new capital stock or other property received
in exchange for the Purchased Shares in consummation of the transaction but only
to the extent the Purchased Shares are at the time covered by such right.
6.7 LAPSE. The First Refusal Right under this Article VI shall lapse
-----
and cease to have effect upon the earliest to occur of (i) the first date on
--------
which shares of the Corporation's Common Stock are held of record by more than
five hundred (500) persons, (ii) a determination is made by the Corporation's
Board of Directors that a public market exists for the outstanding shares of the
Corporation's Common Stock, or (iii) a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act,
covering the offer and sale of the Corporation's Common Stock in the aggregate
amount of at least $5,000,000. However, the market stand-off provisions of
paragraph 4.4 shall continue to remain in full force and effect following the
lapse of the First Refusal Right hereunder.
VII. ESCROW
------
7.1 DEPOSIT. Upon issuance, the certificates for any Unvested Shares
-------
purchased hereunder shall be deposited in escrow with the Corporate Secretary of
the Corporation to be held in accordance with the provisions of this Article
VII. Each
-11-
<PAGE>
deposited certificate shall be accompanied by a duly-executed Assignment
Separate from Certificate in the form of Exhibit I. The deposited certificates,
together with any other assets or securities from time to time deposited with
the Corporate Secretary pursuant to the requirements of this Agreement, shall
remain in escrow until such time or times as the certificates (or other assets
and securities) are to be released or otherwise surrendered for cancellation in
accordance with paragraph 7.3. Upon delivery of the certificates (or other
assets and securities) to the Corporate Secretary of the Corporation, the Owner
shall be issued an instrument of deposit acknowledging the number of Unvested
Shares (or other assets and securities) delivered in escrow.
7.2 RECAPITALIZATION. All regular cash dividends on the Unvested
----------------
Shares (or other securities at the time held in escrow) shall be paid directly
to the Owner and shall not be held in escrow. However, 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 or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporate Secretary to be held in escrow under this Article
VII, but only to the extent the Unvested Shares are at the time subject to the
escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any other
-----------------
assets or securities held in escrow hereunder, shall be subject to the following
terms and conditions relating to their release from escrow or their surrender to
the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees) elect to exercise
the Repurchase Right under Article V with respect to any Unvested Shares,
then the escrowed certificates for such Unvested Shares (together with any
other assets or securities issued with respect thereto) shall be delivered
to the Corporation concurrently with the payment to the Owner, in cash or
cash equivalent (including the cancellation of any purchase-money
indebtedness), of an amount equal to the aggregate Option Price for such
Unvested Shares, and the Owner shall cease to have any further rights or
claims with respect to such Unvested Shares (or other assets or securities
attributable to such Unvested Shares).
(ii) Should the Corporation (or its assignees) elect to exercise
its First Refusal Right under Article VI with respect to any vested Target
Shares held at the time in escrow hereunder, then the escrowed certificates
for such Target Shares (together with any other assets or securities
attributable thereto) shall, concurrently with the payment of the paragraph
6.3 purchase price for such Target Shares to the Owner, be surrendered to
the Corporation, and the Owner shall cease to have any further rights or
claims with respect to such Target Shares (or other assets or securities).
-12-
<PAGE>
(iii) Should the Corporation (or its assignees) elect not to
---
exercise its First Refusal Right under Article VI with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Owner for
disposition in accordance with provisions of paragraph 6.4.
(iv) As the interest of the Optionee in the Unvested Shares (or
any other assets or securities attributable thereto) vests in accordance
with the provisions of Article V, the certificates for such vested shares
(as well as all other vested assets and securities) shall be released from
escrow and delivered to the Owner in accordance with the following
schedule:
a. The initial release of vested shares (or other vested
-
assets and securities) from escrow shall be effected within thirty
(30) days following the expiration of the initial twelve (12)-month
period measured from the Grant Date.
b. Subsequent releases of vested shares (or other vested
-
assets and securities) from escrow shall be effected at semi-annual
intervals thereafter, with the first such semi-annual release to occur
eighteen (18) months after the Grant Date.
c. Upon the Optionee's cessation of Service, any escrowed
-
Purchased Shares (or other assets or securities) in which the Optionee
is at the time vested shall be promptly released from escrow.
d. Upon any earlier termination of the Corporation's
-
Repurchase Right in accordance with the applicable provisions of
Article V, any Purchased Shares (or other assets or securities) at the
time held in escrow hereunder shall promptly be released to the Owner
as fully-vested shares or other property.
(v) All Purchased Shares (or other assets or securities)
released from escrow in accordance with the provisions of subparagraph (iv)
above shall nevertheless remain subject to (I) the Corporation's First
Refusal Right under Article VI until such right lapses pursuant to
paragraph 6.7, (II) the market stand-off provisions of paragraph 4.4 until
such provisions terminate in accordance therewith and (III) the Special
Purchase Right under Article VIII.
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<PAGE>
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
---------------------------------------
8.1 GRANT. In connection with the dissolution of the Optionee's
-----
marriage or the legal separation of the Optionee and the Optionee's spouse, the
Corporation shall have the right (the "Special Purchase Right"), exercisable at
any time during the thirty (30)-day period following the Corporation's receipt
of the required Dissolution Notice under paragraph 8.2, to purchase from the
Optionee's spouse, in accordance with the provisions of paragraph 8.3, all or
any portion of the Purchased Shares which would otherwise be awarded to such
spouse in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Optionee shall promptly
-----------------------------
provide the Secretary of the Corporation with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the property
rights of the Optionee and the Optionee's spouse in connection with their
marital dissolution or legal separation or (ii) the execution of any contract or
agreement relating to the distribution or division of such property rights. The
Dissolution Notice shall be accompanied by a copy of the actual decree of
dissolution or settlement agreement between the Optionee and the Optionee's
spouse which provides for the award to the spouse of one or more Purchased
Shares in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The Special Purchase Right
----------------------------------
shall be exercisable by delivery of written notice (the "Purchase Notice") to
the Optionee and the Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice), and the fair market value to be paid for such Purchased Shares. The
Optionee (or the Optionee's spouse, to the extent such spouse has physical
possession of the Purchased Shares) shall, prior to the close of business on the
date specified for the purchase, deliver to the Corporate Secretary of the
Corporation the certificates representing the shares to be purchased, each
certificate to be properly endorsed for transfer. To the extent any of the
shares to be purchased by the Corporation are at the time held in escrow under
Article VII, the certificates for such shares shall be promptly delivered out of
escrow to the Corporation. The Corporation shall, concurrently with the receipt
of the stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the fair market value specified for such shares
in the Purchase Notice.
If the Optionee's spouse does not agree with the fair market value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two
-14-
<PAGE>
appraisers shall designate a third appraiser of recognized standing whose
appraisal shall be determinative of such value. The cost of the appraisal shall
be shared equally by the Corporation and the Optionee's spouse. The closing
shall then be held on the fifth business day following the completion of such
appraisal; provided, however, that if the appraised value is more than fifteen
--------
percent (15%) greater than the fair market value specified for the shares in the
Purchase Notice, the Corporation shall have the right, exercisable prior to the
expiration of such five (5)-business-day period, to rescind the exercise of the
Special Purchase Right and thereby revoke its election to purchase the shares
awarded to the spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII shall
-----
lapse and cease to have effect upon the earlier to occur of (i) the first date
-------
on which the First Refusal Right under Article VI lapses or (ii) the expiration
of the thirty (30)-day exercise period specified in paragraph 8.3, to the extent
the Special Purchase Right is not timely exercised in accordance with such
paragraph.
IX. GENERAL PROVISIONS
------------------
9.1 ASSIGNMENT. The Corporation may assign its Repurchase Right
----------
under Article V, its First Refusal Right under Article VI and/or its Special
Purchase Right under Article VIII to any person or entity selected by the
Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
If the assignee of the Repurchase Right is other than a one hundred
percent (100%) owned subsidiary corporation of the Corporation or the parent
corporation owning one hundred percent (100%) of the Corporation, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the fair
market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Unvested Shares thereunder.
9.2 DEFINITIONS. For purposes of this Agreement, the following
-----------
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be considered to be
a parent corporation of the Corporation, provided each such corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(ii) Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be
-15-
<PAGE>
considered to be a subsidiary of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon the Optionee any right to continue in the Service
of the Corporation (or any parent or subsidiary corporation of the Corporation
employing or retaining Optionee) 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 corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
-------
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
9.5 NO WAIVER. The failure of the Corporation (or its assignees) in
---------
any instance to exercise the Repurchase Right granted under Article V, or the
failure of the Corporation (or its assignees) in any instance to exercise the
First Refusal Right granted under Article VI, or the failure of the Corporation
(or its assignees) in any instance to exercise the Special Purchase Right
granted under Article VIII shall not constitute a waiver of any other repurchase
rights and/or rights of first refusal that may subsequently arise under the
provisions of this Agreement or any other agreement between the Corporation and
the Optionee or the Optionee's spouse. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its assignees)
----------------------
shall make available, at the time and place and in the amount and form provided
in this Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement), and such
shares shall be deemed purchased in accordance with the applicable provisions
hereof and the Corporation (or its assignees) shall be deemed the owner and
holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.
-16-
<PAGE>
X. MISCELLANEOUS PROVISIONS
------------------------
10.1 OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
--------------------
additional action and execute whatever additional documents the Corporation may
in its judgment deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either the Optionee or the
Purchased Shares pursuant to the express provisions of this Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State without resort
to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and the Optionee and the Optionee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
10.6 POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
-----------------
his or her true and lawful attorney in fact, for him or her and in his or her
name, place and stead, and for his or her use and benefit, to agree to any
amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
Corsair Communications, INC.
By:_____________________________________________
Title:__________________________________________
Address: ________________________________________________
________________________________________________
________________________________________________
Optionee /*/
Address: ________________________________________________
________________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, 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: ________________________________________________
________________________________________________
___________________
/*/ I have executed the Section 83(b) election that was attached hereto as an
Exhibit. As set forth in Article III, I understand that I, and not the
---
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
-18-
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Corsair Communications, Inc. (the "Corporation"),
________________________ (__________) shares of the Common Stock of the
Corporation standing in his\her name on the books of the Corporation represented
by Certificate No. ___________________ and do hereby irrevocably constitute and
appoint _______________________________ as Attorney to transfer the said stock
on the books of the Corporation with full power of substitution in the premises.
Dated: ________________
Signature ____________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
<PAGE>
REPURCHASE RIGHTS
-----------------
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
____________ shares of the common stock of Corsair Communications, Inc.
(3) The property was issued on _____________, 19___.
(4) The taxable year in which the election is being made is the calendar year
19__.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of annual and monthly
installments over a four year period ending on ____________, 19__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $________ per share.
(7) The amount paid for such property is $_______ per share.
(8) A copy of this statement was furnished to Corsair Communications, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed as of: _______________________.
___________________ __________________________________
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
<PAGE>
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL
REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON EXERCISE OF AN
INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN INCENTIVE
STOCK OPTION.
<PAGE>
FIRST AMENDMENT TO
OPTION AGREEMENT
THIS FIRST AMENDMENT TO 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, Optionee has an option to purchase shares of the Corporation in
accordance with a Notice of Grant dated ____________, _____;
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:
1. The Stock Option Agreement attached to the Notice of Grant as Exhibit
A (the "Option Agreement") is hereby amended by redesignating paragraph 6.B
thereof as paragraph 6.C, and adding the following as a new paragraph 6.B:
"B. If the Option is assumed by the successor corporation in
connection with a Corporate Transaction, Optionee shall vest in 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 or Participant, 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 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, Participant or
other person in the Service of the Corporation (or any Parent or
Subsidiary).
2. The Stock Purchase Agreement attached to the Notice of Grant as
Exhibit B (the "Purchase Agreement") is hereby amended by adding the following
as a new Section 5.7 thereof:
"5.7 CORPORATE TRANSACTION.
---------------------
"A. Immediately prior to the consummation of any of the
following shareholder-approved transactions (a "Corporate Transaction"):
"(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 Purchased
Shares in consummation of the Corporate Transaction, but only to the extent
the Purchased 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 or Participant, 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 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, Participant 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."
3. Notwithstanding the provisions of Sections 1 or 2 hereof, no
acceleration of vesting shall occur under paragraph 6.B of the Option Agreement
as herein amended and no lapse of Repurchase Rights shall occur under Section
5.7 of the Purchase Agreement with respect to any Corporate Transaction
occurring within six (6) months of the date of this First Amendment.
4. Except as expressly set forth herein, the option shall continue to be
governed by the terms of the original Notice of Grant including the Exhibits
thereto.
[Remainder of this page left intentionally blank]
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
Corsair Communications, INC.
By:______________________________________
Title:___________________________________
Address: _________________________________________
_________________________________________
_________________________________________
Optionee
Address: _________________________________________
_________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, 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: _________________________________________
_________________________________________
EXHIBIT C
1996 STOCK OPTION/STOCK ISSUANCE PLAN
C-1
<PAGE>
CORSAIR COMMUNICATIONS, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE I
GENERAL PROVISIONS
------------------
1. PURPOSE
This 1996 Stock Option/Stock Issuance Plan ("Plan") is intended to
promote the interests of Corsair Communications, Inc., a Delaware corporation
(the "Corporation"), by providing individuals who render valuable services to
the Corporation (or any Parent or Subsidiary) with the opportunity to acquire
ownership interests in the Corporation so as to encourage them to continue to
render services to the Corporation (or any Parent or Subsidiary).
2. STRUCTURE OF THE PLAN; TERMINOLOGY
This Plan has two separate components: the Option Grant Program set
forth in Article II and the Stock Issuance Program set forth in Article III.
For the purposes of this Plan, any capitalized term shall have the meaning
assigned under Article IV, Section 8 hereof.
3. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by either the Board or a
committee of two (2) or more Board members appointed by the Board to which the
Board has delegated administrative functions under the Plan (the "Plan
Administrator"). Members of any committee to which the Board has delegated any
administrative functions shall serve for such terms as the Board shall determine
and subject to the Board's right of removal. All delegations of authority to
any committee shall be and remain revocable by the Board.
B. The Plan Administrator shall have full power and authority to
implement, interpret and administer the Plan, to establish all such rules and
regulations as it deems appropriate, and to make such determinations under the
Plan and any outstanding option grants or share issuances as it deems necessary
or advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any outstanding option or share
issuance.
<PAGE>
4. SELECTION OF OPTIONEES AND PARTICIPANTS
A. The persons eligible to receive share issuances under the Stock
Issuance Program and/or option grants pursuant to the Option Grant Program are
limited to Employees; non-employee members of the Board of the Corporation (or
of any Parent or Subsidiary); and consultants and other independent contractors
who provide valuable services to the Corporation (or to any Parent or
Subsidiary).
B. The Plan Administrator shall have the absolute discretion and
authority to determine, subject to the provisions of this Plan, the terms of any
option grant or share issuance. In addition to any other matters over which the
Plan Administrator has discretion hereunder, the Plan Administrator shall
determine which, if any, eligible individuals will be granted options in
accordance with Article II of the Plan and which will be issued shares in
accordance with Article III of the Plan. With respect to option grants made
under the Plan, the Plan Administrator will determine the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable, the vesting schedule (if any)
applicable to shares issued pursuant to the granted options, and the maximum
term for which the option may remain outstanding. With respect to share
issuances under the Stock Issuance Program, in addition to other matters over
which the Plan Administrator has discretion hereunder, the Plan Administrator
will determine the number of shares to be issued to each issuee, the vesting
schedule (if any) applicable to the issued shares, and the consideration to be
paid by the individual for such shares. Notwithstanding the above, the Plan
Administrator may not impose a vesting schedule upon any option grant or any
shares of Common Stock subject to the option which is more restrictive than
twenty percent (20%) per year vesting.
C. Common Stock issuable under the Plan, whether under the Option
Grant Program or the Stock Issuance Program, may be subject to such restrictions
on transfer, repurchase rights or other restrictions as may be imposed by the
Plan Administrator and set forth in the documents governing such option or
issuance.
5. STOCK SUBJECT TO THE PLAN
A. Authorized but unissued or reacquired Common Stock of the
Corporation will be issued under the Plan. The maximum number of shares of
Common Stock which may be issued over the term of the Plan shall not exceed
2,750,000 shares reduced by the number of shares issued or reserved for issuance
under the Company's 1995 Stock Option/ Stock Issuance Plan (the "Prior Plan"),
subject to adjustment from time to time in accordance with the provisions of
this Section 5 of Article I.
B. Shares reserved for issuance under granted options but not in
fact issued pursuant to options granted under the Plan or under the Prior Plan
due to the expiration or termination of the option or the cancellation of any
option (including the cancellation of any option in accordance with Section 3 of
Article II or its counterpart in the
-2-
<PAGE>
Prior Plan) will remain available for issuance under the Plan. Shares actually
issued under the Plan, whether pursuant to the exercise of an option under the
Option Grant Program or a stock issuance pursuant to the Stock Issuance Program,
which are subsequently repurchased by the Corporation will not become available
for future issuance.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the aggregate number and/or class of shares issuable under
the Plan and (ii) the aggregate number and/or class of shares and the option
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive.
6. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the rights and obligations of
an optionee with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any issuee with respect to Common Stock issued
under the Plan prior to such action unless such optionee or issuee consents to
such amendment. In addition, the Board shall not, without the approval of the
Corporation's shareholders, amend the Plan so as to (i) increase the maximum
number of shares issuable under the Plan (except for adjustments required under
Article I, Section 5.C), (ii) materially increase the benefits accruing to
individuals who participate in the Plan, or (iii) materially modify the
eligibility requirements for participation in the Plan.
B. Options to purchase shares of Common Stock may be granted under
the Option Grant Program and shares of Common Stock may be issued under the
Stock Issuance Program, which are in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
--------
issued under the Option Grant Program or the Stock Issuance Program are held in
escrow until shareholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan is
obtained. If such approval is not obtained within twelve (12) months after the
date the initial excess issuances are made, then (I) any unexercised options
representing such excess shall terminate and cease to be exercisable and (II)
the Corporation shall promptly refund to the optionees and issuees the option or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
7. EFFECTIVE DATE AND TERM OF PLAN
-3-
<PAGE>
A. The Plan shall become effective when adopted by the Board.
Options to purchase shares of Common Stock may be granted under the Option Grant
Program and shares of Common Stock may be issued under the Stock Issuance
Program from and after the effective date, provided any shares actually issued
--------
under the Plan are held in escrow until shareholder approval of the Plan is
obtained. If such approval is not obtained within twelve (12) months after the
effective date, then (I) all options shall terminate and cease to be
exercisable, (II) the Corporation shall promptly refund to the optionees and
issuees the option or purchase price paid for any shares issued under the Plan,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding, and (III) this Plan shall
terminate in its entirety.
B. Unless sooner terminated by reason of Section 7A of this Article
I, the Plan shall terminate upon the earlier of (i) May 31, 2006, or (ii) the
-------
date on which all shares available for issuance under the Plan have been issued
pursuant to the exercise of options granted under Article II or the issuance of
shares under Article III. The termination of the Plan shall have no effect on
any outstanding options under or shares issued and outstanding under the Plan,
and such securities shall thereafter continue to have force and effect in
accordance with the provisions of the agreements evidencing such options and
issuances.
C. No additional options shall be granted or shares issued under the
Prior Plan (other than issuances pursuant to already outstanding options) after
the date on which this Plan has been adopted by the Board, provided that options
may be granted or shares issued under the Prior Plan if shareholder approval is
not obtained as set forth in paragraph A hereof.
8. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon any person 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)
or of the optionee or the issuee, which rights are hereby expressly reserved by
each, to terminate Service of the optionee or issuee at any time for any reason
whatsoever, with or without cause or to engage in any Corporate Transaction.
ARTICLE II
OPTION GRANT PROGRAM
--------------------
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or Non-Statutory Options except that individuals who
are not Employees may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each
--------
-4-
<PAGE>
such instrument shall comply with the terms and conditions of Sections 1 and 3
of this Article II and each instrument evidencing an Incentive Option shall, in
addition, comply with the provisions of Section 2 of this Article II.
A. OPTION PRICE.
------------
(I) The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than eighty-five percent (85%) of the Fair Market Value of a share of Common
Stock on the date of the option grant, and provided that the option price per
share for any 10% Shareholder shall not be less than 100% of the fair market
value of the stock on the date of grant.
(II) The option price per share shall be immediately due upon
exercise of the option and shall, subject to the provisions of Article IV,
Section 1 and the agreement evidencing such grant, be payable in cash or check
drawn to the Corporation's order. Notwithstanding the above, should the
Corporation's outstanding Common Stock be registered under Section 12(g) of the
1934 Act, at the time the option is exercised, then the option price may also be
paid as follows:
- in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value; or
- through a special sale and remittance procedure pursuant
to which the optionee provides irrevocable written instructions (I) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, an amount sufficient to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and
State income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (II) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
Except to the extent such sale and remittance procedure is utilized, payment of
the option price must occur at the time the option is exercised.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
----------------------------
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement evidencing such option. However, no option
granted under the Plan shall have a term in excess of ten (10) years from the
grant date.
C. NO ASSIGNMENT. During the lifetime of the Optionee, the option
-------------
shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death. However,
-5-
<PAGE>
a Non-Statutory Option may be assigned in accordance with the terms of a
Qualified Domestic Relations Order. The assigned option may only be exercised
by the person or persons who acquire a proprietary interest in the option
pursuant to such Qualified Domestic Relations Order. The terms applicable to
the assigned option (or portion thereof) shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate.
D. TERMINATION OF SERVICE. The following provisions shall govern
----------------------
the exercise period applicable to any options held by the optionee at the time
of cessation of Service or death:
(I) Should the optionee cease to remain in Service for any
reason other than death or Permanent Disability, then the period during which
each outstanding option held by such optionee is to remain exercisable shall be
limited to the three (3)-month period following the date of such cessation of
Service.
(II) Should such Service terminate by reason of Permanent
Disability or should the optionee die while holding one or more outstanding
options, then the period during which each such option is to remain exercisable
shall be limited to the twelve (12)-month period following the date of the
optionee's cessation of Service or death. During the limited exercise period
following the optionee's death, the option may be exercised by the personal
representative of the optionee's estate or by the person or persons to whom the
option is transferred pursuant to the optionee's will or in accordance with the
laws of descent and distribution.
(III) The Plan Administrator shall have full power and
authority to extend (either at the time the option is granted or at any time
while the option remains outstanding) the period of time for which the option is
to remain exercisable following the optionee's cessation of Service, from the
limited period otherwise applicable under subsection 1C of this Article II, to
such greater period of time as the Plan Administrator may deem appropriate under
the circumstances.
(IV) Notwithstanding the above no option shall be
exercisable after the specified expiration date of the option term.
(V) Each such option shall, during the applicable limited
exercise period, be exercisable only with respect to the shares for which the
option was exercisable on the date of the optionee's cessation of Service.
E. SHAREHOLDER RIGHTS. An optionee shall not have rights as a
------------------
shareholder with respect to any shares subject to an option until such optionee
shall have exercised the option and paid the option price.
-6-
<PAGE>
F. UNVESTED SHARES. The Plan Administrator shall have the
---------------
discretion to grant options which are exercisable for unvested shares of Common
Stock under the Plan. Should the Optionee cease Service while holding such
unvested shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, all or (at the discretion of the Corporation and
with the consent of the Optionee) any of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
2. INCENTIVE OPTIONS
All provisions of the Plan shall be applicable to Incentive Options
granted hereunder and, in addition, the terms and conditions specified in this
Section 2 shall be applicable to Incentive Options granted under the Plan.
Options which are specifically designated as Non-Statutory Options when issued
under the Plan shall not be subject to such terms and conditions set forth
---
herein.
A. OPTION PRICE.
------------
(I) The option price per share of the Common Stock subject
to an Incentive Option shall in no event be less than one hundred percent (100%)
of the Fair Market Value of a share of Common Stock on the grant date.
(II) If the individual to whom the option is granted is a
10% Shareholder, then the option price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value of the Common Stock on the
date of the option grant.
B. DOLLAR LIMITATION. The aggregate Fair Market Value (determined
-----------------
as of the date or dates of grant) of Common Stock which first becomes
exercisable during any one calendar year under Incentive Options granted to any
Employee under any option plan of the Corporation (or any parent or subsidiary
corporation) shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds options which become exercisable
in the same calendar year, the foregoing limitation on such options shall be
applied on the basis of the order in which such options are granted. Any
options in excess of such limitation shall automatically be treated as Non-
statutory Options.
C. TERM OF OPTION FOR 10% SHAREHOLDERS. No option granted to a 10%
-----------------------------------
Shareholder shall have a term in excess of five (5) years from the grant date.
3. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options
-7-
<PAGE>
under the Plan covering the same or a different numbers of shares of Common
Stock but having an option price per share established at the time of such
cancellation and regrant in accordance with the provisions of this Plan.
4. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with such
Corporate Transaction. In addition, all outstanding repurchase rights under the
Plan shall terminate automatically in the event of any Corporate Transaction,
except to the extent the repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
--------
securities shall remain the same.
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
ARTICLE III
STOCK ISSUANCE PROGRAM
----------------------
1. STOCK ISSUANCES
Shares of Common Stock shall be issuable under the Stock Issuance
Program through direct and immediate issuances without any intervening stock
option grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") in a form acceptable to the Plan Administrator,
which form shall be in compliance with the provisions of the Plan.
2. ISSUE PRICE
The purchase price per share shall be fixed by the Plan Administrator,
but in no event shall it be less than eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock at the time of issuance, and provided
that the issue price per share for
-8-
<PAGE>
any 10% Shareholder shall not be less than 100% of the fair market value of the
stock on the date of grant.
3. PAYMENT OF ISSUE PRICE
Except as provided in Article IV, Section 1, shares shall be issued
only in exchange for cash, a check payable to the Corporation, for services
previously rendered to the Corporation (or any Parent or Subsidiary) or such
other lawful consideration as may be acceptable to the Plan Administrator.
ARTICLE IV
MISCELLANEOUS
-------------
1. LOANS
A. The Plan Administrator may assist any optionee or issuee (other
than a non-employee director) in the exercise of one or more options granted to
such optionee under the Option Grant Program or the purchase of one or more
shares to be issued to such issuee under the Stock Issuance Program, including
the satisfaction of any Federal and State income and employment tax obligations
arising therefrom, by (i) authorizing the extension of a loan from the
Corporation to such optionee or issuee, or (ii) permitting the optionee or
issuee to pay the option price or purchase price for the purchased Common Stock
in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
authorized with or without security or collateral. However, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events the maximum credit
available to each optionee or issuee may not exceed the sum of (i) the aggregate
---
option price or purchase price payable for the purchased shares plus (ii) any
Federal and State income and employment tax liability incurred by the optionee
or issuee in connection with such exercise or purchase.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.
2. VESTING OF SHARES AND REPURCHASE RIGHTS
A. The Plan Administrator, in its absolute discretion, may issue
fully and immediately vested shares of Common Stock, or the Plan Administrator
may impose such vesting requirements as it deems appropriate with the
Corporation retaining a right to repurchase any unvested shares. The terms of
the vesting schedule and of the Corporation's
-9-
<PAGE>
repurchase rights shall be as determined by the Plan Administrator and set forth
in the agreement governing such issuance. Notwithstanding the above, the Plan
Administrator may not impose a vesting schedule upon any option grant or any
shares of Common Stock subject to the option which is more restrictive than
twenty percent (20%) per year vesting.
B. Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash dividend) which the
holder of unvested Common Stock may have the right to receive by reason of a
stock dividend, stock split, reclassification or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting and repurchase
limitations applicable to the unvested Common Stock with respect to which it was
paid or arose, and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.
C. No person to whom shares of Common Stock have been issued
pursuant to the Plan may transfer any such shares which have not vested.
Notwithstanding the above, the issuee shall have the right to make a gift of
unvested shares acquired under the Plan to his/her spouse, parents or issue or
to a trust established for such spouse, parents or issue, provided the
transferee of such shares delivers to the Corporation a written agreement to be
bound by all the provisions of the Plan and the Issuance or Stock Purchase
Agreement executed by the issuee at the time of his/her acquisition of the
gifted shares.
3. MARKET STAND-OFF AGREEMENTS
The Plan Administrator may require each person to whom any shares are
issued under this Plan to enter into an agreement which restricts or prohibits
the sale of any stock of the Corporation by such person for a reasonable period
of time following a public offering of any shares of stock by the Corporation.
4. RIGHT OF FIRST REFUSAL
Until such time as the Corporation's outstanding shares of Common
Stock are first registered under Section 12(g) of the 1934 Act, the Plan
Administrator may subject any shares issued pursuant to the Plan to a right of
first refusal with respect to any proposed disposition of such shares other than
a transfer permitted by Section 2.C of this Article IV. Such right of first
refusal shall be exercisable by the Corporation (or its assignees) in accordance
with the terms and conditions specified in the instrument governing the issuance
of such shares.
5. SECURITIES LAWS; LEGENDS
A. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until the Corporation shall have determined
that there has been full and adequate compliance with all applicable
requirements of the Federal and state securities laws and all other applicable
legal and regulatory requirements.
-10-
<PAGE>
B. Shares issued under the Plan shall bear such legends as the Plan
Administrator deems necessary or appropriate, including such restrictive legends
as the Plan Administrator shall require to reflect the terms of any agreement
between the issuee and the Corporation.
6. SHAREHOLDER RIGHTS
Subject to the rights of the Corporation set forth herein or in any
other agreement entered into between the Corporation and an issuee of shares
under the Plan, each person to whom shares of Common Stock have been issued
under the Plan shall have all the rights of a shareholder with respect to those
shares whether or not his/her interest in such shares is vested. Accordingly,
the issuee shall have the right to vote such shares and to receive any cash
dividends or other distributions paid or made with respect to such shares.
7. ACCELERATION
The Plan Administrator may, in its discretion, provide for the
automatic acceleration upon a Change of Control and\or Corporate Transaction of
the time at which any option will become exercisable or for the lapse of any
repurchase right tied to vesting by including a provision to such effect in the
documents evidencing the rights of the optionee or issuee.
8. DEFINITIONS
The following definitions shall be in effect under this Plan:
A. BOARD shall mean the Board of Directors of the Corporation.
-----
B. COMMON STOCK shall mean the common stock of the Corporation.
------------
C. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) any transaction or series of related transactions
(including, without limitation, any reorganization, merger or
consolidation) in which more than fifty percent (50%) of the Corporation's
outstanding voting stock is transferred to a person or persons different
from those who held the stock immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
-11-
<PAGE>
D. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation or any Parent or Subsidiary, 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.
E. FAIR MARKET VALUE per share of Common Stock on any relevant date
-----------------
under the Plan shall be the value determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any Stock Exchange but is traded on the NASDAQ
National Market System, the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers through the
NASDAQ National Market System or any successor system. If there is no
closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed or admitted
to trading on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on the NASDAQ National
Market System, then such Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
F. INCENTIVE OPTION shall mean a stock option which satisfies the
----------------
requirements of Internal Revenue Code Section 422.
G. NON-STATUTORY OPTION shall mean a stock option not intended to
--------------------
meet the requirements of Code Section 422.
H. PARENT shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
-12-
<PAGE>
I. PERMANENT DISABILITY shall have the meaning assigned to such term
--------------------
in Code Section 22(e)(3).
J. SERVICE shall mean the provision of services to the Corporation
-------
or any Parent or Subsidiary by an individual in the capacity of an Employee, a
non-employee member of the Board or a consultant or independent contractor.
K. SUBSIDIARY shall mean each corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
L. 10% STOCKHOLDER shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation.
9. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
10. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any options granted under Article II or the purchase of any shares issued under
Article III shall be subject to the satisfaction of all applicable Federal,
State and local income and employment tax withholding requirements.
11. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the
Option Grant Program, the issuance of any shares under the Stock Issuance
Program, and the issuance of Common Stock upon the exercise of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
12. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under the
Plan, unless such individual is a key Employee whose duties in connection with
the Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.
-13-
<PAGE>
EXHIBIT 10.22
CORSAIR COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
--------
A. The Board of Directors of the Corporation has adopted the Corsair
Communications, Inc. 1996 Stock Option/Stock Issuance Plan (the "Plan") for the
purpose of attracting and retaining the services of persons who contribute to
the growth and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and this
Agreement is executed pursuant to and is intended to carry out the purposes of
the Plan.
AGREEMENT
---------
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 Corporation hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that number
of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
-----------
years measured from the Grant Date and shall expire at the close of business on
the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
-----------------------
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
-----------------
in part at any time prior to the time the Plan is approved by the Corporation's
shareholders in accordance with Paragraph 17. Provided such shareholder
approval is obtained, this option shall thereupon become exercisable for the
Option Shares in one or more installments as is specified in the Grant Notice.
As the option becomes exercisable in one or more installments, the installments
shall accumulate and the option shall remain
<PAGE>
exercisable for such installments until the Expiration Date or the sooner
termination of the option term under Paragraph 5 or Paragraph 6 of this
Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified
--------------------------------------
in Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Except as otherwise provided in subparagraph (ii) or
(iii) below, should Optionee cease to remain in Service while this option
is outstanding, then the period for exercising this option shall be reduced
to a three (3)-month period commencing with the date of such cessation of
Service, but in no event shall this option be exercisable at any time after
the Expiration Date. Upon the expiration of such three (3)-month period or
(if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(ii) Should Optionee die while this option is outstanding,
then the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the law of descent and distribution shall have the
right to exercise this option. Such right shall lapse and this option shall
cease to be exercisable upon the earlier of (A) the expiration of the
-------
twelve (12) month period measured from the date of Optionee's death or (B)
the Expiration Date. Upon the expiration of such twelve (12) month period
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service while this option is outstanding, then
the Optionee shall have a period of twelve (12) months (commencing with the
date of such cessation of Service) during which to exercise this option,
but in no event shall this option be exercisable at any time after the
Expiration Date. Optionee shall be deemed to be permanently disabled if
Optionee is unable to engage in any substantial gainful activity for the
Corporation or the parent or subsidiary corporation retaining his/her
services by reason of any medically determinable physical or mental
impairment, which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than twelve
(12) months. Upon the expiration of such limited period of exercisability
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iv) During the limited period of exercisability applicable
under subparagraph (i), (ii) or (iii) above, this option may be exercised
for any or all of the Option Shares for which this option is, at the time
of the
-2-
<PAGE>
Optionee's cessation of Service, exercisable in accordance with the
exercise schedule specified in the Grant Notice and the provisions of
Paragraph 6 of this Agreement.
(v) For purposes of this Paragraph 5 and for all other purposes
under this Agreement:
A. 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.
B. The Optionee shall be deemed to be an EMPLOYEE of the
Corporation and to continue in the Corporation's employ for so long as the
Optionee remains in the employ of the Corporation or one or more of its
parent or subsidiary corporations, 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.
C. A corporation shall be considered to be a SUBSIDIARY
corporation of the Corporation if it is a member of an unbroken chain of
corporations beginning with the Corporation, provided each such corporation
in the chain (other than the last corporation) owns, at the time of
determination, stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
D. A corporation shall be considered to be a PARENT corporation
of the Corporation if it is a member of an unbroken chain ending with the
Corporation, provided each such corporation in the chain (other than the
Corporation) owns, at the time of determination, stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
6. SPECIAL TERMINATION OF OPTION.
-----------------------------
A. This Option, to the extent not previously exercised, shall
terminate and cease to be exercisable upon the consummation of one or more of
the following shareholder-approved transactions (a "Corporate Transaction")
unless this Option is expressly assumed by the successor corporation or parent
thereof:
(i) a merger or consolidation in which the Corporation is not
the surviving entity,
-3-
<PAGE>
(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.
B. 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.
7. ADJUSTMENT IN OPTION SHARES.
---------------------------
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the total number of Option Shares subject to this option,
(ii) the number of Option Shares for which this option is to be exercisable from
and after each installment date specified in the Grant Notice and (iii) the
Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, 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.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
----------------------------
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
---------------------------
A. In order to exercise this option with respect to all or any part
of the Option 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:
-4-
<PAGE>
(i) Execute and deliver to the Secretary of the Corporation a stock
purchase agreement (the "Purchase Agreement") in substantially the form of
Exhibit B to the Grant Notice.
(ii) Pay the aggregate Option Price for the purchased shares in one
or more forms approved under the Plan.
(iii) Furnish to the Corporation appropriate documentation that the
person or persons exercising the option, if other than Optionee, have the
right to exercise this option.
B. Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
(i) in shares of Common Stock held by the Optionee for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at fair market value on the
Exercise Date; or
(ii) through a special sale and remittance procedure pursuant to which
the Optionee is to provide irrevocable written instructions (a) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation by
reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to effect the sale transaction.
C. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ National Market
System, the fair market value shall be the closing selling price of one
share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers through its NASDAQ system or
any successor system. If there is no closing selling price for the Common
Stock on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of
fair market value.
-5-
<PAGE>
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-
counter market, or if the Plan Administrator determines that the value
determined pursuant to subparagraphs (i) and (ii) above does not accurately
reflect the fair market value of the Common Stock, then such fair market
value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
D. As soon after the Exercise Date as practical, the Corporation
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, with the appropriate legends affixed thereto.
E. In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
------------------------------------
A. The exercise of this option and the issuance of Option Shares
upon such exercise shall be subject to compliance by the Corporation 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
Corporation's Common Stock may be listed at the time of such exercise and
issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
----------------------
in Paragraph 3 or 6, 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
Corporation.
-6-
<PAGE>
12. LIABILITY OF CORPORATION.
------------------------
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
13. NOTICES. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal 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 the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
14. LOANS. The Plan Administrator may, in its absolute discretion
-----
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. GOVERNING LAW. The interpretation, performance, and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. The grant of this option is subject to
--------------------
approval of the Plan by the Corporation's shareholders within twelve (12) months
after
-7-
<PAGE>
the adoption of the Plan by the Board of Directors. Notwithstanding any
-------------------
provision of this Agreement to the contrary, this option may not be exercised in
- --------------------------------------------------------------------------------
whole or in part until such shareholder approval is obtained. In the event that
- ------------------------------------------------------------
such shareholder approval is not obtained, then this option shall thereupon
terminate in its entirety and the Optionee shall have no further rights to
acquire any Option Shares hereunder.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
-------------------------------------------------- ------
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
B. Should this option be designated as immediately exercisable in
the Grant Notice, then this option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
C. Should this option be designated as exercisable in installments
in the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Corporation's Common Stock for which
such installment first becomes exercisable hereunder will, when added to the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any parent or subsidiary
corporation) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
-8-
<PAGE>
19. WITHHOLDING. Optionee hereby agrees to make appropriate
-----------
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
-9-
<PAGE>
FIRST AMENDMENT TO
OPTION AGREEMENT
THIS FIRST AMENDMENT TO 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, Optionee has an option to purchase shares of the Corporation in
accordance with a Notice of Grant dated ____________, _____;
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:
1. The Stock Option Agreement attached to the Notice of Grant as Exhibit
A (the "Option Agreement") is hereby amended by redesignating paragraph 6.B
thereof as paragraph 6.C, and adding the following as a new paragraph 6.B:
"B. If the Option is assumed by the successor corporation in
connection with a Corporate Transaction, Optionee shall vest in 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 or Participant, 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
<PAGE>
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 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, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
2. The Stock Purchase Agreement attached to the Notice of Grant as
Exhibit B (the "Purchase Agreement") is hereby amended by adding the following
as a new Section 5.7 thereof:
"5.7 CORPORATE TRANSACTION.
---------------------
"A. Immediately prior to the consummation of any of the
following shareholder-approved transactions (a "Corporate Transaction"):
"(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 Purchased
Shares in consummation of the Corporate Transaction, but only to the extent
the Purchased 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
<PAGE>
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 or Participant, 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 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, Participant 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."
3. Notwithstanding the provisions of Sections 1 or 2 hereof, no
acceleration of vesting shall occur under paragraph 6.B of the Option Agreement
as herein amended and no lapse of Repurchase Rights shall occur under Section
5.7 of the Purchase Agreement with respect to any Corporate Transaction
occurring within six (6) months of the date of this First Amendment.
4. Except as expressly set forth herein, the option shall continue to be
governed by the terms of the original Notice of Grant including the Exhibits
thereto.
[Remainder of this page left intentionally blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
Corsair Communications, INC.
By:______________________________________
Title:___________________________________
Address: _________________________________________
_________________________________________
_________________________________________
Optionee
Address: _________________________________________
_________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, 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 10.23
IMMEDIATELY EXERCISABLE
REPURCHASE RIGHT
RIGHT OF FIRST REFUSAL
----------------------
CORSAIR COMMUNICATIONS, INC.
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made as of this ___ day of _________, 19__, by and among
Corsair Communications, Inc., a Delaware corporation (the "Corporation"),
_________________________, the holder of a stock option (the "Optionee") under
the Corporation's 1996 Stock Option/Stock Issuance Plan and
_______________________, the Optionee's spouse.
I. EXERCISE OF OPTION
------------------
1.1 EXERCISE. Optionee hereby purchases _____________ shares
--------
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on _____________, 19___
("Grant Date") to purchase up to ____________ shares of the Common Stock ("Total
Purchasable Shares") under the Corporation's 1996 Stock Option/Stock Issuance
Plan (the "Plan") at an option price of $__________ per share ("Option Price").
1.2 PAYMENT. Concurrently with the delivery of this Agreement to the
-------
Corporate Secretary of the Corporation, Optionee shall pay the Option Price for
the Purchased Shares in accordance with the provisions of the agreement between
the Corporation and Optionee evidencing the Option (the "Option Agreement") and
shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise, together with a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
1.3 DELIVERY OF CERTIFICATES. The certificates representing the
------------------------
Purchased Shares hereunder shall be held in escrow by the Corporate Secretary of
the Corporation in accordance with the provisions of Article VII.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation actually
------------------
exercises its repurchase right, rights of first refusal or special purchase
right under this Agreement, Optionee (or any successor in interest) shall have
all the rights of a shareholder (including voting and dividend rights) with
respect to the Purchased Shares, including the Purchased Shares held in escrow
under Article VII, subject, however, to the transfer restrictions of Article IV.
<PAGE>
II. SECURITIES LAW COMPLIANCE
-------------------------
2.1 EXEMPTION FROM REGISTRATION. The Purchased Shares have not been
---------------------------
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form of Exhibit C to the Notice of Grant of Stock Option (the "Grant
Notice") accompanying the Option Agreement.
2.2 RESTRICTED SECURITIES.
---------------------
A. Optionee hereby confirms that Optionee has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchased Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is prepared
to hold the Purchased Shares for an indefinite period and that Optionee is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period immediately
following the date on which the Corporation first becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Purchased Shares, to the extent vested under Article V, may
be sold (without registration) pursuant to the applicable requirements of Rule
144. If Optionee is at the time of such sale an affiliate of the Corporation for
purposes of Rule 144 or was such an affiliate during the preceding three (3)
months, then the sale must comply with all the requirements of Rule 144
(including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two (2)-year holding period requirement
of the Rule will not be applicable. If Optionee is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will be
applicable to the sale.
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation (nor was such an affiliate during the
preceding three (3) months), sell the Purchased Shares (without registration)
pursuant to paragraph (k) of Rule 144 after the Purchased Shares have been held
for a period of three (3) years following the payment in cash of the Option
Price for such shares.
-2-
<PAGE>
2.3 DISPOSITION OF SHARES. Optionee hereby agrees that Optionee
---------------------
shall make no disposition of the Purchased Shares (other than a permitted
transfer under paragraph 4.1) unless and until there is compliance with all of
the following requirements:
(a) Optionee shall have notified the Corporation of the proposed
disposition and provided a written summary of the terms and conditions of
the proposed disposition .
(b) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (i)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
(d) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Purchased Shares pursuant to the provisions
of the Commissioner Rules identified in paragraph 2.5.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Article II nor (ii) to treat as the owner of the Purchased
---
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
2.4 RESTRICTIVE LEGENDS. In order to reflect the restrictions on
-------------------
disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or more of the
following legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action' letter of the Securities and
Exchange Commission with respect to such sale or offer, or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
-3-
<PAGE>
disposed of except in conformity with the terms of a written agreement dated
____________, 19___ between the Corporation and the registered holder of the
shares (or the predecessor in interest to the shares). Such agreement grants
certain repurchase rights and rights of first refusal to the Corporation (or its
assignees) upon the sale, assignment, transfer, encumbrance or other disposition
of the Corporation's shares or upon termination of service with the Corporation.
The Corporation will upon written request furnish a copy of such agreement to
the holder hereof without charge."
III. SPECIAL TAX ELECTION
--------------------
3.1 SECTION 83(B) ELECTION APPLICABLE TO THE EXERCISE OF A NON-
----------------------------------------------------------
STATUTORY STOCK OPTION. If the Purchased Shares are acquired hereunder pursuant
- ----------------------
to the exercise of a non-statutory stock option, as specified in the Grant
--------------------------
Notice, then the Optionee understands that under Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), the excess of the fair market
value of the Purchased Shares on the date any forfeiture restrictions applicable
to such shares lapse over the Option Price paid for such shares will be
reportable as ordinary income on such lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. Optionee understands that he/she may elect under Section
83(b) of the Code to be taxed at the time the Purchased Shares are acquired
hereunder, rather than when and as such Purchased Shares cease to be subject to
such forfeiture restrictions. Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement. Even
if the fair market value of the Purchased Shares at the date of this Agreement
equals the Option Price paid (and thus no tax is payable), the election must be
made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT II HERETO. OPTIONEE UNDERSTANDS THAT FAILURE TO
MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE RESTRICTIONS
LAPSE.
3.2 CONDITIONAL SECTION 83(B) ELECTION APPLICABLE TO THE EXERCISE OF
----------------------------------------------------------------
AN INCENTIVE STOCK OPTION. If the Purchased Shares are acquired hereunder
- -------------------------
pursuant to the exercise of an incentive stock option under the Federal tax
----------------------
laws, as specified in the Grant Notice, then the following tax principles shall
be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
B. The excess of (i) the fair market value of the Purchased
Shares on the date the Option is exercised or (if later) on the date any
forfeiture restrictions applicable to the Purchased Shares lapse over (ii)
the Option Price paid for the Purchased Shares will be includible in the
Optionee's taxable income for alternative minimum tax purposes.
-4-
<PAGE>
C. If the Optionee makes a disqualifying disposition of the
Purchased Shares, then the Optionee will recognize ordinary income in the
year of such disposition equal in amount to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised or
(if later) on the date any forfeiture restrictions applicable to the
Purchased Shares lapse over (ii) the Option Price paid for the Purchased
Shares. Any additional gain recognized upon the disqualifying disposition
will be either short-term or long-term capital gain depending upon the
period for which the Purchased Shares are held prior to the disposition.
D. For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase the
Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. The term "disqualifying disposition" means any sale or
other disposition 1/ of the Purchased Shares within two (2) years after
the Grant Date or within one (1) year after the execution date of this
Agreement.
E. In the absence of final Treasury Regulations relating to
incentive stock options, it is not certain whether the Optionee may, in
connection with the exercise of the Option for any Purchased Shares at the
time subject to forfeiture restrictions, file a protective election under
Section 83(b) of the Code which would limit (I) the Optionee's alternative
minimum taxable income upon exercise and (II) the Optionee's ordinary
income upon a disqualifying disposition, to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised
over (ii) the Option Price paid for the Purchased Shares. THE APPROPRIATE
FORM FOR MAKING SUCH A PROTECTIVE ELECTION IS ATTACHED AS EXHIBIT II TO
THIS AGREEMENT AND MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN
THIRTY (30) DAYS AFTER THE DATE OF THIS AGREEMENT. HOWEVER, SUCH ELECTION
----------------------
IF PROPERLY FILED WILL ONLY BE ALLOWED TO THE EXTENT THE FINAL TREASURY
-----------------------------------------------------------------------
REGULATIONS PERMIT SUCH A PROTECTIVE ELECTION.
---------------------------------------------
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY,
AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(B), EVEN
IF OPTIONEE REQUESTS THE
__________________
1/ Generally, a disposition of shares purchased under an incentive stock
option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
-5-
<PAGE>
CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS/HER BEHALF. This
filing should be made by registered or certified mail, return receipt requested,
and Optionee must retain two (2) copies of the completed form for filing with
his or her State and Federal tax returns for the current tax year and an
additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
---------------------
4.1 RESTRICTION ON TRANSFER. Optionee shall not transfer, assign,
-----------------------
encumber or otherwise dispose of any of the Purchased Shares which are subject
to the Corporation's Repurchase Right under Article V. In addition, Purchased
Shares which are released from the Repurchase Right shall not be transferred,
assigned, encumbered or otherwise made the subject of disposition in
contravention of the Corporation's First Refusal Right under Article VI. Such
restrictions on transfer, however, shall not be applicable to (i) a gratuitous
---
transfer of the Purchased Shares made to the Optionee's spouse or issue,
including adopted children, or to a trust for the exclusive benefit of the
Optionee or the Optionee's spouse or issue, provided and only if the Optionee
--------------------
obtains the Corporation's prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by the
Optionee in connection with the acquisition of the Purchased Shares.
4.2 TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
----------------------
to whom the Purchased Shares are transferred by means of one of the permitted
transfers specified in paragraph 4.1 must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Corporation that such
person is bound by the provisions of this Agreement and that the transferred
shares are subject to (i) both the Corporation's Repurchase Right and the
Corporation's First Refusal Right granted hereunder and (ii) the market stand-
off provisions of paragraph 4.4, to the same extent such shares would be so
subject if retained by the Optionee.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI and VII
-------------------
of this Agreement, the term "Owner" shall include the Optionee and all
subsequent holders of the Purchased Shares who derive their chain of ownership
through a permitted transfer from the Optionee in accordance with paragraph 4.1.
4.4 MARKET STAND-OFF PROVISIONS.
---------------------------
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the
-6-
<PAGE>
foregoing transactions with respect to, any Purchased Shares without the prior
written consent of the Corporation or its underwriters. Such limitations shall
be in effect for such period of time from and after the effective date of such
registration statement as may be requested by the Corporation or such
underwriters; provided, however, that in no event shall such period exceed one
--------
hundred-eighty (180) days. The limitations of this paragraph 4.4 shall remain
in effect for the two-year period immediately following the effective date of
the Corporation's initial public offering and shall thereafter terminate and
cease to have any force or effect.
B. Owner shall be subject to the market stand-off provisions of this
paragraph 4.4 provided and only if the officers and directors of the Corporation
--------------------
are also subject to similar arrangements.
C. In the event of any stock dividend, stock split, recapitalization
or other change affecting the Corporation's outstanding Common Stock effected as
a class without receipt of consideration, then any new, substituted or
additional securities distributed with respect to the Purchased Shares shall be
immediately subject to the provisions of this paragraph 4.4, to the same extent
the Purchased Shares are at such time covered by such provisions.
D. In order to enforce the limitations of this paragraph 4.4, the
Corporation may impose stop-transfer instructions with respect to the Purchased
Shares until the end of the applicable stand-off period.
V. REPURCHASE RIGHT
----------------
5.1 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 Purchased
Shares in which the Optionee has not acquired a vested interest in accordance
with the vesting provisions of paragraph 5.3 (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.
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable sixty (60)-day period specified in
paragraph 5.1. 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. To the extent one
or more certificates representing Unvested Shares may
-7-
<PAGE>
have been previously delivered out of escrow to the Owner, then 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
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), 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.
5.3 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 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right lapses shall, however, continue to be subject to (i) the First Refusal
Right of the Corporation and its assignees under Article VI, (ii) the market
stand-off provisions of paragraph 4.4 and (iii) the Special Purchase Right under
Article VIII.
5.4 AGGREGATE VESTING LIMITATION. If the Option is exercised in more
----------------------------
than one increment so that the Optionee is a party to one or more other Stock
Purchase Agreements ("Prior Purchase Agreements") which are executed prior to
the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which the Optionee would otherwise at the time
be vested, in accordance with the vesting provisions of paragraph 5.3, had all
the Purchased Shares been acquired exclusively under this Agreement.
5.5 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 5.3) 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.
5.6 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 Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
-8-
<PAGE>
made to the number of Purchased 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.
VI. RIGHT OF FIRST REFUSAL
----------------------
6.1 GRANT. The Corporation is hereby granted rights of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner desires
------------------------------
to accept a bona fide third-party offer for the transfer of any or all of the
Purchased Shares (the shares subject to such offer to be hereinafter called the
"Target Shares"), Owner shall promptly (i) deliver to the Corporate Secretary of
the Corporation written notice (the "Disposition Notice") of the terms and
conditions of the offer, including the purchase price and the identity of the
third-party offeror, and (ii) provide satisfactory proof that the disposition of
the Target Shares to such third-party offeror would not be in contravention of
the provisions set forth in Articles II and IV of this Agreement.
6.3 EXERCISE OF RIGHT. The Corporation shall, for a period of forty-
-----------------
five (45) days following receipt of the Disposition Notice, have the right to
repurchase any or all of the Target Shares specified in the Disposition Notice
upon the same terms and conditions specified therein or upon terms and
conditions which do not materially vary from those specified therein. Such
right shall be exercisable by delivery of written notice (the "Exercise Notice")
to Owner prior to the expiration of the forty-five (45)-day exercise period. If
such right is exercised with respect to all the Target Shares specified in the
Disposition Notice, then the Corporation (or its assignees) shall effect the
repurchase of the Target Shares, including payment of the purchase price, not
more than ten (10) business days after delivery of the Exercise Notice; and at
such time Owner shall deliver to the Corporation the certificates representing
the Target Shares to be repurchased, each certificate to be properly endorsed
for transfer. To the extent any of the Target Shares are at the time held in
escrow under Article VII, the certificates for such shares shall automatically
be released from escrow and delivered to the Corporation for purchase. Should
the purchase price specified in the Disposition Notice be payable in property
other than cash or evidences of indebtedness, the Corporation (or its assignees)
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If the Owner and the Corporation (or its
assignees) cannot agree on such cash value within ten (10) days after the
Corporation's receipt of the Disposition Notice, the valuation shall be made by
an appraiser of recognized standing selected by the Owner and the Corporation
(or its assignees) or, if
-9-
<PAGE>
they cannot agree on an appraiser within twenty (20) days after the
Corporation's receipt of the Disposition Notice, each shall select an appraiser
of recognized standing and the two appraisers shall designate a third appraiser
of recognized standing, whose appraisal shall be determinative of such value.
The cost of such appraisal shall be shared equally by the Owner and the
Corporation. The closing shall then be held on the later of (i) the tenth
-----
business day following delivery of the Exercise Notice or (ii) the tenth
business day after such cash valuation shall have been made.
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is not
---------------------
given to Owner within forty-five (45) days following the date of the
Corporation's receipt of the Disposition Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; provided,
--------
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of paragraph 2.2(a) and
(ii) the market stand-off provisions of paragraph 4.4. In the event Owner does
not effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the Corporation's First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation (or its
-------------------------
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within thirty (30) days after the date of the Disposition Notice, to
effect the sale of the Target Shares pursuant to one of the following
alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of paragraph 6.4, as if the Corporation
did not exercise the First Refusal Right hereunder; or
(ii) sale to the Corporation (or its assignees) of the portion of
the Target Shares which the Corporation (or its assignees) has elected to
purchase, such sale to be effected in substantial conformity with the
provisions of paragraph 6.3.
-10-
<PAGE>
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
-----------------------
(a) In the event of any stock dividend, stock split, recapitalization
or other transaction 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 which is by reason of such transaction
distributed with respect to the Purchased Shares shall be immediately subject to
the Corporation's First Refusal Right hereunder, but only to the extent the
Purchased Shares are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to person or persons other
than those who held such securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the State
in which the Corporation is incorporated, or to create a holding company
structure,
the Corporation's First Refusal Right shall remain in full force
and effect and shall apply to the new capital stock or other property received
in exchange for the Purchased Shares in consummation of the transaction but only
to the extent the Purchased Shares are at the time covered by such right.
6.7 LAPSE. The First Refusal Right under this Article VI shall lapse
-----
and cease to have effect upon the earliest to occur of (i) the first date on
--------
which shares of the Corporation's Common Stock are held of record by more than
five hundred (500) persons, (ii) a determination is made by the Corporation's
Board of Directors that a public market exists for the outstanding shares of the
Corporation's Common Stock, or (iii) a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act,
covering the offer and sale of the Corporation's Common Stock in the aggregate
amount of at least $5,000,000. However, the market stand-off
-11-
<PAGE>
provisions of paragraph 4.4 shall continue to remain in full force and effect
following the lapse of the First Refusal Right hereunder.
VII. ESCROW
------
7.1 DEPOSIT. Upon issuance, the certificates for any Unvested Shares
-------
purchased hereunder shall be deposited in escrow with the Corporate Secretary of
the Corporation to be held in accordance with the provisions of this Article
VII. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Corporate Secretary pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with paragraph 7.3. Upon delivery of the
certificates (or other assets and securities) to the Corporate Secretary of the
Corporation, the Owner shall be issued an instrument of deposit acknowledging
the number of Unvested Shares (or other assets and securities) delivered in
escrow.
7.2 RECAPITALIZATION. All regular cash dividends on the Unvested
----------------
Shares (or other securities at the time held in escrow) shall be paid directly
to the Owner and shall not be held in escrow. However, 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 or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporate Secretary to be held in escrow under this Article
VII, but only to the extent the Unvested Shares are at the time subject to the
escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any other
-----------------
assets or securities held in escrow hereunder, shall be subject to the following
terms and conditions relating to their release from escrow or their surrender to
the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees) elect to
exercise the Repurchase Right under Article V with respect to any Unvested
Shares, then the escrowed certificates for such Unvested Shares (together with
any other assets or securities issued with respect thereto) shall be delivered
to the Corporation concurrently with the payment to the Owner, in cash or cash
equivalent (including the cancellation of any purchase-money indebtedness), of
an amount equal to the aggregate Option Price for such Unvested Shares, and the
Owner shall cease to have any further rights or claims with respect to such
Unvested Shares (or other assets or securities attributable to such Unvested
Shares).
-12-
<PAGE>
(ii) Should the Corporation (or its assignees) elect to
exercise its First Refusal Right under Article VI with respect to any vested
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall, concurrently with the payment of the
paragraph 6.3 purchase price for such Target Shares to the Owner, be surrendered
to the Corporation, and the Owner shall cease to have any further rights or
claims with respect to such Target Shares (or other assets or securities).
(iii) Should the Corporation (or its assignees) elect not to
---
exercise its First Refusal Right under Article VI with respect to any Target
Shares held at the time in escrow hereunder, then the escrowed certificates for
such Target Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Owner for disposition in accordance with
provisions of paragraph 6.4.
(iv) As the interest of the Optionee in the Unvested Shares
(or any other assets or securities attributable thereto) vests in accordance
with the provisions of Article V, the certificates for such vested shares (as
well as all other vested assets and securities) shall be released from escrow
and delivered to the Owner in accordance with the following schedule:
a. The initial release of vested shares (or other vested
-
assets and securities) from escrow shall be effected within thirty
(30) days following the expiration of the initial twelve (12)-month
period measured from the Grant Date.
b. Subsequent releases of vested shares (or other vested
-
assets and securities) from escrow shall be effected at semi-annual
intervals thereafter, with the first such semi-annual release to occur
eighteen (18) months after the Grant Date.
c. Upon the Optionee's cessation of Service, any escrowed
-
Purchased Shares (or other assets or securities) in which the Optionee
is at the time vested shall be promptly released from escrow.
d. Upon any earlier termination of the Corporation's
-
Repurchase Right in accordance with the applicable provisions of
Article V, any Purchased Shares (or other assets or securities) at the
time held in escrow
-13-
<PAGE>
hereunder shall promptly be released to the Owner as fully-vested
shares or other property.
(v) All Purchased Shares (or other assets or securities)
released from escrow in accordance with the provisions of subparagraph (iv)
above shall nevertheless remain subject to (I) the Corporation's First
Refusal Right under Article VI until such right lapses pursuant to
paragraph 6.7, (II) the market stand-off provisions of paragraph 4.4 until
such provisions terminate in accordance therewith and (III) the Special
Purchase Right under Article VIII.
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
---------------------------------------
8.1 GRANT. In connection with the dissolution of the Optionee's
-----
marriage or the legal separation of the Optionee and the Optionee's spouse, the
Corporation shall have the right (the "Special Purchase Right"), exercisable at
any time during the thirty (30)-day period following the Corporation's receipt
of the required Dissolution Notice under paragraph 8.2, to purchase from the
Optionee's spouse, in accordance with the provisions of paragraph 8.3, all or
any portion of the Purchased Shares which would otherwise be awarded to such
spouse in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Optionee shall promptly
-----------------------------
provide the Secretary of the Corporation with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the property
rights of the Optionee and the Optionee's spouse in connection with their
marital dissolution or legal separation or (ii) the execution of any contract or
agreement relating to the distribution or division of such property rights. The
Dissolution Notice shall be accompanied by a copy of the actual decree of
dissolution or settlement agreement between the Optionee and the Optionee's
spouse which provides for the award to the spouse of one or more Purchased
Shares in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The Special Purchase Right
----------------------------------
shall be exercisable by delivery of written notice (the "Purchase Notice") to
the Optionee and the Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice), and the fair market value to be paid for such Purchased Shares. The
Optionee (or the Optionee's spouse, to the extent such spouse has physical
possession of the Purchased Shares) shall, prior to the close of business on the
date specified for the purchase, deliver to the Corporate Secretary of the
Corporation the certificates representing the shares to be purchased, each
certificate to be properly
-14-
<PAGE>
endorsed for transfer. To the extent any of the shares to be purchased by the
Corporation are at the time held in escrow under Article VII, the certificates
for such shares shall be promptly delivered out of escrow to the Corporation.
The Corporation shall, concurrently with the receipt of the stock certificates,
pay to the Optionee's spouse (in cash or cash equivalents) an amount equal to
the fair market value specified for such shares in the Purchase Notice.
If the Optionee's spouse does not agree with the fair market value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two appraisers shall
designate a third appraiser of recognized standing whose appraisal shall be
determinative of such value. The cost of the appraisal shall be shared equally
by the Corporation and the Optionee's spouse. The closing shall then be held on
the fifth business day following the completion of such appraisal; provided,
--------
however, that if the appraised value is more than fifteen percent (15%) greater
than the fair market value specified for the shares in the Purchase Notice, the
Corporation shall have the right, exercisable prior to the expiration of such
five (5)-business-day period, to rescind the exercise of the Special Purchase
Right and thereby revoke its election to purchase the shares awarded to the
spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII shall
-----
lapse and cease to have effect upon the earlier to occur of (i) the first date
-------
on which the First Refusal Right under Article VI lapses or (ii) the expiration
of the thirty (30)-day exercise period specified in paragraph 8.3, to the extent
the Special Purchase Right is not timely exercised in accordance with such
paragraph.
IX. GENERAL PROVISIONS
------------------
9.1 ASSIGNMENT. The Corporation may assign its Repurchase Right
----------
under Article V, its First Refusal Right under Article VI and/or its Special
Purchase Right under Article VIII to any person or entity selected by the
Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
If the assignee of the Repurchase Right is other than a one hundred
percent (100%) owned subsidiary corporation of the Corporation or the parent
corporation owning one hundred percent (100%) of the Corporation, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the fair
market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Unvested Shares thereunder.
-15-
<PAGE>
9.2 DEFINITIONS. For purposes of this Agreement, the following
-----------
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a parent corporation of the Corporation, provided each
such corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
(ii) Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a subsidiary of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon the Optionee any right to continue in the Service
of the Corporation (or any parent or subsidiary corporation of the Corporation
employing or retaining Optionee) 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 corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
-------
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
9.5 NO WAIVER. The failure of the Corporation (or its assignees) in
---------
any instance to exercise the Repurchase Right granted under Article V, or the
failure of the Corporation (or its assignees) in any instance to exercise the
First Refusal Right granted under Article VI, or the failure of the Corporation
(or its assignees) in any instance to exercise the Special Purchase Right
granted under Article VIII shall not constitute a waiver of any other repurchase
rights and/or rights of first refusal that may subsequently arise under the
provisions of this Agreement or any other agreement between the
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<PAGE>
Corporation and the Optionee or the Optionee's spouse. No waiver of any breach
or condition of this Agreement shall be deemed to be a waiver of any other or
subsequent breach or condition, whether of like or different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its assignees)
----------------------
shall make available, at the time and place and in the amount and form provided
in this Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement), and such
shares shall be deemed purchased in accordance with the applicable provisions
hereof and the Corporation (or its assignees) shall be deemed the owner and
holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.
X. MISCELLANEOUS PROVISIONS
------------------------
10.1 OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
--------------------
additional action and execute whatever additional documents the Corporation may
in its judgment deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either the Optionee or the
Purchased Shares pursuant to the express provisions of this Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State without resort
to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and the Optionee and the Optionee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
-17-
<PAGE>
10.6 POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
-----------------
his or her true and lawful attorney in fact, for him or her and in his or her
name, place and stead, and for his or her use and benefit, to agree to any
amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
Corsair Communications, INC.
By: ______________________________________________
Title: ___________________________________________
Address: __________________________________________________
__________________________________________________
_________________________________________________
Optionee /*/
Address: __________________________________________________
__________________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, 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: __________________________________________________
__________________________________________________
___________________
/*/ I have executed the Section 83(b) election that was attached hereto as an
Exhibit. As set forth in Article III, I understand that I, and not the
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
-19-
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Corsair Communications, Inc. (the "Corporation"),
________________________ (__________) shares of the Common Stock of the
Corporation standing in his\her name on the books of the Corporation represented
by Certificate No. ___________________ and do hereby irrevocably constitute and
appoint _______________________________ as Attorney to transfer the said stock
on the books of the Corporation with full power of substitution in the premises.
Dated: ________________
Signature ____________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
<PAGE>
REPURCHASE RIGHTS
-----------------
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
____________ shares of the common stock of Corsair Communications, Inc.
(3) The property was issued on _____________, 19___.
(4) The taxable year in which the election is being made is the calendar year
19__.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of annual and monthly
installments over a four year period ending on ____________, 19__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $________ per share.
(7) The amount paid for such property is $_______ per share.
(8) A copy of this statement was furnished to Corsair Communications, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed as of: _______________________.
_____________________ ___________________
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
<PAGE>
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL
REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON EXERCISE OF AN
INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN INCENTIVE
STOCK OPTION.
<PAGE>
FIRST AMENDMENT TO
OPTION AGREEMENT
THIS FIRST AMENDMENT TO 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, Optionee has an option to purchase shares of the Corporation in
accordance with a Notice of Grant dated ____________, _____;
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:
1. The Stock Option Agreement attached to the Notice of Grant as Exhibit
A (the "Option Agreement") is hereby amended by redesignating paragraph 6.B
thereof as paragraph 6.C, and adding the following as a new paragraph 6.B:
"B. If the Option is assumed by the successor corporation in
connection with a Corporate Transaction, Optionee shall vest in 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 or Participant, 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
<PAGE>
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 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, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
2. The Stock Purchase Agreement attached to the Notice of Grant as
Exhibit B (the "Purchase Agreement") is hereby amended by adding the following
as a new Section 5.7 thereof:
"5.7 CORPORATE TRANSACTION.
---------------------
"A. Immediately prior to the consummation of any of the
following shareholder-approved transactions (a "Corporate Transaction"):
"(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 Purchased
Shares in consummation of the Corporate Transaction, but only to the extent
the Purchased 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
<PAGE>
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 or Participant, 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 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, Participant 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."
3. Notwithstanding the provisions of Sections 1 or 2 hereof, no
acceleration of vesting shall occur under paragraph 6.B of the Option Agreement
as herein amended and no lapse of Repurchase Rights shall occur under Section
5.7 of the Purchase Agreement with respect to any Corporate Transaction
occurring within six (6) months of the date of this First Amendment.
4. Except as expressly set forth herein, the option shall continue to be
governed by the terms of the original Notice of Grant including the Exhibits
thereto.
[Remainder of this page left intentionally blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
Corsair Communications, INC.
By:______________________________________
Title:___________________________________
Address: _________________________________________
_________________________________________
_________________________________________
Optionee
Address: _________________________________________
_________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, 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 10.24
PROMISSORY NOTE
---------------
$50,000 April 10, 1996
Palo Alto, California
MARTIN SILVER, an individual resident of the State of California
("Obligor"), for value received, hereby promises to pay to the order of CORSAIR
COMMUNICATIONS, INC., a Delaware corporation, or holder ("Payee"), in lawful
money of the United States at 3408 Hillview Avenue, Palo Alto, California 94304,
the principal sum of Fifty Thousand Dollars ($50,000).
1. Interest. Unpaid principal of this Note shall bear interest at a rate
--------
equal to the greater of 5.5% per annum or the applicable minimum Federal rate.
2. Payment. Unpaid principal under this Note and all interest
-------
accrued hereunder (not previously forgiven under Section 3 below) shall be due
and payable on the expiration of the 60-day period following the date the
Obligor ceases for any reason to remain in the employment on a regular and full-
time basis by Payee. This Note may be prepaid, in whole or in part, at any time
without premium or penalty. Any payment shall be deemed made upon receipt by
Payee.
3. Forgiveness. Provided the undersigned is employed by Payee as a full-
-----------
time employee on each applicable date, Ten Thousand Dollars ($10,000.00) of the
principal and all accrued interest with respect to such Ten Thousand Dollars
($10,000.00) will be forgiven on April 10, 1997 and on April 10 of each
succeeding year through and including April 10, 2001.
4. Full-time Employee. For purposes of applying the provisions of this
------------------
Note under Sections 2 and 3 above, the Obligor shall be considered a full-time
employee of Payee for so long as the Obligor renders services as a director or
full-time employee of Payee, any successor entity or one or more of Payee's
fifty percent (50%)-or-more owned (directly or indirectly) subsidiaries.
HOWEVER, NOTHING IN THIS NOTE SHALL CONFER UPON THE OBLIGOR ANY RIGHT TO
CONTINUE IN THE EMPLOYMENT OF PAYEE (OR ITS SUCCESSORS OR SUBSIDIARIES) FOR ANY
PERIOD OF SPECIFIC DURATION OR INTERFERE WITH OR OTHERWISE RESTRICT IN ANY WAY
THE RIGHTS OF PAYEE OR THE OBLIGOR, WHICH RIGHTS ARE HEREBY EXPRESSLY RESERVED
BY EACH, TO TERMINATE OBLIGOR'S EMPLOYMENT AT ANY TIME FOR ANY REASON
WHATSOEVER, WITH OR WITHOUT CAUSE.
5. Cancellation. Upon payment in full of all principal and accrued
------------
interest payable hereunder, this Note shall be surrendered to Obligor for
cancellation.
6. Transfer. This Note may be transferred only upon surrender of the
--------
original Note for registration of transfer, duly endorsed, or accompanied by a
duly
<PAGE>
executed written instrument of transfer in form satisfactory to Obligor.
Thereupon, a new note for like principal amount and interest will be issued to,
and registered in the name of, the transferee. Principal is payable only to the
registered holder of this Note.
7. Waiver. Obligor waives presentment, demand for performance, notice of
------
nonperformance, protest, notice of protest, and notice of dishonor. No delay on
the part of Payee in exercising any right hereunder shall operate as a waiver of
such right under this Note. This Note is being delivered in and shall be
construed in accordance with the laws of the State of California.
8. Attorneys' Fees. If the indebtedness represented by this Note or any
---------------
part thereof is collected at law or in equity or in bankruptcy, receivership or
other judicial proceedings or if this Note is placed in the hands of attorneys
for collection after default, Obligor agrees to pay, in addition to the
principal and interest payable hereon, reasonable attorneys' fees and costs
incurred by Payee.
9. Deed of Trust. This Note is one of the Notes referred to in that
-------------
certain Deed of Trust ("Deed of Trust") dated the same date as this Note between
Obligor, Payee and Old Republic Title Company, and is subject to the terms
thereof. This Note is secured as set forth in the Deed of Trust.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, Obligor has duly executed this Note, as of the date
first above written.
MARTIN SILVER
By: /s/ Martin J. Silver
--------------------------
Title: Chief Financial Officer
-----------------------
<PAGE>
EXHIBIT 10.25
PROMISSORY NOTE
---------------
$50,000 April 10, 1996
Palo Alto, California
MARTIN SILVER, an individual resident of the State of California
("Obligor"), for value received, hereby promises to pay to the order of CORSAIR
COMMUNICATIONS, INC., a Delaware corporation, or holder ("Payee"), in lawful
money of the United States at 3408 Hillview Avenue, Palo Alto, California 94304,
the principal sum of Fifty Thousand Dollars ($50,000).
1. Interest. Unpaid principal of this Note shall bear interest at a
--------
rate equal to the greater of 5.5% per annum or the applicable minimum Federal
rate.
2. Payment. Unpaid principal under this Note and all interest
-------
accrued hereunder shall be due and payable on the earlier of (a) April 10, 1999;
(b) the expiration of the 60-day period following the date the Obligor ceases
for any reason to remain in the employment on a regular and full-time basis by
Payee; (c) the expiration of the 190-day period following the date on which
Payee completes a successful initial public offering of shares of its common
stock; or (d) the date on which Payee completes the consummation of any
corporate transaction in which (i) more than fifty percent (50%) of the
outstanding shares of the common stock of Payee are acquired by a single
purchaser or by a group of purchasers acting in concert and Obligor receives
cash or publicly traded securities in connection therewith; (ii) all or
substantially all of the assets of Payee are acquired by a single purchaser or a
group of purchasers acting in concert; (e) that date on which Payee merges with
or into another organization; or (f) the expiration of the 10-day period
--
following the date on which Obligor sells, transfers, or suffers or permits the
sale or transfer of Obligor's real property located at 601 Almond Avenue, Los
Altos, California (the "Real Property"). Obligor hereby covenants that Obligor
shall provide Payee with written notice of any sale or transfer of the Real
Property at least ten (10) days prior to the date Obligor transfers title to the
Real Property. This Note may be prepaid, in whole or in part, at any time
without premium or penalty. Any payment shall be deemed made upon receipt by
Payee.
3. Full-time Employee. For purposes of applying the provisions of
------------------
this Note under Section 2 above, the Obligor shall be considered a full-time
employee of Payee for so long as the Obligor renders services as a director or
full-time employee of Payee, any successor entity or one or more of Payee's
fifty percent (50%)-or-more owned (directly or indirectly) subsidiaries.
HOWEVER, NOTHING IN THIS NOTE SHALL CONFER UPON THE OBLIGOR ANY RIGHT TO
CONTINUE IN THE EMPLOYMENT OF PAYEE (OR ITS SUCCESSORS OR SUBSIDIARIES) FOR ANY
PERIOD OF SPECIFIC DURATION OR INTERFERE WITH OR OTHERWISE RESTRICT IN ANY WAY
THE RIGHTS OF PAYEE OR THE OBLIGOR, WHICH RIGHTS ARE HEREBY EXPRESSLY RESERVED
BY EACH, TO
<PAGE>
TERMINATE OBLIGOR'S EMPLOYMENT AT ANY TIME FOR ANY REASON WHATSOEVER, WITH OR
WITHOUT CAUSE.
4. Cancellation. Upon payment in full of all principal and accrued
------------
interest payable hereunder, this Note shall be surrendered to Obligor for
cancellation.
5. Transfer. This Note may be transferred only upon surrender of the
--------
original Note for registration of transfer, duly endorsed, or accompanied by a
duly executed written instrument of transfer in form satisfactory to Obligor.
Thereupon, a new note for like principal amount and interest will be issued to,
and registered in the name of, the transferee. Principal is payable only to the
registered holder of this Note.
6. Waiver. Obligor waives presentment, demand for performance,
------
notice of nonperformance, protest, notice of protest, and notice of dishonor.
No delay on the part of Payee in exercising any right hereunder shall operate as
a waiver of such right under this Note. This Note is being delivered in and
shall be construed in accordance with the laws of the State of California.
7. Attorneys' Fees. If the indebtedness represented by this Note or
---------------
any part thereof is collected at law or in equity or in bankruptcy, receivership
or other judicial proceedings or if this Note is placed in the hands of
attorneys for collection after default, Obligor agrees to pay, in addition to
the principal and interest payable hereon, reasonable attorneys' fees and costs
incurred by Payee.
8. Deed of Trust. This Note is one of the Notes referred to in that
-------------
certain Deed of Trust ("Deed of Trust") dated the same date as this Note between
Obligor, Payee and Old Republic Title Company, and is subject to the terms
thereof. This Note is secured as set forth in the Deed of Trust.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, Obligor has duly executed this Note, as of the
date first above written.
MARTIN SILVER
By: /s/ Martin J. Silver
--------------------
Title: Chief Financial Officer
-----------------------
<PAGE>
EXHIBIT 10.26
LOAN AND SECURITY AGREEMENT
Dated as of July 31, 1996
between
COMDISCO, INC.
6111 North River Road
Rosemont, Illinois 60018
as Lender
and
CORSAIR COMMUNICATIONS, INC.
a Delaware corporation
3408 Hillview Avenue
Palo Alto, California 94304
as Borrower
CREDIT AMOUNT: $2,000,000
Treasury Note Maturity: 42 months
--------
Loan Margin: 805 basis points
---
Commitment Termination Date: July 31, 1996
The defined terms and information set forth on this cover page are a part
of the Loan and Security Agreement, dated as of the date first written above
(this "Agreement"), entered into by and between COMDISCO, INC. ("Lender") and
the borrower ("Borrower") set forth above. The terms and conditions of this
Agreement agreed to between Lender and Borrower are as follows:
ARTICLE I
INTERPRETATION
--------------
1
<PAGE>
1.01. Certain Definitions. Unless otherwise indicated in this Agreement or any
-------------------
other Operative Document, the following terms, when used in this Agreement or
any other Operative Document, shall have the following respective meanings:
"Borrower's Home State" shall mean the state in which Borrower's
---------------------
principal place of business is located.
"Business Day" shall mean any day other than a Saturday, Sunday or public
------------
holiday under the laws of California, Illinois or Borrower's Home State or other
day on which banking institutions are authorized or obligated to close in
California, Illinois or Borrower's Home State.
"Cash Equivalents" shall mean (i) cash, (ii) marketable direct
----------------
obligations issued or unconditionally guaranteed by the United States or any
agency thereof maturing within one year from the date of the acquisition
thereof, (iii) commercial paper currently having a rating of at least "Al" or
"P1" by a national credit rating agency and maturing not more than one (1) year
from the creation thereof, and (iv) certificates of deposit, maturing not more
than one year from the date of creation thereof, issued by commercial banks
incorporated under the laws of the United States or a state thereof having
combined capital and surplus of not less than $200,000,000.
"Change of Control" shall mean the occurrence of any of the following (i)
-----------------
the acquisition by any person or group of persons acting together of 50% or more
of the outstanding voting securities of Borrower, (ii) the sale or all or
substantially all of the assets of Borrower, or (iii) a merger or consolidation
in which the shareholders of Borrower immediately prior to the consummation of
such merger or consolidation do not own at least 50% of the outstanding voting
securities of the surviving corporation immediately after such merger or
consolidation.
"Claim" has the meaning given to that term in Section 10.03.
----- -------------
"Collateral" has the meaning given to that term Section 5.01(a).
---------- ---------------
"Commitment Fee" has the meaning given to that term in Section 2.04.
-------------- ------------
"Commitment Termination Date" shall mean the date specified on the cover
---------------------------
page of this Agreement.
"Credit Amount" shall mean the maximum amount that Lender is committed to
-------------
lend (if the conditions specified in Schedule 3 are satisfied), which amount is
set forth following such term on the cover page of this Agreement.
"Current Assets" shall mean the aggregate amount of all of the
--------------
consolidated assets of Borrower and its Subsidiaries that would, in accordance
with GAAP, be classified on a balance sheet as current assets.
"Current Liabilities" shall mean the aggregate amount of all of the
-------------------
consolidated liabilities of Borrower and its Subsidiaries that would, in
accordance with GAAP, be classified on a balance sheet as current liabilities.
"Debt" shall mean, with respect to Borrower or any Subsidiary, the
----
aggregate amount of, without duplication, (a) all obligations of such Person for
borrowed money, (b) all
2
<PAGE>
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade payables of less than
180 days), (d) all capital lease obligations of such Person, (e) all obligations
or liabilities of others secured by a lien on any asset of such Person, whether
or not such obligation or liability is assumed, and (f) all obligations or
liabilities of others guaranteed by such Person. Unless otherwise indicated,
the term "Debt" shall include all Debt of Borrower and its Subsidiaries.
----
"Default" shall mean any event which with the passing of time or the
-------
giving of notice or both would become an Event of Default hereunder.
"Default Rate" shall mean the per annum rate of interest equal to the
------------
higher of (i) 18% or (ii) the Prime Rate plus 6%, but such rate shall in no
event be more than the highest rate permitted by applicable law.
"Disclosure Schedule" has the meaning set forth in the definition of the
-------------------
term "Permitted Liens."
"Environmental Law" shall mean the Resource Conservation and Recovery Act
-----------------
of 1987, the Comprehensive Environmental Response, Compensation and Liability
Act, and any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree (in each case having the force of law) regulating or
imposing liability or standards of conduct concerning any Hazardous Material, as
now or at any time hereafter in effect.
"Equipment" has the meaning given to that term in Section 5.01(a).
--------- ---------------
"Equity Securities" of any Person shall mean (a) all common stock,
-----------------
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"Event of Default" has the meaning given to that term in Section 9.01.
---------------- ------------
"Event of Loss" has the meaning given to that term in Section 6.01(e).
------------- ---------------
"Funding Date" shall mean any date on which the Loan is made to or on
------------
account of Borrower under this Agreement.
"GAAP" shall mean generally accepted accounting principles and practices
----
as in effect in the United States of America from time to time, consistently
applied.
"Hazardous Material" means any hazardous, dangerous or toxic constituent
------------------
material, pollutant, waste or other substance, whether solid, liquid or gaseous,
which is regulated by any federal, state or local governmental authority.
"Initial Public Offering" means the closing of the initial public
-----------------------
offering of Borrower's Common Stock effected pursuant to a registration
statement on Form S-1 (or its successor) filed under the Securities Act of 1933,
as amended.
"Intellectual Property" shall mean all of Borrower's right, title and
---------------------
interest in and to patents, patent rights (and applications therefor),
trademarks and service marks (and
3
<PAGE>
applications and registrations therefor), inventions, copyrights, mask works
(and applications and registrations therefor), trade names, trade styles,
software and computer programs, trade secrets, methods, processes, know how,
drawings, specifications, descriptions, and all memoranda, notes, and records
with respect to any research and development, all whether now owned or
subsequently acquired or developed by Borrower and whether in tangible or
intangible form or contained on magnetic media readable by machine together with
all such magnetic media.
"Landlord Consent" shall mean a consent in the form of Exhibit C or such
---------------- ---------
other form as Lender may agree to accept.
"Lien" shall mean any pledge, bailment, lease, mortgage, hypothecation,
----
conditional sales and title retention agreements, charge, claim, encumbrance or
other lien in favor of any Person.
"Loan" shall mean the advance by Lender to Borrower under this Agreement.
----
"Loan Margin" shall mean the number of basis points set forth following
-----------
such term on the cover page of this Agreement.
"Loan Rate" shall mean, with respect to the Loan, the per annum rate of
---------
interest (based on a year of 360 days and actual days elapsed) equal to the sum
of (a) the U.S. Treasury note rate of a term equal to the Treasury Note Maturity
as quoted in The Wall Street Journal on the date two (2) Business Days prior to
-----------------------
the requested Funding Date of the Loan plus (b) the Loan Margin.
"Make-Whole Premium" shall mean an amount equal to the greater of (i)
------------------
zero and (ii) the excess of (x) the sum of the present values, at the date of
prepayment of the amount of each remaining scheduled payment of interest on and
principal on the Loan, or portion of such payment, which will not be required to
be made as a result of such prepayment (each such payment an "Amount Payable")
--------------
(each such Amount Payable discounted separately at the Treasury Rate, determined
on the date three (3) Business Days before the date of prepayment, compounded
monthly, from the date such Amount Payable would be due), over (y) the principal
amount of such Note to be prepaid. The "Treasury Rate" shall be, prior to
Borrower's Initial Public Offering, the yield (as quoted in The Wall Street
Journal on the date which is three (3) Business Days prior to the date of
prepayment) on U.S. Treasury securities adjusted to a constant maturity equal to
the then remaining number of full months to maturity of the Note. After
Borrower's Initial Public Offering, the "Treasury Rate" shall be the rate
determined pursuant to the previous sentence plus 200 basis points.
"Note" or "Notes" shall mean the secured promissory note or notes, as
---- -----
applicable, of Borrower substantially in the form of Exhibit A.
---------
"Obligations" has the meaning given to that term Section 5.01.
----------- ------------
"Operative Documents" shall mean this Agreement, the Note, the Warrant,
-------------------
the Landlord Waiver and Consent(s) and all other documents, instruments and
agreements executed and delivered in connection herewith or therewith or in
respect of the closing of the transactions contemplated hereby or thereby.
4
<PAGE>
"Payment Date" means the last day of each calendar month.
------------
"Permitted Liens" shall mean (a) the Lien created by this Agreement, (b)
---------------
Liens for fees, taxes, levies, imposts, duties or other governmental charges of
any kind which are not yet delinquent or which are being contested in good faith
by appropriate proceedings which suspend the collection thereof (provided,
--------
however, that such proceedings do not involve any substantial danger of the
- -------
sale, forfeiture or loss of any item of Equipment and that Borrower has
adequately bonded such Lien or reserves sufficient to discharge such Lien have
been provided on the books of Borrower), (c) Liens identified on the disclosure
schedule attached hereto as Schedule 2 ("Disclosure Schedule"), (d) Liens to
-------------------
secure payment of worker's compensation, employment insurance, old age pensions
or other social security obligations of Borrower in the ordinary course of
business of Borrower, (e) Liens upon any equipment or other personal property
acquired by Borrower after the date hereof to secure (i) the purchase price of
such equipment or other personal property or (ii) lease obligations or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment or other personal property; provided that (A) such Liens are
--------
confined solely to the equipment or other personal property so acquired, and (B)
no such Lien shall be created, incurred, assumed or suffered to exist in favor
of Borrower's officers, directors or shareholders holding five percent (5%) or
more of Borrower's Equity Securities, (f) non-exclusive licenses of Intellectual
Property entered into in the ordinary course of business and licenses, Liens or
similar arrangements entered into in connection with joint ventures and
corporate collaborations, and (g) Liens referred to in and to which Lender has
agreed to be subordinated pursuant to Section 5.05.
------------
"Person" shall mean and include an individual, a partnership, a
------
corporation, a business trust, a joint stock company, a limited liability
company, an unincorporated association or other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.
"Prime Rate" shall mean the interest rate per annum publicly announced
----------
from time to time by Bank of America NT & SA (or its successor) as its reference
rate, but such rate shall in no event be more than the highest interest rate
permitted by applicable law.
"Qualified Financing" shall mean the closing of the sale of the Equity
-------------------
Securities of Borrower having net proceeds to Borrower of not less than
$10,000,000.
"Subsidiary" shall mean any corporation of which a majority of the
----------
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.
"Tangible Net Worth" shall mean Borrower's consolidated assets as
------------------
determined in accordance with GAAP minus (a) consolidated liabilities, as
determined in accordance with GAAP, (b) all intangible assets of Borrower,
including, but not limited to, all assets which should be classified as
intangible assets, such as goodwill, patents, trademarks, copyrights,
franchises, treasury stock and deferred charges (including unamortized debt
discount and research and development costs), (c) cash held in a sinking or
other similar fund established for the purpose of redemption or other retirement
of capital stock, (d) to the extent not already deducted from total assets,
reserves for depreciation, depletion, obsolescence or amortization of properties
and other reserves or appropriations of retained earnings which
5
<PAGE>
have been or should be established in connection with the business conducted by
Borrower, and (e) unless approved by Borrower's auditors, any revaluation or
other write-up in book value of assets subsequent to Borrower's fiscal year last
ended at the date of this Agreement.
"Term" shall mean the period from and after the date hereof until the
----
payment or satisfaction in full of all Obligations under this Agreement and the
other Operative Documents.
"Treasury Note Maturity" shall mean the period of months set forth
----------------------
following such term on the cover page of this Agreement.
"Warrant" shall mean a warrant to purchase securities of Borrower
-------
substantially in the form of Exhibit C.
---------
1.02. Headings. Headings in this Agreement and each of the other
--------
Operative Documents are for convenience of reference only and are not part of
the substance hereof or thereof.
1.03. Plural Terms. All terms defined in this Agreement or any other
------------
Operative Document in the singular form shall have comparable meanings when used
in the plural form and vice versa.
---- -----
1.04. Construction. This Agreement is the result of negotiations among,
------------
and has been reviewed by, Borrower and Lender and their respective counsel.
Accordingly, this Agreement shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lender.
1.05. Entire Agreement. This Agreement, together with the terms set
----------------
forth in each of the other Operative Documents, taken together, constitute and,
contain the entire agreement of Borrower and Lender and, with regard to their
respective subject matters, supersede any and all prior agreements, term sheets,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, with respect to their respective subject
matters.
1.06. Other Interpretive Provisions. References in this Agreement to
-----------------------------
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other
Operative Documents to any document, instrument or agreement shall include (a)
all exhibits, schedules, annexes and other attachments thereto, (b) all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) such document, instrument or agreement, or replacement or predecessor
thereto, as amended, modified and supplemented from time to time and in effect
at any given time. The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any other Operative Document shall
refer to this Agreement or such other Operative Document, as the case may be, as
a whole and not to any particular provision of this Agreement or such other
Operative Document, as the case may be. The words "include" and "including" and
words of similar import when used in this Agreement or any other Operative
Document shall not be construed to be limiting or exclusive. Unless otherwise
indicated in this Agreement or any other Operative Document, all accounting
6
<PAGE>
terms used in this Agreement or any other Operative Document shall be construed,
and all accounting and financial computations hereunder or thereunder shall be
computed, in accordance with generally accepted accounting principles as in
effect in the United States of America from time to time.
ARTICLE II
THE CREDIT
----------
2.01. Credit Facility.
---------------
(a) Commitment. On the terms and subject to the conditions hereof and
----------
relying upon the representations and warranties herein set forth as and when
made or deemed to be made, Lender agrees to lend to Borrower a Loan in the
aggregate principal amount of Two Million Dollars ($2,000,000).
(b) Loan Interest Rate. Borrower shall pay interest on the unpaid
------------------
principal amount of the Loan from the date of the Loan until the Loan is paid in
full, at a per annum rate of interest equal to the Loan Rate determined in
accordance with the definition of Loan Rate. The Loan Rate applicable to the
Loan shall not be subject to change in the absence of manifest error. All
computations of interest on the Loan shall be based on a year of 360 days and
actual days elapsed. If Borrower pays interest on the Loan which is determined
to be in excess of the then legal maximum rate, then that portion of each
interest payment representing an amount in excess of the then legal maximum rate
shall be deemed a payment of principal and applied against the principal of the
Loan.
(c) Payments of Principal and Interest. Borrower shall make payments of
----------------------------------
accrued interest only on the aggregate outstanding principal amount of the Loan
on each Payment Date through and including January 31, 1996. Thereafter, on
each Payment Date, commencing on February 28, 1997, Borrower shall make thirty-
six (36) payments of principal equal to 2.7778% of the original principal amount
of the Loan, plus accrued interest on the unpaid principal balance of the Loan,
until the Loan is paid in full with the last payment to occur, unless the Loan
is earlier prepaid, on January 31, 2000. The Loan may not be prepaid except as
set forth in Section 2.02(f).
2.02. Use of Proceeds; the Loans and the Note; Disbursement.
-----------------------------------------------------
(a) Use of Proceeds. The proceeds of the Loan shall be used solely for
---------------
working capital or general corporate purposes of Borrower.
(b) The Loan and the Note. The obligation of Borrower to repay the
---------------------
aggregate unpaid principal amount of and interest on the Loan shall be evidenced
by the Note. Lender may, and is hereby authorized by Borrower to, endorse on a
grid annexed to the Note appropriate notations regarding the Loan; provided,
--------
however, that the failure to make, or an error in making, any such notation
- -------
shall not limit or otherwise affect the obligations of Borrower hereunder or
under the Note.
(d) Disbursement. Subject to the satisfaction of the conditions set forth
------------
in this Agreement, Lender shall disburse the Loan by wire transfer to Borrower
in same day immediately available funds unless otherwise directed in writing by
Borrower.
7
<PAGE>
(e) Termination of Commitment to Lend. Notwithstanding anything to the
---------------------------------
contrary in the Operative Documents, Lender's obligation to lend to Borrower
hereunder shall terminate on the earlier of (i) the occurrence of any Event of
Default hereunder, and (ii) the Commitment Termination Date.
(f) Optional Payment with Premium. At any time after the first
-----------------------------
anniversary date hereof, upon three (3) Business Days' prior written notice to
Lender, Borrower may, at its option, at any time, prepay the Loan, either in
whole or from time to time in any part of the principal amount thereof equal to
$500,000 or more, at a prepayment price equal to the principal amount of the
Loan so to be prepaid, plus interest accrued thereon through and including the
date of such prepayment, plus a premium equal to the Make-Whole Premium.
(g) Mandatory Prepayment. Prior to any contemplated Change of Control,
--------------------
Borrower shall give Lender written notice of thereof together with a description
of the proposed transaction and financial information concerning the surviving
or acquiring entity or such entity's parent if applicable (and will deliver
additional information upon Lender's reasonable request). Lender shall notify
Borrower within thirty (30) days of receipt of such notice whether or not it
will consent (such consent not to be unreasonably withheld) to the assignment to
and the assumption by such surviving or acquiring entity or the continuation of
the Loan with the Borrower if the Borrower has become a Subsidiary of any such
entity. If Lender does not so consent (and such consent shall not be
unreasonably withheld), then prior to the closing of the Change of Control,
Borrower shall prepay the principal, accrued interest and other amounts due with
respect to the Loan, plus a premium equal to the Make-Whole Premium.
2.03. Other Payment Terms.
-------------------
(a) Place and Manner. Borrower shall make all payments due to Lender in
----------------
lawful money of the United States, in immediately available funds, at the
address for payments and in the manner specified in Section 10.05(b).
----------------
(b) Date. Whenever any payment due hereunder shall fall due on a day
----
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be.
(c) Default Rate. If either (i) any amounts required to be paid by
------------
Borrower under this Agreement or the other Operative Documents (including
principal or interest payable on the Loan, any fees or other amounts) remain
unpaid for five (5) days after such amounts are due, or (ii) an Event of Default
has occurred and is continuing, Borrower shall pay interest on the aggregate,
outstanding principal balance hereunder from the date due or from the date of
the Event of Default, as applicable, until such past due amounts are paid in
full or until all Events of Defaults are cured, as applicable, at a per annum
rate equal to the Default Rate, such rate to change from time to time as the
Prime Rate shall change. All computations of such interest at the Default Rate
shall be based on a year of 360 days and actual days elapsed.
2.04. Commitment Fee. Lender has received a commitment fee from Borrower
--------------
in the amount of $5,000 (the "Commitment Fee"). Any portion of the Commitment
--------------
Fee not utilized to pay Lender's expenses in connection with the negotiation,
documentation and
8
<PAGE>
funding of the Loan (such expenses not to exceed $2,500) will be applied by
Lender to amounts due under the Note in the order in which such amounts are due.
If the Loan is not made, any remaining balance of the Contingent Fee shall be
retained by Lender.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.01. Representations and Warranties. Except as set forth in the
------------------------------
Disclosure Schedule, Borrower makes the following representations and warranties
to Lender as of the date hereof and again on each Funding Date:
(a) Organization and Qualification. Borrower is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of its state of
incorporation and is duly qualified to do business in Borrower's Home State.
Borrower has no Subsidiaries.
(b) Authority. Borrower has all necessary corporate power, authority and
---------
legal right and has obtained all approvals and consents and has given all
notices necessary to execute and deliver this Agreement and the other Operative
Documents and to perform the terms hereof and thereof. Borrower has all
requisite corporate power and authority to own and operate its properties and to
carry on its businesses as now conducted.
(c) Conflict with Other Instruments, etc. Neither the execution and
------------------------------------
delivery of any Operative Document to which Borrower is a party nor the
consummation of the transactions therein contemplated nor compliance with the
terms, conditions and provisions thereof will conflict with or result in a
breach of any of the terms, conditions or provisions of the charter or the
bylaws of Borrower or, to its knowledge, any law or any regulation, order, writ,
injunction or decree of any court or governmental instrumentality or any
material agreement or instrument to which Borrower is a party or by which it or
any of its properties is bound or to which it or any of its properties is
subject, or constitute a default thereunder or result in the creation or
imposition of any Lien, other than Permitted Liens.
(d) Title to Properties. Borrower has good and marketable title to the
-------------------
Collateral, free and clear of all Liens, other than Permitted Liens. Borrower
has title and ownership of, or is licensed under, all Intellectual Property,
with no known infringement of the rights of others. Borrower has not received
any communications alleging that Borrower has violated, or by conducting its
business as proposed, would violate any proprietary rights of any other Person.
Borrower has no knowledge of any infringement or violation by it of the
intellectual property rights of any third party and has no knowledge of any
violation or infringement by a third party of any of its Intellectual Property.
The Collateral and the Intellectual Property constitute substantially all of the
assets and property of Borrower. Borrower does not own any right, title or
interest in or to any real property or motor vehicles, other than motor vehicles
leased to executives as part of a benefit arrangement.
(e) Authorization, Governmental Approvals, etc. The execution and
------------------------------------------
delivery by Borrower of each Operative Document, the granting of the security
interest in the Collateral, the issuance of the Warrant, the issuance of the
securities into which the Warrant is exercisable, the issuance of any securities
into which the securities issuable upon exercise of the Warrant are convertible,
and the performance of the obligations herein and therein contemplated have each
been duly authorized by all necessary action on the part of
9
<PAGE>
Borrower. No authorization, consent, approval, license or exemption of, and no
registration, qualification, designation, declaration or filing with, or notice
to, any Person is, was or will be necessary to (i) the valid execution and
delivery of any Operative Document to which Borrower is a party, (ii) the
performance of Borrower's obligations under any Operative Document, or (iii) the
granting of the security interest in the Collateral, except for filings in
connection with the perfection of the security interest in any of the Collateral
or the issuance of the Warrant. The Operative Documents have been or will be
duly executed and delivered and constitute or will constitute legal, valid and
binding obligations of Borrower, enforceable in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws of general application relating to or affecting
the enforcement of creditors' rights or by general principles of equity.
(f) Litigation. There are no actions, suits, proceedings or
----------
investigations pending or, to the knowledge of Borrower, threatened against or
affecting Borrower, or the business or any property or asset owned by it, before
any court or governmental department, agency or instrumentality which, if
adversely determined, could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.
(g) Disclosure. Neither any Operative Document nor any other agreement,
----------
document or certificate furnished by Borrower to Lender, including, without
limitation, historical financial statements, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading. There is no fact known
to Borrower which materially adversely affects, or which could reasonably be
expected in the future to materially adversely affect, its ability to perform
its obligations under the Operative Documents to which it is a party.
(h) Security Interest. Assuming the proper filing of one or more
-----------------
financing statement(s) identifying the Collateral with the proper state and/or
local authorities, the security interests in the Collateral granted to Lender
pursuant to this Agreement (i) constitute and will continue to constitute first
priority security interests (except to the extent any other Permitted Lien
existing on the date of this Agreement may create any priority to Lender's Lien
under this Agreement) and (ii) are and will continue to be superior and prior to
the rights in the Collateral of all other creditors of Borrower (except to the
extent of such Permitted Liens).
(i) Executive Offices. The principal place of business and chief
-----------------
executive office of Borrower, and the office where Borrower will keep all
records and files regarding the Collateral, is set forth on the cover page of
this Agreement.
ARTICLE IV
REPORTING REQUIREMENTS
----------------------
4.01. Furnishing Reports. Borrower shall furnish to Lender:
------------------
(a) Financial Statements. So long as Borrower is not subject to the
--------------------
reporting requirements of Section 12 or Section 15 of the Securities and
Exchange Act of 1934, as amended, promptly as they are available, unaudited
monthly and audited annual financial statements of Borrower and such other
financial information as Lender may reasonably request from time to time. From
and after such time as Borrower becomes a publicly reporting company, promptly
as they are available and in any event: (i) at the time of filing
10
<PAGE>
of Borrower's Form 10-K with the Securities and Exchange Commission after the
end of each fiscal year of Borrower, the financial statements of Borrower filed
with such Form 10-K; and (ii) at the time of filing of Borrower's Form 10-Q with
the Securities and Exchange Commission after the end of each of the first three
fiscal quarters of Borrower, the financial statements of Borrower filed with
such Form 10-Q.
(b) Compliance Statements. Promptly as they are available and in any
---------------------
event within (30) days of the end of each fiscal quarter of Borrower a
certificate of Borrower's Chief Financial Officer or other senior officer
stating that he or she has reviewed the provisions of this Agreement and that
Borrower is not in default in the observance or performance of any of the
provisions hereof, or if Borrower shall be so in default, specifying all such
defaults and events of which he or she may have knowledge and setting forth the
calculation of compliance or noncompliance with the financial covenant set forth
in Section 7.02.
(b) Notice of Defaults. As soon as possible, and in any event within five
------------------
(5) Business Days after the discovery of a Default or Event of Default provide
Lender with an Officer's Certificate of Borrower setting forth the facts
relating to or giving rise to such Default or Event of Default and the action
which Borrower proposes to take with respect thereto.
(c) Miscellaneous. Such other information as Lender may reasonably
-------------
request from time to time.
ARTICLE V
GRANT OF SECURITY INTEREST
GENERAL PROVISIONS CONCERNING SECURITY
--------------------------------------
5.01. Grant of Security Interest. Borrower, in order to secure the
--------------------------
payment of the principal and interest with respect to the Loan made pursuant to
this Agreement, all other sums due under and in respect hereof and of the other
Operative Documents, including fees, charges, expenses and attorneys' fees and
costs and the performance and observance by Borrower of all other terms,
conditions, covenants and agreements herein and in the other Operative Documents
(all such amounts and obligations being herein sometimes called the
"Obligations"), does hereby grant to Lender and its successors and assigns, a
security interest in and to the following property (collectively, the
"Collateral"): All right, title, interest, claims and demands of Borrower in and
----------
to:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all laboratory equipment, computer equipment, office
equipment, machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing;
11
<PAGE>
(c) All contract rights and general intangibles, including Intellectual
Property, now owned or hereafter acquired, including, without limitation,
goodwill, license agreements, franchise agreements, blueprints, drawings,
purchase orders, customer lists, route lists, infringements, claims, computer
programs, computer disks, computer tapes, literature, reports, catalogs, design
rights, income tax refunds, payments of insurance and rights to payment of any
kind;
(d) All now existing and hereafter arising accounts, royalties, license
rights and all other forms of obligations owing to Borrower arising out of the
sale or lease of goods, the licensing of technology or the rendering of services
by Borrower (subject, in each case, to the contractual rights of third parties
to require funds received by Borrower to be expended in a particular manner),
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's books relating to the foregoing; and
(f) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof, including,
without limitation, insurance, condemnation, requisition or similar payments and
proceeds of the sale or licensing of Intellectual Property to the extent such
proceeds no longer constitute Intellectual Property.
5.02 Duration of Security Interest. Subject to Section 5.06, Lender's
----------------------------- ------------
security interest in the Collateral shall continue until the payment in full and
the satisfaction of all Obligations, whereupon such security interest shall
terminate. Lender, upon payment in full and the satisfaction of the
Obligations, shall promptly execute such further documents and take such further
actions as may be necessary to effect the release and/or termination
contemplated by this Section 5.02, including duly executing and delivering
------------
termination statements for filing in all relevant jurisdictions.
5.03 Possession of Collateral. Except as set forth in Section 5.04, so
------------------------
long as no Event of Default has occurred and is continuing, Borrower shall
remain in full possession, enjoyment and control of the Collateral (except only
as may be otherwise required by Lender for perfection of its security interest
therein) and to manage, operate and use the same and each part thereof with the
rights and franchises appertaining thereto; provided, however, that the
-------- -------
possession, enjoyment, control and use of the Collateral shall at all times be
subject to the observance and performance of the terms of this Agreement.
5.04 Location of Collateral. The Collateral is and shall remain in the
----------------------
possession of Borrower at Borrower's address stated on the cover page of this
Agreement.
5.05 Lien Subordination. Lender agrees that the Liens granted to it
------------------
hereunder shall be subordinate to the Liens of existing and future lenders
providing working capital financing; provided that such Liens are confined
--------
solely to inventory, accounts receivable (and instruments and general
intangibles related specifically to such inventory and accounts receivable) and
the proceeds thereof; and provided, further, that the Obligations hereunder
-------- -------
shall not be subordinate in right of payment to any obligations to working
capital lenders and Lender's rights and remedies hereunder shall not in any way
be subordinate to the
12
<PAGE>
rights and remedies of any such working capital lenders. Lender agrees to
execute and deliver such agreements and documents as may be reasonably requested
by Borrower from time to time which set forth the lien subordination described
in this Section 5.05 and are reasonably acceptable to Lender. Lender shall have
------------
no obligation to execute any agreement or document which would impose
obligations, restrictions or lien priority on Lender which are less favorable
than those described in this Section 5.05. In particular, so long as no Event
------------
of Default has occurred and is continuing, Lender agrees that it will execute
and deliver an Intercreditor Agreement with Silicon Valley Bank in the form
attached hereto as Exhibit E.
---------
5.06 Partial Release of Collateral. Upon receipt of evidence of the
-----------------------------
occurrence of a Qualified Financing, Lender shall release its security interest
in all of the items set forth in Section 5.01(c) which constitute Intellectual
---------------
Property.
5.07 Additional Covenants.
--------------------
(a) Landlord Waiver. In connection with the execution and delivery of
---------------
this Agreement, Borrower has caused to be delivered to Lender a Sublessor's
Waiver and Consent from Syntex Corp. which is the sublessor of Borrower's
facility. Borrower agrees that within 30 days of the earlier of its expiration
of its sublease with Syntex Corp. or its entering into a new lease for its
current or another facility, it will obtain a Landlord Consent from the owner of
the premises which it is then occupying.
(b) Copyright Filings. Borrower agrees that in the event that it
-----------------
registers the copyrights to its software with the United States Copyright
Office, it will promptly notify Borrower of such registration and will at its
expense execute and cause to be filed with the United States Copyright Office
such instruments or documents as Lender may reasonably request to perfect and
maintain Lender's security interest in such copyrights.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
6.01. Affirmative Covenants.
---------------------
(a) Payment of Taxes. etc. Borrower shall pay and discharge all taxes,
----------------------
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon any of its properties; provided that there shall be no
---------
requirement to pay any such tax, assessment, charge, levy or claim (i) which is
being contested in good faith and by appropriate proceedings or which presents
no risk of seizure, forfeiture, levy or other event which could jeopardize any
Collateral or (ii) for which payment in full is bonded or reserved in Borrower's
financial statements.
(b) Inspection Rights. Borrower shall, at any reasonable time and from
-----------------
time to time, permit Lender or any of its agents or representatives to inspect
the Collateral, to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, Borrower and to discuss the
affairs, finances and accounts of Borrower with any of its officers or directors
relating in each case to Lender's capacity as lender and secured party hereunder
and with respect to the Collateral.
13
<PAGE>
(c) Maintenance of Equipment and Similar Assets. Borrower shall keep and
--------------------------------------------
maintain all items of equipment and other similar types of personal property
that form any significant portion or portions of the Collateral in good
operating condition and repair and shall make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Borrower shall not permit any such
material item of Collateral to become a fixture to real estate or an accession
to other personal property, without the prior written consent of Lender.
Borrower shall not permit any such material item of Collateral to be operated or
maintained in violation of any applicable law, statute, rule or regulation.
With respect to items of leased equipment (to the extent Lender has any security
interest in any residual Borrower's interest in such equipment under the lease),
Borrower shall keep, maintain, repair, replace and operate such leased equipment
in accordance with the terms of the applicable lease.
(d) Insurance.
---------
(i) Borrower shall, obtain and maintain for the Term, at its own
expense, (x) "all risk" insurance against loss or damage to the Collateral, (y)
commercial general liability insurance (including contractual liability,
products liability and completed operations coverages) reasonably satisfactory
to Lender, and (z) such other insurance against such other risks of loss and
with such terms, as shall in each case be reasonably satisfactory to or
reasonably required by Lender (as to carriers, amounts and otherwise).
Borrower's insurance which has been reviewed and approved by Lender prior to the
making of the Loan hereunder shall be deemed to satisfy the requirements of this
Section 6.01(d).
(ii) The deductible with respect to "all-risk" insurance required by
clause (x) above and product liability insurance required by clause (y) above
shall not exceed $25,000; otherwise the deductible with respect to any insurance
required to be maintained hereunder shall not exceed $5,000. The amount of
commercial general liability insurance (other than products liability coverage
and completed operations insurance) required by clause (y) above shall be at
least $5,000,000 per occurrence. The amount of the products liability and
completed operations insurance required by clause (y) above shall be at least
$5,000,000 per occurrence. Each "all risk" policy shall: (x) name Lender as loss
payee, (y) provide for each insurer's waiver of its right of subrogation against
Lender, and (z) provide that such insurance (A) shall not be invalidated by any
action of, or breach of warranty by, Borrower of a provision of any of its
insurance policies, and (B) shall waive set-off, counterclaim or offset against
Lender. Each liability policy shall (w) name Lender as an additional insured and
(x) provide that such insurance shall have cross-liability and severability of
interest endorsements (which shall not increase the aggregate policy limits of
Borrowers insurance). All insurance policies shall (y) provide that Borrower's
insurance shall be primary without a right of contribution of Lender's
insurance, if any, or any obligation on the part of Lender to pay premiums of
Borrower, and (z) shall contain a clause requiring the insurer to give Lender at
least 30 days' prior written notice of its cancellation (other than cancellation
for nonpayment for which 10 days' notice shall be sufficient). Borrower shall on
or prior to the first Funding Date and prior to each policy renewal, furnish to
Lender certificates of insurance or other evidence satisfactory to Lender that
such insurance coverage is in effect.
14
<PAGE>
ARTICLE VII
NEGATIVE AND FINANCIAL COVENANTS
--------------------------------
7.01. Negative Covenants. So long as the Obligations remain outstanding,
------------------
Borrower shall not:
(a) Name: Location of Chief Executive Office and Collateral. Without
-------------------------------------------------------
thirty (30) days prior written notice to Lender, change its chief executive
office or principal place of business or remove or cause to be removed from the
location set forth on the cover page hereof or move any Collateral to a location
other than that set forth on the cover page hereof.
(b) Liens on Collateral. Create, incur, assume or suffer to exist any
-------------------
Lien of any kind upon any Collateral, whether now owned or hereafter acquired,
except Permitted Liens.
(c) Negative Pledge Regarding Intellectual Property. Create, incur,
-----------------------------------------------
assume or suffer to exist any Lien of any kind upon any Intellectual Property,
whether now owned or hereafter acquired, except Permitted Liens.
(d) Dispositions of Collateral or Intellectual Property. Convey, sell,
---------------------------------------------------
offer to sell, lease, transfer, exchange or otherwise dispose of (collectively,
a "Transfer") all or any part of the Collateral to any Person, other than: (i)
--------
transfers of inventory in the ordinary course of business; (ii) transfers of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower in the ordinary course of business; or (iii) transfers of worn-out or
obsolete Equipment. It is expressly agreed and understood that the ordinary
course of Borrower's business includes entering into agreements and arrangements
with third parties for research, development, distribution, manufacturing, sale
or marketing of products and the licensing of Intellectual Property in
connection with such agreements and arrangements.
(e) Distributions. (i) Pay any dividends or make any distributions on
-------------
its Equity Securities; (ii) purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities (other than pursuant to the terms
of employee stock purchase plans, employee restricted stock agreements or
similar arrangements in an aggregate amount not to exceed $100,000); (iii)
return any capital to any holder of its Equity Securities as such; (iv) make any
distribution of assets, Equity Securities, obligations or securities to any
holder of its Equity Securities as such; or (v) set apart any sum for any such
purpose; provided, however, that Borrower may pay dividends payable solely in
Common Stock.
(f) Mergers or Acquisitions. Except with Lender's prior written
-----------------------
consent as set forth in Section 2.02(g), merge or consolidate with or into any
---------------
other Person or acquire all or substantially all of the capital stock or assets
of another Person.
(i) Transactions With Affiliates. Enter into any contractual
----------------------------
obligation with any affiliate or engage in any other transaction with any
affiliate except upon terms at least as favorable to Borrower or such Subsidiary
as an arms-length transaction with unaffiliated Persons.
(j) Maintenance of Accounts. Borrower shall not maintain any deposit
-----------------------
accounts or accounts holding securities owned by Borrower except (i) accounts
located at Silicon Valley Bank and (ii) other accounts with respect to which
Lender takes such action as it deems necessary to obtain a perfected security
interest in such account.
15
<PAGE>
(k) Indebtedness. Prior to the closing of a Qualified Financing,
------------
Borrower shall not incur any Debt except Debt subordinated to the Obligations on
terms and conditions satisfactory to Lender.
7.02 Financial Covenant. From and after the occurrence of a Qualified
------------------
Financing, as of the last day of each calendar month, Borrower shall maintain a
ratio of Debt to Tangible Net Worth of not greater than 1.5:1.00.
ARTICLE VIII
CONDITIONS PRECEDENT
--------------------
8.01. Closing. At the time of execution and delivery of this Agreement,
-------
Borrower shall have duly executed and/or delivered to Lender the items set forth
in Part I of Schedule 3.
--------------------
8.02. Other Conditions. The obligation of Lender to make the Loan
----------------
shall be subject to the execution and/or delivery to Lender of each of the items
set forth in Part I of Schedule 3 and the satisfaction of by Borrower of each
--------------------
condition set forth in Part II of Schedule 3.
---------------------
8.03. Covenant to Deliver. Borrower agrees (not as a condition but as
-------------------
a covenant) to deliver to Lender each item required to be delivered to Lender as
a condition to the Loan, if the Loan is advanced. Borrower expressly agrees
that the extension of the Loan prior to the receipt by Lender of any such item
shall not constitute a waiver by Lender of Borrower's obligation to deliver such
item.
ARTICLE IX
DEFAULT AND REMEDIES
--------------------
9.01. Events of Default. An "Event of Default" shall mean the
-----------------
occurrence of one or more of the following described events:
(a) Borrower shall (i) default in the payment of principal of or
interest on the Loan for five (5) days after the same is due, or (ii) default in
the payment of any expense or other amount payable hereunder or thereunder for
ten (10) days after receipt of written notice from Lender that the same is due;
or
(b) Borrower shall breach any provision of Section 7.01, Section 7.02 or
------------ ------------
Section 6.01(d); or
(c) Borrower shall default in the performance of any covenant,
agreement or obligation (other than a covenant, agreement or obligation referred
to in Section 9.01(a) or Section 9.01(b)) contained in any Operative Document
--------------- ----------------
and Borrower shall fail to cure within thirty (30) days after receipt of written
notice from Lender any default in the performance of any such covenant,
agreement or obligation contained therein; or
(d) Any representation or warranty made herein or on a Funding Date by
Borrower in any Operative Document, or any certificate or financial statement
furnished pursuant to
16
<PAGE>
the provisions of any Operative Document, shall prove to have been false or
misleading in any material respect as of the time made or furnished; or
(e) Borrower shall assert that any Operative Document is not, a legal,
valid and binding obligation of Borrower enforceable in accordance with its
terms; or
(f) A default shall exist under any agreement with (i) any third party
or parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any indebtedness or other obligations
of Borrower in an amount in excess of $250,000, or (ii) Lender, resulting in a
right by Lender, whether or not exercised, to accelerate the maturity of any
indebtedness or other obligations of Borrower, or (iii) MMC/GATX Partnership No.
I. resulting in a right by MMC/GATX Partnership No. I., whether or not
exercised, to accelerate the maturity of any indebtedness; or
(g) A proceeding shall have been instituted in a court of competent
jurisdiction seeking a decree or order for relief in respect of Borrower in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee (or similar official) of Borrower or
for any substantial part of its property, or for the winding-up or liquidation
of its affairs, and such proceeding shall remain undismissed or unstayed and in
effect for a period of thirty (30) consecutive days or such court shall enter a
decree or order granting the relief sought in such proceeding; or
(h) Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian (or other similar official)
of Borrower or for any substantial part of its property, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action in furtherance of
any of the foregoing.
9.02. Consequences of Event of Default. (a) If an Event of Default
--------------------------------
specified under clauses (a) through (f) of Section 9.01 shall occur and be
----------------------- ------------
continuing, Lender may (i) declare the Loan, together with interest thereon,
plus the Make-Whole Premium and all other liabilities of Borrower hereunder and
under the other Operative Documents to be immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived, and (ii) terminate its commitment to make the Loan and
terminate any commitment to advance money or extend credit to or for the benefit
of Borrower pursuant to any other agreement or commitment extended by Lender to
Borrower.
(b) If an Event of Default specified under clause (g) or (h) of
--------------------
Section 9.01 shall occur, then immediately and without notice (i) the Loan,
- ------------
together with interest thereon, plus premium, and all other liabilities of
Borrower hereunder and under the other Operative Documents shall automatically
become due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, and (ii) Lender's commitment
hereunder to make the Loan and any other commitment of Lender to Borrower to
advance money or extend credit pursuant to any other agreement or commitment
shall be terminated.
17
<PAGE>
9.03. Rights Regarding Collateral. Borrower agrees that when any Event
---------------------------
of Default has occurred and is continuing, Lender shall have the rights,
options, duties and remedies of a secured party as permitted by law and, in
addition to and without limiting the foregoing, Lender may exercise any one or
more or all, and in any order, of the remedies herein set forth, including the
following:
(a) Lender, personally or by agents or attorneys, shall have the right
(subject to compliance with any applicable mandatory legal requirements) to
require Borrower to assemble the Collateral and make it available to Lender at a
place to be designated by Lender or to take immediate possession of the
Collateral, or any portion thereof, and for that purpose may pursue the same
wherever it may be found, and may enter any of premises of Borrower, with or
without notice, demand, process of law or legal procedure, to the extent
permitted by applicable law, and search for, take possession of, remove, keep
and store the same, or use and operate or lease the same until sold. In
furtherance of Lender's rights hereunder, Borrower hereby grants to Lender an
irrevocable, non-exclusive license (exercisable without royalty or other payment
by Lender) to use, license or sublicense any patent, trademark, trade name,
copyright or other intellectual property in which Borrower now or hereafter has
any right, title or interest together with the right of access to all media in
which any of the foregoing may be recorded or stored; provided, however, that
such license shall only be exercisable in connection with the disposition of
Collateral upon Lender's exercise of its remedies hereunder.
(b) Lender may, if at the time such action may be lawful and always
subject to compliance with any mandatory legal requirements, either with or
without taking possession and either before or after taking possession, without
instituting any legal proceedings whatsoever, having first given notice of such
sale by registered or certified mail to Borrower once at least ten (l0) days
prior to the date of such sale, and having first given any other notice which
may be required by law, sell and dispose of the Collateral, or any part thereof,
at a private sale or at public auction, to the highest bidder, in one lot as an
entirety or in separate lots, and either for cash or on credit and on such terms
as Lender may determine, and at any place (whether or not it be the location of
the Collateral or any part thereof) designated in the notice referred to above.
To the extent permitted by applicable law, any such sale or sales may be
adjourned from time to time by announcement at the time and place appointed for
such sale or sales, or for any such adjourned sale or sales, without further
published notice, and Borrower, Lender or the holder or holders of the Note, or
of any interest therein, may bid and become the purchaser at any such sale.
(c) Lender may proceed to protect and enforce this Agreement and the
other Operative Documents by suit or suits or proceedings in equity, at law or
in bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted;
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for any real property security or any part thereof, or for the recovery of
judgment for the Obligations or for the enforcement of any other proper, legal
or equitable remedy available under applicable law.
9.05. Effect of Sale. Any commercially reasonably sale, whether under
--------------
any power of sale available to Lender or by virtue of judicial proceedings,
shall operate to divest all right, title, interest, claim and demand whatsoever,
either at law or in equity, of Borrower in and to the property sold, and shall
be a perpetual bar, both at law and in equity, against Borrower, its successors
and assigns, and against any and all persons claiming the property sold or any
part thereof under, by or through Borrower, its successors or assigns.
18
<PAGE>
9.06. Application of Collateral Proceeds. The proceeds and/or avails
----------------------------------
of the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lender at the
time of, or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows:
(a) First, to the payment of reasonable costs and expenses, including
-----
all amounts expended to preserve the value of the Collateral, of foreclosure or
suit, if any, and of such sale and the exercise of any other rights or remedies,
and of all proper fees, expenses, liability and advances, including reasonable
legal expenses and attorneys' fees, incurred or made hereunder by Lender;
(b) Second, to the payment to Lender of the amount then owing or unpaid
------
on the Note, and in case such proceeds shall be insufficient to pay in full the
whole amount so due, owing or unpaid upon the Note, then first, to the unpaid
interest thereon, second, to unpaid principal thereof and third to the remaining
-----
balance of the Obligations under the Note; such application to be made upon
presentation of the Note, and the notation thereon of the payment, if partially
paid, or the surrender and cancellation thereof, if fully paid;
(c) Third, to the payment of other amounts then payable to Lender under
-----
any of the Operative Documents; and
(d) Fourth, to the payment of the surplus, if any, to Borrower, its
------
successors and assigns, or to whomsoever may be lawfully entitled to receive the
same.
9.07. Reinstatement of Rights. If Lender shall have proceeded to
-----------------------
enforce any right under this Agreement or any other Operative Document by
foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case (unless otherwise ordered by a court of
competent jurisdiction), Lender shall be restored to its former position and
rights hereunder with respect to the property subject to the security interest
created under this Agreement.
ARTICLE X
MISCELLANEOUS
-------------
10.01. Modifications, Amendments or Waivers. The provisions of any
------------------------------------
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.
10.02. No Implied Waivers; Cumulative Remedies; Writing Required. No
---------------------------------------------------------
delay or failure of Lender in exercising any right, power or remedy hereunder
shall affect or operate as a waiver thereof; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such a
right, power or remedy preclude any further exercise thereof or of any other
right, power or remedy. The rights and remedies hereunder of Lender are
cumulative and not exclusive of any rights or remedies which it would otherwise
have. Any waiver, permit, consent or approval of any kind or character on the
part of Lender of any breach or default under this Agreement or any such waiver
of any provision or condition of this Agreement must be in writing and shall be
effective only in the specified instance and to the extent specifically set
forth in such writing.
19
<PAGE>
10.03. Expenses; Indemnification. Borrower agrees upon demand to pay
-------------------------
or reimburse Lender for all liabilities, obligations and out-of-pocket expenses,
including reasonable fees and expenses of counsel for Lender, from time to time
arising in connection the enforcement or collection of sums due under the
Operative Documents. Borrower shall indemnify, reimburse and hold Lender, each
of Lender's partners, and each of their respective successors, assigns, agents,
officers, directors, shareholders, servants, agents and employees harmless from
and against all liabilities, losses, damages, actions, suits, demands, claims of
any kind and nature (including claims relating to environmental discharge,
cleanup or compliance), all costs and expenses whatsoever to the extent they may
be incurred or suffered by such indemnified party in connection therewith
(including reasonable attorneys' fees and expenses), fines, penalties (and other
charges of applicable governmental authorities), licensing fees relating to any
item of Collateral, damage to or loss of use of property (including
consequential or special damages to third parties or damages to Borrower's
property), or bodily injury to or death of any person (including any agent or
employee of Borrower) (each, a "Claim"), directly or indirectly relating to or
arising out of the use of the proceeds of the Loan or otherwise, the falsity of
any representation or warranty of Borrower or Borrower's failure to comply with
the terms of this Agreement or any other Operative Document during the Term.
The foregoing indemnity shall cover, without limitation, (i) any Claim in
connection with a design or other defect (latent or patent) in any item of
equipment included in the Collateral, (ii) any Claim for infringement of any
patent, copyright, trademark or other intellectual property right, (iii) any
Claim resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release of any Hazardous Materials on the
premises of Borrower, including any Claims asserted or arising under any
Environmental Law, or (iv) any Claim for negligence or strict or absolute
liability in tort; provided, however, that Borrower shall not indemnify Lender
-----------------
for any liability incurred by Lender as a direct and sole result of Lender's
gross negligence or willful misconduct. Such indemnities shall continue in full
force and effect, notwithstanding the expiration or termination of this
Agreement. Upon Lender's written demand, Borrower shall assume and diligently
conduct, at its sole cost and expense, the entire defense of Lender, each of its
partners, and each of their respective, agents, employees, directors, officers,
shareholders, successors and assigns against any indemnified Claim described in
this Section 10.03. Borrower shall not settle or compromise any Claim against or
-------------
involving Lender without first obtaining Lender's written consent thereto, which
consent shall not be unreasonably withheld.
10.04. Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
-------
THIS AGREEMENT OR ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM
LENDER UNDER ANY THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.05. Notices; Payments. (a) All notices and other communications given
-----------------
to or made upon any party hereto in connection with this Agreement shall be in
writing (including telexed, telecopied or telegraphic communication) and mailed
(by certified or registered mail), telexed, telegraphed, telecopied or delivered
to the respective parties, as follows:
Borrower: At the address set forth on the cover page of this Agreement.
20
<PAGE>
Lender: COMDISCO, INC.
6111 North River Road
Rosemont, IL. 60018
Telephone No.: 847-518-5450
Telecopier No.: 847-518-5465
Attention: Venture Lease
with a copy to:
COMDISCO, INC.
6111 North River Road
Rosemont, IL. 60018
Telephone No.: 847-518-5075
Telecopier No.: 847-518-5088
Attention: General Counsel
or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.
(b) Unless Lender specifies otherwise in writing, all payments shall be
made to:
COMDISCO, INC.
P.O. Box 91744
Chicago, IL. 60693
10.06. Termination. This Agreement shall terminate at the end of the
-----------
Term; provided, however, that the termination of this Agreement shall not affect
-------- -------
any of the rights and remedies of either party hereunder, it being understood
and agreed that all such rights and remedies shall continue in full force and
effect until payment of all amounts owed to Lender under or in connection with
the Operative Documents, whether on account of principal, interest, fees or
otherwise.
10.07. Severability. If any provision of any Operative Document is held
------------
invalid or unenforceable to any extent or in any application, the remainder of
such Operative Document and all other Operative Documents, or the application of
such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.
10.08. Survival. All representations, warranties, covenants and
--------
agreements of the parties contained herein or made in writing in connection
herewith shall survive the execution and delivery of the Operative Documents,
the making of Loan hereunder, the granting of security and the issuance of the
Note.
10.09. Governing Law. THIS AGREEMENT, THE OTHER OPERATIVE DOCUMENTS AND
-------------
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. ANY ACTION TO ENFORCE THIS AGREEMENT MAY BE BROUGHT IN CALIFORNIA
OR, WITH REGARD TO COLLATERAL, MAY ALSO BE BROUGHT WHEREVER SUCH COLLATERAL IS
LOCATED.
21
<PAGE>
10.10. Successors and Assigns. This Agreement and the other Operative
----------------------
Documents shall be binding upon and inure to the benefit of Lender, all future
holders of the Note, Borrower and their respective successors and permitted
assigns, except that Borrower may not assign or transfer its rights hereunder or
any interest herein without the prior written consent of Lender. Lender may sell
to any other financial entity (a "Participant") participation interests in
-----------
Lender's rights under this Agreement and the other Operative Documents; provided
that notwithstanding the sale of participations, Lender shall remain solely
responsible for the performance of its obligations under this Agreement, Lender
shall remain the holder of the Note for all purposes under this Agreement and
Borrower shall continue to deal solely and directly with Lender in connection
with this Agreement and the other Loan Documents; and provided, further, that
Lender may not sell any participation interest to any entity which might be a
competitor of Borrower without Borrower's prior written consent. Lender may
disclose the Operative Documents and any other financial or other information
relating to Borrower or any Subsidiary to any potential Participant, provided
that such Participant agrees to protect the confidentiality of such documents
and information using the same measures that it uses to protect its own
confidential information.
10.11. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
10.12. Further Assurances. Borrower will, at its own expense, from
------------------
time to time do, execute, acknowledge and deliver all further acts, deeds,
conveyances, transfers and assurances, and all financing and continuation
statements and similar notices, reasonably necessary or proper for the
perfection of the security interest being herein provided for in the Collateral,
whether now owned or hereafter acquired.
10.13. Power of Attorney in Respect of the Collateral. Borrower does
----------------------------------------------
hereby irrevocably appoint Lender (which appointment is coupled with an
interest), the true and lawful attorney-in-fact of Borrower with full power of
substitution, for it and in its name (a) to perform (but Lender shall not be
obligated to and shall incur no liability to Borrower or any third party for
failure to perform) any act which Borrower is obligated by this Agreement to
perform, (b) to ask, demand, collect, receive, receipt for, sue for, compound
and give acquittance for any and all rents, issues, profits, avails,
distributions, income, payment draws and other sums in which a security interest
is granted under Section 5.01 with full power to settle, adjust or compromise
------------
any claim thereunder as fully as if Lender were Borrower itself, (c) to receive
payment of and to endorse the name of Borrower to any items of Collateral
(including checks, drafts and other orders for the payment of money) that come
into Lender's possession or under Lender's control, (d) to make all demands,
consents and waivers, or take any other action with respect to, the Collateral,
(e) in Lender's discretion, to file any claim or take any other action or
institute proceedings, either in its own name or in the name of Borrower or
otherwise, which Lender may reasonably deem necessary or appropriate to protect
and preserve the right, title and interest of Lender in and to the Collateral,
and (f) to otherwise act with respect thereto as though Lender were the outright
owner of the Collateral; provided, however, that the power of attorney herein
-------- -------
granted shall be exercisable only upon the occurrence and during the
continuation of an Event of Default. Borrower agrees to reimburse Lender upon
demand for all reasonable costs and expenses, including attorneys' fees and
expenses, which Lender may incur while acting as Borrower's attorney in fact
hereunder, all of which costs and expenses are included within the Obligations.
22
<PAGE>
10.14 Confidentiality. All information (other than periodic reports
---------------
filed by Borrower with the Securities and Exchange Commission) disclosed by
Borrower to Lender in writing or through inspection pursuant to this Agreement
shall be considered confidential. Lender agrees to use the same degree of care
to safeguard and prevent disclosure of such confidential information as Lender
uses with its own confidential information, but in any event no less than a
reasonable degree of care. Lender shall not disclose such information to any
third party (other than Lender's or Lender's partner's attorneys and auditors
subject to the same confidentiality obligation set forth herein) and shall use
such information only for purposes of evaluation of its investment in Borrower
and the exercise of Lender's rights and the enforcement of its remedies under
this Agreement and the other Operative Agreements. The obligations of
confidentiality shall not apply to any information that Lender can demonstrate
(a) was known to the public prior to disclosure by Borrower under this
Agreement, (b) becomes known to the public through no fault of Lender, (c) is
disclosed to Lender by a third party' having a legal right to make such
disclosure, or (d) is independently developed by Lender.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written .
CORSAIR COMMUNICATIONS, INC.
By: /s/ Martin J. Silver
------------------------------------
Name: Martin J. Silver
----------------------------------
Title: CFO
--------------------------------
COMDISCO, INC.
By: /s/ James P. Labe
------------------------------------
Name: James P. Labe
-----------------------------------
Title: President Venture Lease Division
----------------------------------
24
<PAGE>
SCHEDULES
1 Funding Certificate
2 Disclosure Schedule
3 Conditions Precedent
EXHIBITS
A Form of Secured Promissory Note
B Form of Landlord Consent
C Form of Warrant
D Form of Opinion of Counsel
E Form of Intercreditor Agreement
25
<PAGE>
SCHEDULE 1
FUNDING CERTIFICATE
The undersigned Martin J. Silver, being the duly elected and acting of
CORSAIR COMMUNICATIONS, INC., a Delaware corporation ("Borrower"), does hereby
certify to COMDISCO, INC. in connection with that certain Loan and Security
Agreement dated as of July 31, 1996 (the "Loan Agreement") with other
capitalized terms used below having the meanings ascribed thereto in the Loan
Agreement) that:
1. The representations and warranties made by Borrower in Article III of
-----------
the Loan Agreement and in the other Operative Documents are true and
correct as of the date hereof.
2. No event or condition has occurred and is continuing that would
constitute a Default or an Event of Default under the Loan Agreement
or any other Operative Document.
3. Borrower is in compliance with the covenants and requirements
contained in Articles IV, VI and VII of the Loan Agreement.
-----------------------
4. All conditions referred to in Article VIII of the Loan Agreement to
------------
the making of the Loan to be made on or about the date hereof been
satisfied.
5. No material adverse change in the general affairs, management, results
of operations, condition (financial or otherwise or prospects of
borrower, whether or not arising from transactions in the ordinary
course of business, has occurred.
Dated: July 31, 1996
CORSAIR COMMUNICATIONS, INC.
By: /s/ Martin J. Silver
-----------------------------------
Name: Martin J. Silver
---------------------------------
Title: CFO
--------------------------------
26
<PAGE>
SCHEDULE 2
DISCLOSURE SCHEDULE
27
<PAGE>
DISCLOSURE SCHEDULE
-------------------
The following matters are exceptions to the representations and warranties
of Corsair Communications, Inc., a Delaware corporation (the "Company") as set
forth in Article III of the Loan and Security Agreement dated July 31, 1996
between the Company and Comdisco, Inc. (the "Agreement"). The section numbers
in this Disclosure Schedule correspond to the section numbers in the Agreement;
however, any information disclosed herein under any section number shall be
deemed to be disclosed and incorporated into any other section number under the
Agreement where such disclosure would otherwise be appropriate. Where the terms
of a contract or other disclosure item have been summarized or described in this
Disclosure Schedule, such summary or description does not purport to be a
complete statement of the material terms of such contract or other item. Any
terms defined in the Agreement shall have the same meaning when used in this
Disclosure Schedule as when used in the Agreement unless the context otherwise
requires.
Section 3.01(d) Title to Properties.
--------------- -------------------
Pursuant to a Loan and Security Agreement dated August 31, 1995 between the
Company and Comdisco ("Comdisco"), the Company borrowed $1,000,000 from Comdisco
and has granted to Comdisco a first priority security interest in and to the
following property: (i) the equipment and other property (the "Equipment")
described in Exhibit A attached hereto; and (ii) all proceeds, products,
replacements, additions to, substitutions for and accessions to any and all
Equipment including, without limitation, the proceeds applicable to insurance
covering the Equipment.
Pursuant to a Loan and Security Agreement of even date herewith between the
Company and MMC/GATX Partnership No. I ("MMC/GATX"), the Company borrowed
$3,000,000 from MMC/GATX, and has granted to MMC/GATX a security interest in the
same collateral as covered by the Agreement.
Section 3.01(f) Litigation.
--------------- ----------
Ronald H. Busch, Robert E. Hartmann, Michael B. Powell, James M. Simmons,
John Taylor, Sharen Blasquez-Guerra and Peter McCoy (collectively, the
"Plaintiffs") have filed a lawsuit in the superior court of the state of
California, county of San Francisco naming TRW, Inc., ESL Incorporated and the
Company as defendants. The claims contained in the Plaintiffs' complaint relate
to their dismissal on or about the time at which Corsair purchased the
PhonePrint assets from ESL Incorporated. Only two of the seven Plaintiffs were
ever employed by Corsair, and Corsair is seeking indemnification from TRW, Inc.
with regard to this matter.
Section 3.01(h) Security Interest.
--------------- -----------------
See Section 3.01(d) above.
28
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS GOING WITH PHONEPRINT
HP 7550A 231 CMPTR PLOTTER GRPH 86/01/21 C0012235 2520A20644 1
APPLE MACPLUS 686 COMPUTER PERSONAL 87-03-16 C0014120 F7101K2M00 1 2,294.63 2,294.63
APPLE MACPLUS 551 COMPUTER PERSONAL 87-4-28 C0014342 F6050CM0200 1 1,837.45 1,837.45
APPLE MACPL US COMPUTER PERSONAL 87-6-15 C0014542 F7232M2M00 1 1,508.13 1,508.13
452
APPLE MAC PLUS 745 COMPUTER PERSONAL 87-5-10 C0016103 F819350M00 1 1,460.17 1,460.17
AST PREMIUM 286 COMPUTER PERSONAL -- C0017172 38521 1 0.00
APPLE MAC II 459 COMPUTER PERSONAL 87-7-26 C0017215 F926DEM56 1 3,827.87 3,827.87
APPLE ? CMPTR MONITOR COLOR ? C0017806 1 0.00 0.00
APPLE MAC II 547 COMPUTER PERSONAL 91-9-5 C0019273 F51245N576 1 4,560.80 3,624.93
APPLE M0402 189 CMPTR MONITOR, MONO 91-9-05 C0019285 PH1238K35M 1 1,561.19 1,240.84
APPLE M0402 188 CMPTR MONITOR, MONO 91-8-20 C0019290 PH1239USA1 1 1,561.74 1,255.54
APPLE MAC II 505 COMPUTER PERSONAL 91-8-20 C0019291 F51270UG76 1 4,208.20 3,376.66
APPLE MAC II 408 COMPUTER PERSONAL 91-11-11 C0019589 F113881XC5 1 3,403.30 2,653.23
RADIUS 168 218 CMPTR, MONITOR 91-11-19 C0019590 DCH1410A00 1 1,395.30 1,068.23
APPLE MAC II ? MAC 11C1 W/EXT KYBD ? C0019941 F11441A1716 1 4,327.13 3,285.73
RADIUS TPD/19 CMPTR MONITOR 92-4-1 C0020185 DCH2040A01 1 1,305.13 341.43
245
APPLE MACII 11044 COMPUTER, PERSONAL 92-5-7 C0020195 F12176F971 1 4,353.50 3,085.11
RADIUS TPD/19 COMPTR MONITOR 92-12-14 C0021173 DCH26/ 1 1,109.13 687.66
2DA04
APPLE CENTRIS 1342 COMPUTER PERSONAL 93-4-5 C0021600 F1311CLDOC 1 4,194.11 2,246.18
DELL 1351 COMPUTER COMPUTER PERSONAL 93-6-16 C0021988 2KY12 1 4,221.88 2,082.79
S466/M
DELL 1351 COMPUTER COMPUTER PERSONAL 93-6-16 C0021989 2KY16 1 4,221.88 2,082.79
S466/M
APPLE CENTRIS COMPUTER PERSONAL 93-6-8 C0021990 F1305DAYOC 1 6,040.86 2,940.16
1933
APPLE CENTRIS COMPUTER PERSONAL 93-6-8 C0021991 F13050QYOC 1 6,040.88 2,940.17
1933
RADIUS CMPTR MONITOR, COLOR 93-7-13 C0021992 WTB324A105 1 2,247.53 1,061.33
719 350
RADIUS CMPTR MONITOR, COLOR 93-7-13 C0021993 WTB324A100 1 2,247.56 1,0051.34
719 350
TEXAS INSTR 531 2559821 CMPTR PRINTER LASER 93-6-15 C0021994 321030674 1 1,660.56 819.21
APPLE QUADRA 449 CENTRIS 650 C0022026 CK327000CG7 1 4,263.01 1,914.06
APPLE CENTRIS 1243 COMPUTER PERSONAL 93-6-24 C0022035 F1321D3550C 1 3,884.73 1,916.44
APPLE CENTRIS 1243 COMPUTER PERSONAL 93-6-24 C0022037 F1321DN90C 1 3,884.73 1,916.44
APPLE CENTRIS 473 COMPUTER PERSONAL 93-8-4 C0022137 F23075WSCN 1 3,281.96 1,480.93
APPLE CENTRIS 473 COMPUTER PERSONAL 93-8-4 C0022138 F23075WWCN 1 3,281.96 1,480.53
APPLE CENTRIS (610) COMUTER PERSONAL 93-8-4 C0022139 F2331HXMCN 1 3,281.96 1,480.51
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022140 F2307KB3CN 1 1,780.56 807.74
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022141 F2307W66CN 1 1,780.56 807.74
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022142 F2307KB5CN 1 1,780.56 807.74
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022143 F23075NRCN 1 1,790.56 807.74
290
APPLE CENTRIS 573 COMPUTER PERSONAL 93-8-4 C0022145 F23073WUCN 1 1,790.56 807.74
RADIUS 770 348 CMPTR MONITOR COLOR 93-5-4 C0022145 HNC7190ADI 1 2,405.36 1,064.34
RADIUS 779 348 21" COLOR MONITOR 93-5-15 C0022146 HNC190ADI00A 1 2,463.40 1,099.15
APPLE PRO 630 814 CMPTR PTINER LASER 93-11-19 C0022147 F132614010 1 2,344.56 1,147.23
NCA 4542NT 717A CMPTR DRIVE DISK 94-3-11 C0022151 G9360753 1 1,406.17 634.32
NCA MXT1240S 660 CMPTR DRIVE DISK 94-3-1 C0022196 G93658772 1,234.67 584.04
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-21 C0022479 C03905VIC 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022480 CX3905VFI 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022481 CX371U8ZIC 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022482 CX337UZ1C 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022483 CX33725I1C 1 2,083.94 808.11
(610)
APPLE 504 QUADRA COMPUTER PERSONAL/21" CLR 93-11-9 C0022484 CX3371V21C 1 2,083.94 808.11
(610) MONITOR
RADIUS 448 381 CMPTR MONITOR COLOR 93-10-8 C0022485 SSG33ZA103 1 2,961.19 1,210.84
</TABLE>
Page 1 of 10
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RADIUS 948 381 CMPTR MONITOR COLOR 93-10-5 C0022486 SSG33ZA103 1 2,961.19 1,210.84
DELL 1,269 COMPUTER COMPUTER PERSONAL 93-10-8 C0022528 30MW5 1 3,933.48 1,608.36
S466M
DELL 1,259 COMPUTER COMPUTER PERSONAL 93-10-8 C0022529 30MW6 1 3,933.50 1,606.37
S466M
CHAPLET SYS 1,627 COMPUTER PERSONAL LLPTR 2/OK C0022619 71263M347 1 5,068.67 1,872.50
NBD486T
SUN MICROSYS 10GXN-407 457 WORKSTATION 94-10-6 C0023073 35054623 1 14,621.40 4,873.50
SUN MICROSYS 10GXN-407,579 WORKSTATION 94-10-6 C0023074 35054632 1 14,469.30 4,795.38
SUN MICROSYS 4/1 5EC-32 177 WORKSTATION 94-10-6 C0023075 351F1078 1 5,656.06 1,385.36
SUN MICROSYS 4/1 5EC-32 177 WORKSTATION 94-1-6 C0023076 351F1068 1 5,656.06 1,385.36
SUN MICROSYS 4/10EC-8 199 WORKSTATION 94-10-6 C0023077 351F2559 1 2,837.55 975.38
SUN MICROSYS X547A-ST 9859 CMPTR DRIVE DISK 94-10-6 C0023078 35183300 1 4,439.00 1,476.53
SUN MICROSYS X547A-ST2 259 CMPTR, DRIVE DISK 94-10-6 C0023079 351U3356 1 2,961.53 1,416.53
</TABLE>
Page 2 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
APPLE 990 POWERBOOK COMPUTER PERSONAL LPTP 93-12-22 C0023101 PC3480MU44 1 3,094.63 1,134.70
APPLE 990 POWERBOOK COMPUTER PERSONAL LPTP 93-12-22 C0023102 PC347D0744 1 3,094.63 1,134.70
APPLE 990 POWERBOOK COMPUTER PERSONAL LPTP 93-12-72 C0023103 PC348DB444 1 3,094.63 1,134.70
APPLE 940 QUADRA COMPUTER PERSONAL 93-12-21 C0023104 PC3465LTIC 1 2,952.33 1,082.52
APPLE 940 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023105 PC3490QHIC 1 2,952.33 1,082.52
/OU
APPLE 445 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023106 PC3495C41C 1 2,952.33 1,082.52
/OU
APPLE 945 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023107 PC3495561C 1 2,952.33 1,082.52
/OU
APPLE 945 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023108 PC3490031C 1 2,952.33 1,082.52
/OU
APPLE 945 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023109 PC465NX1C 1 2,952.33 1,082.52
/OU
APPLE 945 POWERBOOK COMPUTER PERSONAL 93-12-21 C0023110 PC49080IC 1 2,952.33 1,082.52
/OU
APPLE 945 QUADRA COMPUTER PERSONAL 93-12-21 C0023111 FC4504TIC 1 2,952.34 1,082.52
(610)
MICRONET SS-D16000 COMPUTER DRIVE TAPE DATE ? C0023115 5301768 1 1,749.32 734.72
486 COMPUTER - C0023197 1 2,919.93 724.73
HP 7550A 231 CMPTR, PLOTTER, GRPH - C0023308 2631A36846 1 2,080.04 534.68
DELL 1800 COMPUTER COMPUTER PERSONAL 94-3-4 C0023309 3DYPS 1 3,530.99 941.60
S486D
DELL 1800 COMPUTER COMPUTER PERSONAL 94-3-4 C0023310 3DYFM 1 3,530.99 941.60
S486D
DELL 1800 COMPUTER COMPUTER PERSONAL 94-3-4 C0023311 3DYRD 1 3,530.99 941.60
S486D
FR SYSTEMS COM-120A CMPTR, MONITOR 94-3-22 CC0023404 1686 1 13,201.89 3,520.50
6,733
IBM 800 425SX/SI COMPUTER PERSONAL 94-4-11 C0023529 FS02323KKP 1 1,367.70 365.80
IBM 744 425SX/SI COMPUTER PERSONAL 94-4-11 C0023530 PS02323KKI 1 1,457.46 351.95
APPLE 676 QUADRA COMPUTER PERSONAL 94-4-11 C0023531 PC3490E41C 1 5,949.25 1,224.36
APPLE 227 QUADRA COMPUTER PERSONAL 94-3-30 C0023532 PC406015U 1 2,404.99 641.33
APPLE ? QUADRA COMPUTER PERSONAL 94-3-30 C0023533 PC406006U 1 2,404.99 641.33
APPLE QUADRA COMPUTER PERSONAL --? C0023534 PC4060CXU 1 2,295.70 993.52
APPLE 1135 QUADRA COMPUTER PERSONAL 94-3-30 C0023535 PC40600HU 1 2,225.69 593.52
APPLE 1,135 QUADRA COMPUTER PERSONAL 94-3-30 C0023536 PC40600UU 1 2,225.70 593.52
APPLE 2,428 POWER MAC COMPUTER PERSONAL 94-4-14 C0023537 XB412CCNZQ 1 3,617.27 813.46
APPLE 2,428 POWER MAC COMPUTER PERSONAL 94-4-13 C0023538 XB412VDNZQ 1 3,617.28 815.46
APPLE 1,349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-21 C0023605 PC406SYI44 1 2,645.13 617.20
APPLE 1349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-21 C0023605 PC4065VY44 1 2,645.13 617.20
APPLE 1349 POWERMAC COMPUTER PERSONAL 94-4-21 C0023621 XB407LWP19 1 3,232.23 754.19
APPLE 1349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-28 C0023634 PC40458B44 1 2,938.53 676.17
APPLE 1349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-28 C0003635 PC404TBY4 1 2,938.51 676.17
APPLE 1227 QUADRA COMPUTER PERSONAL 94-4-18 C0023647 PC404074U 1 2,404.99 641.33
APPLE 1227 QUADRA COMPUTER PERSONAL 94-4-18 C0023648 PC40603UU 1 2,404.99 641.33
APPLE 1227 QUADRA COMPUTER PERSONAL 94-4-18 C0023649 PC40413RU 1 2,404.99 641.33
APPLE 504 QUADRA610 COMPTR-PERSON 94-6-10 C0023782 DCL4100A01 1 2,774.56 462.43
PERSONAL COMPUTER C0023783 1 5,164.32 660.75
APPLE 2,229 PB DUO POWERBOOK DUO 280c w17" DISP - C0023903 PC429HNT230 1 5,096.67 509.67
280/280C
1224 POWERBOOK DUO 280c w17" DISP - C0023904 1 5,096.67 509.67
APPLE 1,751 M3077 COMPUTER PERSONAL 94-8-14 C0023906 PC4230602Q 1 3,434.08 343.41
(POWERm)
? 17 COLOR MONITOR - C0023907 1 1,017.55 101.76
APPLE M2017 179 CMPTR PERSONAL 94-9-8 C0023908 PC4131861U 1 351.18 23.41
APPLE M2612 1043 CMPTR MONITOR, COLOR 20 94-8-18 C0023909 114130091X 1 2,045.93 204.50
- - ? POWERBOOK 180 - C0023924 1 2,960.76 288.75
- - ? POWERBOOK 180 - C0023925 1 2,960.76 288.75
APPLE 1,239 6100 CMPTR PERSONAL 94-9-6 C0023926 XB432IR217 1 3,257.81 223.86
(POWERMAC)
APPLE 1,239 6100 CMPTR PERSONAL 94-9-6 C0023927 XB43225A17 1 3,357.81 223.86
(POWERMAC)
APPLE 670 M2464 MONITOR-CMPTR 94-9-6 C0023935 PC41316598 1 3,291.03 219.40
POWERMAC
APPLE 1,049 C0-890 MONITOR,COLOR (20) 94-9-6 C0023936 544290841XY 1 2,055.92 137.05
APPLE 1,678 M2464 MONITOR CMPTR 94-7-96 C0023937 PC4112YIU 1 3,291.06 219.40
(POWERPC)
APPLE 1049 C0890 MONOTIR, COLOR 94-9-6 C0023938 S44S98MIXY 1 2,055.92 137.06
APPLE 4128 8100 CMPTR PERSONAL 94-9-6 C0023939 XB42UYP50 1 2,094.18 539.62
</TABLE>
Page 3 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPARC STAT - C0023964 1 1,103.83 0.00
5 GB TAPE - C0023965 1 1,250.29 0.00
SUN MICROS 41OFC2-1825 WORKSTATION 94-10-10 C0023869 441F1232 1 1,577.59 119.25
SUN MICROS 415FC2-2359 WORKSTATION,CLASSIC 94-10-20 30023970 440F1652 1 4,624.53 154.15
RADIUS C0507 MONITOR, COLOR 17" - C0023971 SS1428A162 1 1,095.00 36.50
APPLE 418 QUADRA 605 CMPTR PERSONAL 94-10-10 C0023972 XB43502K2D 1 2,393.28 79.78
APPLE 418 QUADRA 605 COMPUTER PERSONAL 94-10-10 C0029273 XB43500D 1 2,393.28 79.78
SPORTSTER NA 1,172 CMPTR. PERSONAL 94-10-19 C0023974 N/A 1 2,295.85 276.61
APPLE 3125 M2332 POWERBOOK 94-10-20 C0023991 PC433HB823 1 6,127.52 204.25
APPLE 3125 M2332 POWERBOOK 94-20-20 C0023992 PC438HR023 1 6,127.52 20.25
INTEL 486 DXL 486 COMPUTER CO023995 1 4,1588 138.20
APPLE 7100 PERSONAL COMPUTER C0023996 1 4,912.14 163.74
APPLE 7100 PERSONAL COMPUTER C0023997 1 4,912.14 163.74
COMPAQ PROLINEA FOR PAYROLL C0024046 1 2,336.54 0.00
APPLE POWERBOOK 520 FOR FINANCE C0024047 1 3,089.08 0.00
APPLE POWERBOOK 520 FOR FINANCE C0024048 1 3,029.08 0.00
APPLE 7100 PERSONAL COMPUTER C0024049 FC4410CR3YK 1 4,420.45 0.00
APPLE 7100 PERSONAL COMPUTER C0024050 FC4410DW3YK 1 4,420.46 0.00
2500 PENTIUM 90 MHZ FOR STODDARD C0024111 1 4,600.62 0.00
2500 PENTIUM 90 MHZ FOR STODDARD C0024112 1 4,600.62 0.00
1932 POWERBOOK 123 C0024113 1 3,086.21 0.00
TEXTRONIX 7A18N SCOPE PN, DUAL 74-5-2 C0004026 B054254 2 531.20 525.89
TEXTRONIX 7A18N SCOPE PN, DUAL CH 74-5-2 C0004028 B054271 2 531.20 525.89
TEXTRONIX 7704 SCOPE GP, MF 75-9-22 C0004208 B143141 2 3,211.80 3,179.68
HP 6267B PWR SUPP. DC 75-9-1 C0004227 1512A02235 2 750.87 743.36
TEXTRONIX 475DM43 SCOPEPORTABLE 75-8-26 C0004280 252551 2 3,421.74 3,387.52
POWER DESIG TP325 POWER SUPPLY, TRIPLE 76-4-1 C0004357 602113 2 430.00 425.70
TEXTRONIX 7A26 SCOPE PN, DUAL CH 76-4-14 C000440 B129107 2 1,220.20 1,208.00
TEXTRONIX 7B80 SCOPE PN, TIME BASES 77-3-1 C0004649 B041473 2 794.74 786.79
TEXTRONIX 7B53A SCOPE PN DUAL 77-7-1 C0004879 B124703 2 1,039.80 1,029.40
HP 6002A PWR SUPP. DC 78-5-28 C0005290 1802A01049 2 1,251.43 1,238.92
TEXTRONIX 7B53A SCOPE PN, TIME BASE 78-5-30 C0005319 B189223 2 1,134.91 1,121.56
KROHN-HITE 3202R FILTER, TUNABLE 78-6-13 C0005370 3396 2 1,071.23 1,060.62
HP 3964A RCRDR INSTRUMENT 78-7-15 C0005438 1821A0701 2 7,116.18 7,045.02
TEXTRONIX 7A26 SCOPE PN DUAL CH 78-7-28 C0005452 B189524 2 1,412.59 1,394.47
TEXTRONIX 7B85 SCOPE PN TIME BASE 78-12-13 C0005598 B064025 2 1,093.22 1,062.29
SD TIME CODE READER 8132 C0005825 2
HP 436A METER, POWER, MW 19-10-5 C0006519 1930A05680 2 2,350.21 2,326.71
HP 8656A GEN SIGNAL 82-1-29 C0007157 2142A01924 2 7,203.40 7,203.40
HP 197B CAMERA SCOPE 83-3-15 C0007573 1905A04498 2 1,544.41 1,544.41
HP 8970A METER NOISE 83-4-12 C0007647 2221A01029 2 9,948.28 9,948.28
TEXTRONIX 485 SCOPE PORTABLE 83-5-4 C0007725 B191464 2 8,196.25 8,196.25
HP 5335A COUNTER ELEC C0007925 2321A04740 2 4,081.58 4,081.58
BSG PROJ 5110 MODULE AMPL BIAS C00116025 2321A04740 2 4,081.58 4,081.58
TEXTRONIX 2445 SCOPE PORTABLE C0011887 2 2
TEXTRONIX 2465CTS O'SCOPE SNB052750 C0012315 BCG0280 2 4,140.80 4,140.80
HP 160G LOGIC ANALYZER C0012426 2 15,070.21 15,070.21
HP 6024A POWER SUPPLY C0012969 2526A04501 2 1,335.36 1,335.16
IBM 6180-002 CMP FTR PLOTTER CLR 87-2-6 C0013809 11448 2
HP 3335A GEN SYNTHESIZER 87-2-24 C0014059 2516A04099 2 11,401.92 11,401.92
HP 5385A COUNTER ELEC 91-8-9 C0017628 2710A04821 2 2,054,05 2,016.58
HP HP 6632A PWR SUPP. DC 91-5-14 C0019030 2708A00130 2 1,244.82 932.48
FLUKE MFG 6080A GEN SIGNAL 91-7-19 C0019122 53115701 2 21,309.88 17,261.02
HP 6632A PWR SUPP DC 91-6-14 C0019126 3002A0439 2 1,760.15 1,439.11
HP 6632A PWR SUPP DC 91-6-14 C0019128 3002A0424 2 1,760.15 1,439.11
HP 5087A AMPL DISTR 93-3-10 C0021441 2208A0474 2 2,929.02 1,630.49
IFR SYSTEMS COM120A MONITOR COMMUNCATION 93-3-16 C0021580 485001182 2 12,870.00 7,207.20
IFR SYSTEMS 120A RECEIVER COMM 93-7-23 C0021984 485001135 2 13,949.08 6,587.07
NCA PERIPHERAL CMPTR DRIVE DISK 93-6-2 C0021985 G93657270 2 1,526.33 752.99
MXT
NCA PERIPHERAL CMPTR DRIVE DISK 93-6-2 C021986 G93657272 2 1,526.32 752.99
MXT
II INC 2PB36A-006 CCADSP 93-6-18 C0022048 97273 2 1,618.34 809.14
BURR-BROWN 2PB1007-001 CONVERTER A/D 93-6-18 C0022049 98777 2 6,489.39 3,244,79
NCA 4542NT CMPTR DRIVE DISK 94-3-11 C0022150 G93660752 2 1,406.17 634.32
DIGITAL EQ 400090 SYSTEM VAC 94-3-1 C0022191 930169345 2 30,255.88 12,171.25
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022197 2 1,294.67 584.04
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022198 2 1,294.67 584.04
STANFORD RE SR620 COUNTER UNIVERSAL 93-12-17 C0023118 1383 2 4,871.25 1,623.76
STANFORD RE FS700 FREQ STD LORAN 93-12-17 C0023119 405 2 5,737.25 1,912.42
</TABLE>
Page 4 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOW PHASE NOISE OSCL C0023196 2 3,412.95 1,023.75
PANASONIC KX-B8520 PRINT BOARD ELECTRONIC 9-4-11 C0023375 0733221A07 2 1,417.56 383.36
COMPBINET CB-400 BRIDGE ETHERNET 94-3-24 C0023433 A3-3127 2 2,319.91 611.65
NOISE COLM UFX7109 GEN NOISE PROGRAMMABLE 94-4-8 C0023434 2022 2 8,478.50 1,978.22
4MM TAPE DRIVE C0023551 2 1,369.96 319.66
HP 8560E ANAL SPECTRUM 94-7-26 C0023814 3425A01019 2 27,199.93 1,621.32
AUTOCAD SYSTEM C0023823 2 6,392.16 852.29
17 MONITOR C0023824 2 1,515.50 202.07
LASER PRINTER C0023825 2 4,912.02 654.93
2GB HD SCSI-II CABLE C0023963 2 1,216.73 81.12
4.2 GB MUL C0023966 2 3,196.77 0.00
4.2 GB MUL C0023967 2 3,196.77 0.00
4.2 GB MUL C0023963 2 3,196.77 0.00
CSC 1924EXT DRIVE DISK SCSI 94-10-10 C0023975 828315 2 1,093.30 36.44
CSC 1924EXT DRIVE DISK SCSI 94-10-10 C0023976 829405 2 1,093.30 36.44
RADIUS C0507 DRIVE DISK SCSI 94-10-10 C0023977 S91428A1E2 2 1,093.30 36.44
2 GB SCSI C0023978 2 1,093.30 36.44
2 GB SCSI C0023979 2 1,093.30 36.44
2 GB SCSI C0023980 2 1,093.30 36.44
2 GB SCSI C0023981 2 1,093.30 36.44
2 GB SCSI C0023982 2 1,093.30 36.44
2 GB SCSI C0023983 2 1,093.30 36.44
CSC 1924EXT DRIVE DISK SCSI C0023985 2 1,093.30 36.44
2 GB SCSI C0023986 2 1,093.30 36.44
19-2 GB HD & 13 TERMINATORS C0023987 2 1,093.30 36.44
2 GB SCSI C0023988 2 1,093.30 36.44
XYPLEX SERVER C0023999 2 2,209.19 0.00
SUN WORK STATION C0024096 2 7,035.93 0.00
PHONEMAID SIGNAL GENERATORS Self-Corrected 2 72,950.00 0.00
(2)
POWER DESIGN 3610ORF PWR SUPPLY DC 70-9-1 C0001464 810016 3
TEXTRONIX 2335 SCOPE PORTABLE 83-3-18 C0007583 8012536 3 2,715.75 2,715.79
TEXTRONIX 495P ANAL SPECT 83-6-23 C0007792 B010488 3 30,354.49 30,854.49
HP 6653A POWER SUPPLY 94-4-7 C0022979 3347A01177 3 3,076.98 717.57
HP 6653A POWER SUPPLY 94-4-7 C0022980 3347A01585 3 2,976.63 694.54
HP 6653A POWER SUPPLY 94-4-7 C0022981 3347A01182 3 2,976.62 694.56
HP 6653A POWER SUPPLY 94-4-15 C0022982 3345A00408 3 1,828.07 457.49
HP 6543A POWER SUPPLY 94-3-12 C0022983 3218400175 3 4,601.51 1,227.07
HP 6543A POWER SUPPLY 94-3-12 C0022984 3218A00139 3 1,828.07 4487.49
HP 6543A POWER SUPPLY 94-3-12 C0022985 3218A00172 3 1,828.07 487.49
HP 6543A POWER SUPPLY 94-3-12 C0022986 3218A00176 3 1,828.08 487.49
TEXTRONIX TA5475 SCOPE PORTABLE 94-3-22 C0023312 B011081 3 2,614.04 697.08
TEXTRONIX 2232 SCOPE PORTABLE 94-3-22 C0023314 B032127 3 6,748.34 1,789.56
HP 856B8 ANALSPECT 94-3-1 C0023405 2601A82551 3 19,903.88 4,641.24
HP 8482B SENSOR POWER 94-3-1 C0023406 2149A02159 3 18,943.75 5,681.16
HP 8657B GEN SIGNAL 94-3-12 C0023407 3133002203 3 16,957.72 4,522.66
HP 437B METER POWER MW 94-3-15 C0023408 3125U10460 3 2,898.80 869.64
HP 5385A COUNTER ELEC 94-6-6 C0023473 3242A07945 3 2,992.81 988.08
POWER SUPPLY 94-6-6 C0023574 3 4,001.51 613.53
HP 5385A COUNTER ELEC 94-5-27 C00235704 2730406273 3 2,130.88 355.15
DRIVE CONTROL C0023784 3 5,358.38 893.07
DSP32C BOARD C0023874 3 3,085.13 0.00
1924EXT DRIVE DISK SCSI C0023984 87898 3 1,093.30 36.44
MACRONI SIGNAL GENERATOR C0024035 3 24,023.92 0.00
RUGGED COMPUTERS C0024109 3 4,054.25 135.14
RUGGED COMPUTERS C0024110 3 3,907.83 781.57
IBM SEL III TYPEWRITER C0006472 4555133 4
APPLE PRO 630 LASERWRITER PRO 630 C0022148 F132614H108 4 2,544.57 1,147.89
HP FAX 950 FAX-EXPENSED C0023902 IPA4403940 4
HP 451MX LASERJET PRINTER C0024045 USGD517900 4 4,364.48 0.00
HP 8591E ANALSPECT PORTABLE 94-7-21 C0023831 3412A0597 5 12,052.43 1,740.32
SUN MYCROSY X8522A STORAGE PACKAGE 94-9-30 C0023954 43804220 5 1,254.29 83.62
SUN MYCROSY X569A DRIVE DISK 420B 94-9-30 C0023955 43603607 5 2,146.95 209.36
SUN MYCROSY X569A DRIVE DISK 4.2GB 94-9-30 C0023956 43631603 5 3,147.80 209.86
SUN MYCROSY X569A DRIVE DISK 4.2GB 94-930 C0023957 43603341 5 3,147.82 2209.86
XYPLEX SERVER C0023958 5 2,288.19 0.00
1 SUN 4.2GB DISK PACKS C0024122 5 2,857.20 0.00
1 SUN 4.2GB DISK PACKS C0024123 5 2,857.20 0.00
1 SUN 4.2GB DISK PACKS C0024124 5 2,857.80 0.00
1 SUN 4.2GB DISK PACKS C0024125 5 2,857.80 0.00
</TABLE>
Page 5 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEP
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 SUN 4.2GB DISK PACKS C0024126 5 2,257.20 0.00
XPLEX SERVER C0024127 5 2,972.73 0.00
XPLEX SERVER C0024128 5 2,972.73 0.00
ENGINEE XB024-10 PLATFORM LIFTER C0023120 62834-02 6 1,254.08 376.22
ENGINEE XB024-10 PLATFORM LIFTER C0023121 62818-01 6 1,254.08 376.22
ENGINEE XB024-10 PLATFROM TRUCK/LIFT C0023160 63956.02 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023161 67966-03 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023162 63966-04 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023163 63956-01 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023164 63956-05 6 1,503.24 400.87
WORK BENCHES C0023539 6 4,799.63 959.93
WIRE SHELF CARTS C0023540 6 1,679.62 3335.93
FLOOR SCALE C0024036 6 2,803.68 0.00
INSTAPAK MODEL 750 PACKGING C0024129 6 3197.00 0.00
STOCKROOM SECURITY ENCODERS C0022850
HP 3100 C0023841 37,253.97 2,423.08
</TABLE>
* Does Not Include HP3100 Computer. Disposition of this unit is not yet
decided.
** Does not include rack units in cage (warehousing units) which may or may
not be removed when building is vacated. Disposition of this unit is not
yet decided.
Page 6 of 10
<PAGE>
CORSAIR 1995 FIXED ASSET PURCHASES THROUGH 6/30/95
<TABLE>
<CAPTION>
====================================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Computer Equipment (1600)
- -------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Acropolis 950606002, 950606001, 6017 AS171-42801 SCSI disk pedestal w/kit 3954 $ 10,207.98 5/26/95
- ------------------------------------------------------------------------------------------------------------------------------------
Arcom 3C509B 3COM Ethink III 16bit 20 pack 3959 $ 1,643.19 6/8/95
- ------------------------------------------------------------------------------------------------------------------------------------
Arcom 000655-0 USROBO Total Control 6Slot Hub 4289 $ 15,550.58 6/26/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aroma Tech - SNM30254569 M586-90/100 SIS 586 90/100MHz 3477 $ 3,145.22 4/11/95
- ------------------------------------------------------------------------------------------------------------------------------------
Cabletron SEHI-24 Stack ethernet hub intel 24p 3680 $ 6,716.41 5/5/95
- ------------------------------------------------------------------------------------------------------------------------------------
Cabletron SEH-24 Stackable ethernet hub-24 3680 $ 3,029.47 5/9/95
- ------------------------------------------------------------------------------------------------------------------------------------
Cabletron SEHI-24 Stack ethernet hub intel 24p 4220 $ 2,693.75 5/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Cablerock CR5-85 Spare 5 System w/kit 3335 $ 5,732.92 3/21/95
- ------------------------------------------------------------------------------------------------------------------------------------
Central Design - S519F01YC SSFX185322P46 17"C 32MB 1GB TGX 85 3972 $ 8,640.63 5/22/95
- ------------------------------------------------------------------------------------------------------------------------------------
Central Design S20FX16132P46 17"C TGX 61 32MB 1GB 3735 $ 35,140.10 6/8/95
- ------------------------------------------------------------------------------------------------------------------------------------
Central Design - S513F04, S513F04WD, S4C7032P44 S4 70 MHz 20" c32mb535 3792 $ 31,485.41 6/16/95
S513F04KY, S513F031W
- ------------------------------------------------------------------------------------------------------------------------------------
Central Design - 6016869 EXAXEXB-8505 8MM Tape Drive 3869 $ 1,472.89 6/23/95
- ------------------------------------------------------------------------------------------------------------------------------------
Central Design model 70,110 CD-SS4-70, Sun 1, CD-SS5-85, Sun 5 4182 $ 21,259.88 6/28/95
- ------------------------------------------------------------------------------------------------------------------------------------
Ceram 64MB Simm for SS20 3769 $ 7,902.00 5/9/95
- ------------------------------------------------------------------------------------------------------------------------------------
Computerland HPCD-E2039 Laserjet 4M plus toner 3388 $ 2,089.24 3/29/95
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7 of 10
<PAGE>
CORSAIR 1995 FIXED ASSET PURCHASES THROUGH 6/30/95
<TABLE>
<CAPTION>
====================================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Computer Equipment (1600) cont'd
- --------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland 755-C IBM Thinkpad 3603 $ 3,657.37 4/25/95
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland - XB5160N93YX APPL-A0848 PowerMac 8100/110C 16MB 2GB CD 3663 $ 6,768.51 5/2/95
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland - FC517361-446, APPL-A3642 Apple PowerMac 7100/80 16/700/cd 3975 $ 25,581.75 5/12/95
FC5173K2446,
FC5173P0446,FC5173LM446,
C5173KB446, FC51740T44H,
JPGK14205
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland - FC512HJ223L APPL-A0864 Powerbook 280C 4/320 w/monit. & pack 3740 4,758.19 5/12/95
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland - TF513DDT1Y5 APPL-H1485 Powerbook duo dock w/HD 3846 $ 825.40 5/16/95
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland 400012544503291, Patriot 2-Laptop 486/dx 3846 $ 5,314.75 5/26/95
40003244473172
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland RADI-C0504 Two page display / 20GS 3892 $ 3,523.17 6/23/95
DCL5090A0179
DCL5080A0048
DCL5090A0133
DCL5090A0173
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland King-B2320 20 MB module P/PB Duo 250 3975 $ 838.75 6/8/95
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland XB52200WT5PQ, APPL-A3642 PowerMac w/keyboard 3975 $ 33,743.60 6/12/95
XB5200WU5P0, XB5212EK5P0,
XB5212EX5P0, SB5212BJ5P0
- -----------------------------------------------------------------------------------------------------------------------------------
Computerland APPL-A4273 (5) PowerMacs w/monit. & keybds. 4080 $ 14,873.82 6/21/95
- -----------------------------------------------------------------------------------------------------------------------------------
DEL 90C/XPS Dimension Pentium-Mini tower base 3797 $ 3,245.41 6/16/95
- -----------------------------------------------------------------------------------------------------------------------------------
ENS - SN25095490 CSCO-2501 Router package w/software 3033 $ 4,023.81 1/25/95
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 8 of 10
<PAGE>
CORSAIR 1995 FIXED ASSET PURCHASES THROUGH 6/30/95
<TABLE>
<CAPTION>
====================================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Computer Equipment (1600) cont'd
- --------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ENS USROB-000826-0 Analog modem w/fax 3033 $ 6,021.31 1/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
ENS - SN50004214 CSCO-7010 Cisco 7010 router package 3445 $ 27,202.20 4/3/95
- ------------------------------------------------------------------------------------------------------------------------------------
HDS Pentium 586 computer system 3034 $ 4,281.29 1/5/95
- ------------------------------------------------------------------------------------------------------------------------------------
HDS Pentium 586 computer system 3034 $ 4,281.29 1/10/95
- ------------------------------------------------------------------------------------------------------------------------------------
HDS HD Victoria System 3850 $ 6,249.50 5/20/95
- ------------------------------------------------------------------------------------------------------------------------------------
NCA - SN454505410766, 2100S Quantum Empire 2100s hard disk 3311 $ 1,960.41 3/9/95
SNBDOE5021LNY, SN 4360015888,
SN466504640442
- ------------------------------------------------------------------------------------------------------------------------------------
NCA EXT 4-868 HP 35480 3311 $ 1,059.77 3/16/95
- ------------------------------------------------------------------------------------------------------------------------------------
Network Assoc. Asante 12 port ethernet hub 3111 $ 1,179.90 3/21/95
- ------------------------------------------------------------------------------------------------------------------------------------
PDC X827A/S-XBT-4TS 4MM Autoloader 4006 $ 3,831.20 6/13/95
- ------------------------------------------------------------------------------------------------------------------------------------
Seque Sys. 90 Pentium System 4119 $ 3,755.00 6/23/95
- ------------------------------------------------------------------------------------------------------------------------------------
TEL-LAN MX-1600-002 Multi-access remote server 3042 $ 7,028.95 1/24/95
- ------------------------------------------------------------------------------------------------------------------------------------
UUNET Tech. - 25130134-3092 Cisco-2501 Router & CSU/DSU 3721 $ 1,922.00 5/4/95
- ------------------------------------------------------------------------------------------------------------------------------------
Vanstar - SN SFC439MT61XN APPL-A2805 Powerbook 520 4/160 3044 $ 2,970.76 1/5/95
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $335,607.58
===========
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 9 of 10
<PAGE>
<TABLE>
<CAPTION>
CORSAIR 1995 FIXED ASSET PURCHASERS THROUGH 6/30/95
====================================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR CHECK # PURCHASE PRICE PURCHASE DATE
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Furniture Equipment (1640)
- --------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/rack kit 4069 $ 2,507.86 6/14/95
- ------------------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/rack kits 3783 $ 5,794.24 6/16/95
- ------------------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/kit 41277 $ 3,090.05 6/21/95
- ------------------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/rack kit 3891 $ 8,336.62 6/23/95
- ------------------------------------------------------------------------------------------------------------------------------------
Art & Display Co. 1531 Legend kit w/LPCO3 capsule counter 3773 $ 4,595.54 6/15/95
- ------------------------------------------------------------------------------------------------------------------------------------
Audio Graphic Sys. B 70x70 MW DALITE 3960 $ 118.53 5/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Audio Graphic Sys. BB44E-5 Bretford big base 44" cart 3960 $ 210.12 6/13/95
- ------------------------------------------------------------------------------------------------------------------------------------
Cabletron EPIM-X Enet port int. mod. dual in. w/kit 3791 $ 373.90 5/19/95
- ------------------------------------------------------------------------------------------------------------------------------------
Cabletron 9300044-15 Assy. Cbl, XCVR, 802.3 28 AWG 3791 $ 282.74 5/23/95
- ------------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus Furnish. 7488 Paramount desk chair; #61 pewter 4181 $ 318.94 6/1/95
- ------------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. 7488 Office master chair 3418 $ 8,510.00 4/28/95
- ------------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. 15WAL-BL VERSA Stacking chair 3470 $ 13,410.00 5/9/95
- ------------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. 7488 Paramount desk chairs: #61 pewter 3693 $ 27,849.16 6/6/95
- ------------------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. M211-1142 23 Office chairs; MB Sync, pneu, poly 4243 $ 8,624.31 6/26/95
shell
- ------------------------------------------------------------------------------------------------------------------------------------
Lightwave Comm. 5000 Serverswitch w/cables 4194 $ 6,583.50 6/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Lindsay-Ferrari Tackable acoust. panels, worksurfaces 3576 $ 64,323.00 5/17/95
- ------------------------------------------------------------------------------------------------------------------------------------
Lindsay-Ferrari Lindelve File-lateral, rec hdwd., 2drwr 3854 $ 1,082.89 5/23/95
- ------------------------------------------------------------------------------------------------------------------------------------
Perimeter Install. of card render on lobby door 4136 $ 595.00 6/29/95
- ------------------------------------------------------------------------------------------------------------------------------------
Perimeter Install. of sec. system 4156 $ 34,555.00 6/29/95
- ------------------------------------------------------------------------------------------------------------------------------------
Pure Valley Water HTT-45RO Hydrotech w/tank & dispenser 4011 $ 1,403.61 6/27/95
- ------------------------------------------------------------------------------------------------------------------------------------
Voice Pro SRX Phone system - Deliv. pymt. 4028 $ 17,443.06 6/29/95
- ------------------------------------------------------------------------------------------------------------------------------------
VoicePro SRX/VMX 200S Telephone, call processing system 3426 $ 17,433.06 5/1/95
- ------------------------------------------------------------------------------------------------------------------------------------
VoicePro SRX Phone system - Deliv. pymt. 4028 $ 52,042.79 6/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
VoicePro SRX Phone system -n Deliv. pymt. 4028 $ 12,887.93 6/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $292,371.85
====================================================================================================================================
</TABLE>
Page 10 of 10
<PAGE>
SCHEDULE 3
CONDITIONS PRECEDENT
PART I:
- ------
At the time of execution and delivery of this Agreement, there shall also have
been duly executed and delivered to Lender:
(a) The Warrant to purchase the aggregate number of shares set forth in
Exhibit C hereto;
(b) A Sublessor's Waiver and Consent, executed by Syntex Corp., in form
and substance reasonably acceptable to Lender;
(c) A favorable opinion of counsel for Borrower, dated as of the closing
date, in the form attached hereto as Exhibit D;
---------
(d) Copies, certified by the Secretary, Assistant Secretary or Chief
Financial Officer of Borrower as of the closing date of Borrower's
charter documents and bylaws and of all documents evidencing corporate
action taken by Borrower authorizing the execution, delivery and
performance of the Operative Documents to which Borrower is a party,
in form and substance satisfactory to Lender and its counsel;
(e) Good standing certificate from Borrower's state of incorporation and
the state in which Borrower's principal place of business is located,
together with certificates of the applicable governmental authorities
that Borrower is in compliance with the franchise tax laws of each
such state, each dated as of a recent date;
(f) Evidence of the insurance coverage required by Section 6.01(d) of this
---------------
Agreement;
(g) All necessary consents of shareholders and other third parties with
respect to the execution, delivery and performance of this Agreement,
the Warrant, the Note and the other Operative Documents; and
(h) Form UCC-1 Financing Statements, duly executed by Borrower, or other
documents, and Borrower shall have taken such actions, if any, as
Lender shall reasonably determine are necessary or desirable to
perfect and protect its security interest in the Collateral;
(i) Grants of Security Interest in Intellectual Property in the forms
provided by Lender;
28
<PAGE>
(j) Notices of Security Interest to Depository Banks in the forms provided
by Lender;
and
(i) All other documents as Lender shall have reasonably requested.
PART II
- -------
On or prior to the Funding Date of the Loan, each of the items set forth in
Part I of this Schedule 3 shall have been delivered to Lender and the following
- -------------------------
conditions shall have been satisfied or waived by Lender:
(a) Borrower shall have provided to Lender such documents, instruments and
agreements as Lender shall reasonably request to evidence the
perfection and priority of the security interests granted to Lender
pursuant to Article V;
---------
(b) No Event of Default or Default shall have occurred and be continuing;
(c) Borrower shall have duly executed and delivered to Lender a Note
prepared by Lender with respect to the Loan;
(d) In Lender's sole discretion, there shall not have occurred any
material adverse change in the general affairs, management, results of
operations, condition (financial or otherwise) or prospects of
Borrower, where or not arising from transactions in the ordinary
course of business, and there shall not have occurred since the date
first written on the cover page of this Agreement any material adverse
deviation by Borrower from the Fiscal 1996 Operating Plan of Borrower
presented to Lender;
(e) The representations and warranties contained in this Agreement and the
other Operative Documents to which Borrower is a party shall be true
and correct in all material respects as if made on such Funding Date;
(f) Each of the Operative Documents remains in full force and effect;
(g) The Funding Date of the requested Loan shall not be later than the
Commitment Termination Date; and
(h) Lender shall have received the Note, duly executed by Borrower.
29
<PAGE>
EXHIBIT A
SECURED PROMISSORY NOTE
$2,000,000 Dated: July 31, 1996
FOR VALUE RECEIVED, the undersigned, CORSAIR COMMUNICATIONS, INC.
("Borrower"), a Delaware corporation, HEREBY PROMISES TO PAY to the order of
--------
COMDISCO, INC., a Delaware corporation ("Lender") the principal amount of Two
------
Million Dollars ($2,000,000) or such lesser amount as shall equal the aggregate
outstanding principal balance of the Loan made by Lender to Borrower pursuant to
the Loan and Security Agreement referred to below (the "Loan Agreement"), and to
--------------
pay all other amounts due with respect to the Loan on the dates and in the
amounts set forth in the Loan Agreement.
The principal amount of this Note shall be payable in 36 consecutive monthly
installments of 2.778% of the original principal amount of this Note per month
on the last day of each calendar month commencing on February 28, 1997. All
unpaid principal and interest shall, in any event, be payable no later than
January 31, 2000.
Interest on the unpaid principal amount of this Note from the date of this
Note until such principal amount is paid in full shall accrue at the Loan Rate
or, if applicable, the Default Rate. The Loan Rate for this Note is 14.55% per
annum (based on a year of 360 days and actual days elapsed). All accrued
interest shall be payable on the last day of each calendar month, commencing
July 31, 1996.
Whenever any payment due hereunder shall fall on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees, as
the case may be.
Principal, interest and all other amounts due with respect to the Loan, are
payable in lawful money of the United States of America to Lender as follows:
COMDISCO, INC., P.O. BOX 91744, Chicago, Illinois 60693, in immediately
available funds. The Loan made by Lender to Borrower and the interest rate
applicable thereto, and all payments made with respect thereto, shall be
recorded by Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Note.
This Note is the Note referred to in, and is entitled to the benefits of, the
Loan and Security Agreement, dated as of JulyE31, 1996, between Borrower and
Lender (the "Loan Agreement"). The Loan Agreement, among other things
(a) provides for the making of a secured Loan by Lender to Borrower from time to
time in an aggregate principal amount not to exceed at any time outstanding the
amount first above mentioned, the indebtedness of Borrower resulting from the
Loan being evidenced by a Note; and (b) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
Prior to the first anniversary of the date hereof, there shall be no
prepayment of the Loan evidenced by this Note in whole or in part. Borrower
may, at its option, at any time on or after the first anniversary of the date
hereof, prepay the Loan evidenced by this Note, either in whole or from time to
time in any part of the principal amount thereof equal to $500,000
30
<PAGE>
or more, at a prepayment price equal to the principal amount of the Loan so to
be prepaid, plus interest accrued thereon through and including the date of such
prepayment, plus the Make-Whole Premium (as defined in the Loan Agreement). If
the maturity of this Note and the Loan evidenced thereby is accelerated under
the Loan Agreement, Borrower shall pay to Lender, in addition to principal,
interest and all other amounts due with respect to this Note, as liquidated
damages for loss of Lender's benefit of the bargain and not as a penalty, an
amount equal to the Make-Whole Premium (as defined in the Loan Agreement).
This Note and the obligation of Borrower to repay the unpaid principal amount
of the Loan, interest on the Loan and all other amounts due Lender under the
Loan Agreement is secured under the Loan Agreement.
Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower's obligations hereunder not
performed when due. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one
of its officers thereunto duly authorized on the date hereof.
CORSAIR COMMUNICATIONS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
31
<PAGE>
Sheet 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
CORSAIR COMMUNICATIONS
- --------------------------------------------------------------------------
SUBORDINATED PROMISSORY NOTE
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loan Amount: 2,000,000
===========
- --------------------------------------------------------------------------
Interest rate: 14.550%
===========
- --------------------------------------------------------------------------
Payment Amount see below
===========
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
MENT NUM DATE PRINCIPAL INTEREST PAYMENT BALANCE
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
2,000,000.00
- --------------------------------------------------------------------------
0 07/31/96 2,000,000.00
- --------------------------------------------------------------------------
1 08/31/96 0.00 24,250.00 24,250.00 2,000,000.00
- --------------------------------------------------------------------------
2 09/30/96 0.00 24,250.00 24,250.00 2,000,000.00
- --------------------------------------------------------------------------
3 10/31/96 0.00 24,250.00 24,250.00 2,000,000.00
- --------------------------------------------------------------------------
4 11/30/96 0.00 24,250.00 24,250.00 2,000,000.00
- --------------------------------------------------------------------------
5 12/31/96 0.00 24,250.00 24,250.00 2,000,000.00
- --------------------------------------------------------------------------
6 01/31/97 0.00 24,250.00 24,250.00 2,000,000.00
- --------------------------------------------------------------------------
7 02/28/97 55,556.00 24,250.00 79,806.00 1,944,444.00
- --------------------------------------------------------------------------
8 03/31/97 55,556.00 23,576.38 79,132.38 1,888,888.00
- --------------------------------------------------------------------------
9 04/30/97 55,556.00 22,902.77 78,458.77 1,833,332.00
- --------------------------------------------------------------------------
10 05/31/97 55,556.00 22,229.15 77,785.15 1,777,776.00
- --------------------------------------------------------------------------
11 06/30/97 55,556.00 21,555.53 77,111.53 1,722,220.00
- --------------------------------------------------------------------------
12 07/31/97 55,556.00 20,881.92 76,437.92 1,666,664.00
- --------------------------------------------------------------------------
13 08/31/97 55,556.00 20,208.30 75,764.30 1,611,108.00
- --------------------------------------------------------------------------
14 09/30/97 55,556.00 19,534.68 75,090.68 1,555,552.00
- --------------------------------------------------------------------------
15 10/31/97 55,556.00 18,861.07 74,417.07 1,499,996.00
- --------------------------------------------------------------------------
16 11/30/97 55,556.00 18,187.45 73,743.45 1,444,440.00
- --------------------------------------------------------------------------
17 12/31/97 55,556.00 17,513.84 73,069.84 1,388,884.00
- --------------------------------------------------------------------------
18 01/31/98 55,556.00 16,840.22 72,396.22 1,333,328.00
- --------------------------------------------------------------------------
19 02/28/98 55,556.00 16,166.60 71,722.60 1,277,772.00
- --------------------------------------------------------------------------
20 03/31/98 55,556.00 15,492.99 71,048.99 1,222,216.00
- --------------------------------------------------------------------------
21 04/30/98 55,556.00 14,819.37 70,375.37 1,166,660.00
- --------------------------------------------------------------------------
22 05/31/98 55,556.00 14,145.75 69,701.75 1,111,104.00
- --------------------------------------------------------------------------
23 06/30/98 55,556.00 13,472.14 69,028.14 1,055,548.00
- --------------------------------------------------------------------------
24 07/31/98 55,556.00 12,798.52 68,354.52 999,992.00
- --------------------------------------------------------------------------
25 08/31/98 55,556.00 12,124.90 67,680.90 944,436.00
- --------------------------------------------------------------------------
26 09/30/98 55,556.00 11,451.29 67,007.29 888,880.00
- --------------------------------------------------------------------------
27 10/31/98 55,556.00 10,777.67 66,333.67 833,324.00
- --------------------------------------------------------------------------
28 11/30/98 55,556.00 10,104.05 65,660.05 777,768.00
- --------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
Sheet 1
<TABLE>
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
29 12/31/98 55,556.00 9,430.44 64,986.44 722,212.00
- --------------------------------------------------------------------------
30 01/31/99 55,556.00 8,756.82 64,312.82 666,656.00
- --------------------------------------------------------------------------
31 02/28/99 55,556.00 8,083.20 63,639.20 611,100.00
- --------------------------------------------------------------------------
32 03/31/99 55,556.00 7,409.59 62,965.59 555,544.00
- --------------------------------------------------------------------------
33 04/30/99 55,556.00 6,735.97 62,291.97 499,988.00
- --------------------------------------------------------------------------
34 05/31/99 55,556.00 6,062.35 61,618.35 444,432.00
- --------------------------------------------------------------------------
35 06/30/99 55,556.00 5,388.74 60,944.74 388,876.00
- --------------------------------------------------------------------------
36 07/31/99 55,556.00 4,715.12 60,271.12 333,320.00
- --------------------------------------------------------------------------
37 08/31/99 55,556.00 4,041.51 59,597.51 277,764.00
- --------------------------------------------------------------------------
38 09/30/99 55,556.00 3,367.89 58,923.89 222,208.00
- --------------------------------------------------------------------------
39 10/31/99 55,556.00 2,694.27 58,250.27 166,652.00
- --------------------------------------------------------------------------
40 11/30/99 55,556.00 2,020.66 57,576.66 111,096.00
- --------------------------------------------------------------------------
41 12/31/99 55,556.00 1,347.04 56,903.04 55,540.00
- --------------------------------------------------------------------------
42 01/31/00 55,540.00 673.42 56,213.42 0.00
- --------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
EXHIBIT B
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
COMDISCO, INC.
c/o Comdisco Ventures
3000 Sand Hill Road
Building I, Suite 290
Menlo Park, California 94025
Attn: Peggy Parker
________________________________________________________________________________
SUBLESSOR'S WAIVER AND CONSENT
THIS SUBLESSOR'S WAIVER AND CONSENT (this "Waiver"), dated as of July
31, 1996, is executed by and between SYNTEX (U.S.A.) Inc., a Delaware
Corporation ("Sublessor") and COMDISCO, INC. a Delaware corporation ("Lender").
RECITALS
--------
A. Sublessor and CORSAIR COMMUNICATIONS, INC. ("Tenant") are parties
to a Sublease Agreement, dated as of March 31, 1995 (together with any other
agreement between Sublessor and Tenant relating to the Premises, as defined
below, all as amended from time to time, to be referred to herein collectively
as the "Lease"), pursuant to which Sublessor has leased to Tenant a portion of
that certain real property commonly known as 3408 Hillview Avenue, Palo Alto,
California, and more particularly described in Exhibit A hereto (the
---------
"Premises").
B. Tenant and Lender intend to or have entered into a Loan and
Security Agreement dated as of JulyE31, 1996 (the "Loan Agreement") pursuant to
which Lender has agreed or will agree to make loans to Tenant from time to time
secured by certain assets (the "Assets") which will be located on the Premises.
The Assets consist of personal property, business equipment, inventory and
machinery which are now, or in the future may be, located upon and/or affixed to
the Premises.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Sublessor and Lender hereby agree as follows:
1. Waiver and Consent. Sublessor hereby does subordinate any
------------------
interest of Sublessor in the Assets to Lender's interests therein, whether
Sublessor's interest arises by common law, statute or consensually (under the
Lease or otherwise) and whether now in existence or hereafter created. This
subordination shall survive the termination of the Lease. Sublessor further
agrees that (a) neither the Assets nor any item thereof shall become part of or
otherwise be or become a fixture attached to, the Premises, notwithstanding the
manner of the Assets' annexation, the Assets' adaptability to the uses and
purposes for which the Premises are used, and the intentions of the party making
the annexation; (b) the Assets (or any item thereof) may be repossessed by
Lender; (c) in connection with such repossession or otherwise, Lender, and any
of its agents and employees, may enter upon the Premises for the purposes of
preparing for transport, disassembling, dismantling, loading and/or removing the
Assets (or any item thereof); and (d) the right of Lender to enter the Premises
and the other rights granted to Lender in this Waiver shall not terminate until
up to thirty (30) days after Lender receives written notice from Sublessor of
the termination of the Lease; provided, that if Lender exercises its rights
hereunder, for any such period after the termination of the Lease, Lender shall
pay to Sublessor a rental payment (at the last monthly rate payable by Tenant)
for the period from (a) the later of (i) receipt of notice of termination of the
Lease or (ii) the actual termination of the Lease, until (b) the date the Assets
are removed. Notwithstanding the foregoing, a representative of the Lender may
examine the assets to determine their value without assuming any liability for
rent hereunder so long as the examination takes place promptly after notice of
the termination of the Lease.
<PAGE>
2. Costs. Lender agrees to indemnify, defend, protect and hold the
-----
Sublessor harmless from any claim, cost, liability or expense which is asserted
against or incurred by Landlord which arises in connection with the exercise of
Lender's rights under clauses (b) or (c) of Paragraph 1 above.
3. Lease Defaults. Sublessor further agrees to provide Lender with
--------------
telephonic confirmation of any default or event of default under the Lease upon
inquiry by Lender.
4. Sublessor's Representations and Warranties. Sublessor hereby
------------------------------------------
warrants and represents to Lender that (a) Sublessor is the lessor under the
Lease; (b) there are no other agreements between the parties affecting or
relating to the Premises; (c) Sublessor has all requisite power and authority to
execute and deliver this Waiver and no consents from any third party are
required to do so; (d) no event of default (nor any event which with the passage
of time would constitute an event of default) has occurred under the Lease;
(e) there exists no litigation affecting title to the Premises or any adverse
claim with respect to the Premises of which Sublessor has received notice; and
(f) there is no condemnation proceeding pending with respect to any part of the
Premises, nor any threat thereof, of which the Sublessor has received notice.
5. Miscellaneous. This Waiver and all rights hereby granted to
-------------
Lender hereunder shall remain in effect so long as there are any obligations
owing by Tenant under the Loan Agreement or any present or future agreement
between Tenant and Lender which involves the Assets. All the terms and
provisions of this Waiver shall be binding on and inure to the benefit of the
respective successors and assigns of Sublessor and Lender. The rights and
benefits of this Waiver may be assigned or transferred by Lender or to third
parties who may become the lender, directly or indirectly, to Tenant. Lender
shall provide subsequent written notice to Sublessor and Tenant of the
assignment or transfer. Headings in this Waiver are for convenience of
reference only and are not part of the substance hereof. This Waiver shall be
governed by and construed in accordance with the laws of the State of
California.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, Sublessor and Lender have executed this Waiver as
of the date and year first written above.
SUBLESSOR:
SYNTEX (U.S.A.) INC.
By:___________________________
Name:_________________________
Title:________________________
LENDER:
COMDISCO, INC.
By:___________________________
Name:_________________________
Title:________________________
-3-
<PAGE>
EXHIBIT A
ALL THAT certain real property situate in the City of Palo Alto, County of
Santa Clara, State of California described as follows:
COMMENCING at the Northeasterly corner of Lot 5 of Tract #4781 entitled
"Stanford Industrial Park" as filed in the Office of the Recorder of Santa Clara
County on November 13, 1969 in Book 261 of maps at Pages 40 and 41. Said
Northeasterly corner lying on the Westerly line of Hillview Avenue (80 feet in
width); thence from said point of commencement along said Westerly line of
Hillview Avenue North 15degrees27'55" West 720.00 feet to the TRUE POINT OF
BEGINNING of the Parcel to be described; thence from said TRUE POINT OF
BEGINNING and leaving said Westerly line of Hillview Avenue South
72degrees32'05" West 685.00 feet to a point on the Easterly line of Parcel C as
said Parcel is shown upon that certain parcel map filed in the Office of the
Recorder of Santa Clara County on May 22, 1969 in Book 254 of Parcel Maps at
Page 1; thence along said Easterly line of Parcel C North 15degrees27'55" West
360.37 feet; thence leaving said Easterly line North 74degrees32'05" East 685.00
feet to a point on the aforementioned Westerly line of Hillview Avenue; thence
along said Westerly line South 15degrees27'55" East 360.37 feet to the TRUE
POINT OF BEGINNING.
CONTAINING 5.667 Acres of land more or less
EXCEPTING therefrom an easement in favor of the Purissima Hills County Water
District for water line purposes 5.00 feet in width being the Easterly 5.00 feet
of the above described parcel and being more fully described in Volume 7952 of
Official Records of Santa Clara County at Page 197.
EXHIBIT A
<PAGE>
State of California )
)
County of Santa Clara )
On July 30, 1996, before me, the undersigned, personally appeared
Theodore W. Fowlks, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted executed the instrument.
WITNESS my hand and official seal
[NOTARY SEAL]
Signature_______________________________(Seal)
State of ______________________ )
)
County of _____________________ )
On ____________________, 199__ before me, the undersigned, personally
appeared ________________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature_____________________ (Seal)
<PAGE>
EXHIBIT C
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-
ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv)
OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
CORSAIR COMMUNICATIONS
----------------------
WARRANT TO PURCHASE 75,000 SHARES
OF SERIES B PREFERRED STOCK
THIS CERTIFIES THAT, for value received, Comdisco, Inc. and its assignees
are entitled to subscribe for and purchase [an aggregate of 75,000] shares of
the fully paid and nonassessable Series B Preferred Stock (as adjusted pursuant
to Section 4 hereof the "Shares") of CORSAIR COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), subject to the provisions and upon the terms and
conditions hereinafter set forth; provided, however, that in the event that at
-------- -------
the time of exercise of this Warrant there are insufficient authorized shares of
the Company's Series B Preferred Stock to allow issuance of the Shares, then
this Warrant shall be exercisable for the same number of shares of the Company's
Common Stock. The price per Share at which this Warrant is exercisable shall be
the lower of (i) $4.43 or (ii) the price per share at which the next sale of
equity securities of Borrower is made (such price and such other price as shall
result, from time to time, from the adjustments specified in Section 4 hereof is
herein referred to as the "Warrant Price"). As used herein, (a) the term
"Series Preferred" shall mean the Company's presently authorized Series B
Preferred Stock, and any stock into or for which such Series B Preferred Stock
may hereafter be converted or exchanged, (b) the term "Date of Grant" shall mean
July 31, 1996, and (c) the term "Other Warrants" shall mean any other warrants
issued by the Company in connection with the transaction with respect to which
this Warrant was issued, and any warrant issued upon transfer or partial
exercise of this Warrant. The term "Warrant" as used herein shall be deemed to
include Other Warrants unless the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
----
in whole or in part, at any time and from time to time from the Date of Grant
through the later of (i) ten (10) years after the Date of Grant or (ii) five (5)
years after the closing of the Company's initial public offering of its Common
Stock effected pursuant to a Registration Statement on Form S-1 (or its
successor) filed under the Securities Act of 1933, as amended (the "Act").
2 Method of Exercise; Payment; Issuance of New Warrant. Subject to
----------------------------------------------------
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed) at the principal office of the
<PAGE>
Company and by the payment to the Company, by certified or bank check, or by
wire transfer to an account designated by the Company (a "Wire Transfer") of an
amount equal to the then applicable Warrant Price multiplied by the number of
Shares then being purchased, or (b) exercise of the right provided for in
Section 10.3 hereof. The person or persons in whose name(s) any certificate(s)
representing shares of Series Preferred shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be delivered to
the holder hereof as soon as possible and in any event within thirty (30) days
after such exercise and, unless this Warrant has been fully exercised or
expired, a new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof as soon as possible and in any event within such
thirty-day period.
3. Stock Fully Paid: Reservation of Shares. All Shares that may be
---------------------------------------
issued upon the exercise of the rights represented by this Warrant, upon
issuance pursuant to the terms and conditions herein and upon payment of the
Warrant Price multiplied by the number of shares to be issued either in cash or
pursuant to the terms of Section 10.3 hereof, will be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The Company agrees that prior to December 31, 1996, it will take
such actions as are necessary, including obtaining stockholder consent, to
authorize the issuance of a sufficient number of shares of Series B Preferred
Stock to allow the full exercise of this Warrant. During the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized, and reserved for the purpose of the issue upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Series Preferred or Common Stock to provide for the exercise of
the rights represented by this Warrant and, if applicable, a sufficient number
of shares of its Common Stock to provide for the conversion of the Series
Preferred into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification or
--------------------------
change of securities of the class issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in of
any merger of the Company with or into another corporation (other than a merger
with another corporation in which the Company is the acquiring and the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall duly
execute and deliver to the holder of this Warrant a new Warrant (in form and
substance reasonably satisfactory to the holder of this Warrant), so that the
holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the shares of Series Preferred theretofore issuable
upon exercise
<PAGE>
of this Warrant, the kind and amount of shares of stock, other securities, money
and property receivable upon such reclassification, change or merger by a holder
of the number of shares of Series Preferred then purchasable under this Warrant.
Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4 and, in the case of a new Warrant issuable after conversion of the authorized
shares of the Series Preferred into shares of Common Stock or after the
amendment of the terms of the antidilution protection of the Series Preferred,
shall provide for antidilution protection that shall be as nearly equivalent as
may be practicable to the antidilution provisions applicable to the Series
Preferred on the Date of Grant. The provisions of this subparagraph (a) shall
similarly apply to successive reclassifications, changes, mergers and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
---------------------------------------
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution
specifically provided for in Sections 4(a) and 4(b)), of Series Preferred, then
the Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of shares of Series Preferred outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of Series Preferred outstanding immediately after such dividend
or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price pursuant to Sections 4.01(b) or 4.01(c), the number of Shares of
Series Preferred purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of Shares purchasable
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately prior to such
adjustment and the denominator of which shall be the Warrant Price immediately
thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
-------------------
the Shares of Series Preferred purchasable hereunder are set forth in the
Company's Certificate of Incorporation, as amended through the Date of Grant, a
true and complete copy of which is attached hereto as Exhibit B (the "Charter").
The Company shall promptly provide the holder hereof with any restatement,
amendment, modification or waiver of the Charter promptly after the same has
been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
---------------------
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the
<PAGE>
event requiring the adjustment the amount of the adjustment, the method by which
such adjustment was calculated, and the Warrant Price and the number of Shares
purchasable hereunder after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (without regard to Section 13 hereof, by
first class mail, postage prepaid) to the holder of this Warrant. In addition,
whenever the conversion price or conversion ratio of the Series Preferred shall
be adjusted, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the conversion price or ratio of the Series Preferred after
giving effect to such adjustment, and shall cause copies of such certificate to
be mailed (without regard to Section 13 hereof, by first class mail, postage
prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Act; Disposition of Warrant or Shares of Series
---------------------------------------------------------------
Preferred.
- ---------
(a) Compliance with Act. The holder of this Warrant, by acceptance
-------------------
hereof, agrees that this Warrant, and the shares of Series Preferred to be
issued upon exercise hereof and any Common Stock issued upon conversion thereof
are being acquired for investment and not with a view to the sale or
distribution of any part thereof and the holder of this Warrant has no present
intention of selling or engaging in any public distribution of this Warrant, and
that such holder will not offer, sell or otherwise dispose of this Warrant or
any shares of Series Preferred to be issued upon exercise hereof or any Common
Stock issued upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state securities laws. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act and any applicable state securities laws or an exemption from such
registration is available, the holder hereof shall confirm in writing that the
shares of Series Preferred so purchased (and any shares of Common Stock issued
upon conversion thereof) are being acquired for investment and not with a view
toward distribution or resale in violation of the Act and shall confirm such
other matters related thereto as may be reasonably requested by the Company.
This Warrant and all shares of Series Preferred issued upon exercise of this
Warrant and all shares of Common Stock issued upon conversion thereof (unless
registered under the Act and any applicable state securities laws) shall be
stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE
<PAGE>
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED,
DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder,
at such time as the restrictions on the transfer of the applicable security
shall have terminated. In addition, in connection with the issuance of this
Warrant, the holder specifically represents to the Company by acceptance of this
Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
in violation of the Act.
(2) The holder understands that this Warrant has not been registered under
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the holder's investment intent
as expressed herein.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. The holder is aware of the provisions of
Rule 144, promulgated under the Act.
(4) The holder has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment
and has the ability to bear the economic risks of its investment.
(5) The holder is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated under the Act, as presently in effect.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
--------------------------------
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of such holder's counsel, or other evidence, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state securities law then in effect) of this Warrant or such
shares of Series Preferred or Common Stock and indicating whether or not under
the Act certificates for this Warrant or such shares of Series Preferred to be
sold or otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such law.
Promptly upon receiving such written notice and reasonably satisfactory opinion
or other evidence, if so requested, the Company, as promptly as practicable but
no later than fifteen (15) days after receipt of the written notice, opinion or
other evidence, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such shares of Series Preferred or Common Stock, all
in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 7(b) that the opinion of
counsel for the holder or other evidence is not reasonably satisfactory to the
Company, the Company shall so notify the holder
<PAGE>
promptly with details thereof after such determination has been made.
Notwithstanding the foregoing, this Warrant or such shares of Series Preferred
or Common Stock may, as to such federal laws, be offered, sold or otherwise
disposed of in accordance with Rule 144 or 144A under the Act, provided that the
Company shall have been furnished with such information as the Company may
reasonably request to provide a reasonable assurance that the provisions of Rule
144 or 144A have been satisfied. Each certificate representing this Warrant or
the shares of Series Preferred thus transferred (except a transfer pursuant to
Rule 144 or 144A) shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with such laws, unless in the
aforesaid opinion of counsel for the holder, such legend is not required in
order to ensure compliance with such laws. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any
-----------------------------
legend described in this Warrant nor the requirements of Section 7(b) above
shall apply to any transfer of, or grant of a security interest in, this Warrant
(or the Series Preferred or Common Stock obtainable upon exercise thereof) or
any part hereof (i) to a partner of the holder if the holder is a partnership,
(ii) to a partnership of which the holder is a partner, or (iii) to any
affiliate of the holder if the holder is a corporation; provided, however, in
-------- -------
any such transfer, if applicable, the transferee shall on the Company's request
agree in writing to be bound by the terms of this Warrant as if an original
signatory hereto.
8. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company
will transmit to the holder of this Warrant such information, documents and
reports as are generally distributed to the holders of any class or series of
the securities of the Company concurrently with the distribution thereof to the
shareholders.
9. Registration Rights. The Company grants registration rights to the
-------------------
holder of this Warrant for any Common Stock of the Company obtained upon
conversion of the Series Preferred, comparable to the registration rights
granted to the investors in that certain Investor Rights Agreement, dated as of
December 10, 1996, as amended, as of December 14, 1994 and October 31, 1995 (the
"Registration Rights Agreement"), with the following exceptions and
clarifications:
(1) The holder will have no demand registration rights pursuant to
Section 1.2 of the Registration Rights Agreement.
(2) The holder will be subject to the same provisions regarding
indemnification as contained in the Registration Rights
Agreement.
<PAGE>
(3) The registration rights are freely assignable by the holder of
this Warrant.
10. Additional Rights.
-----------------
10.1 Secondary Sales. The Company agrees that it will not interfere with
---------------
the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available so long as such
sales are in accordance with all applicable state and federal securities laws.
10.2 Mergers. The Company shall provide the holder of this Warrant with at
-------
least twenty (20) days' notice of the terms and conditions of any of the
following potential transactions: (i) the sale, lease, exchange, conveyance or
other disposition of all or substantially all of the Company's property or
business, or (ii) its merger into or consolidation with any other corporation
(other than a wholly-owned subsidiary of the Company), or any transaction
(including a merger or other reorganization) or series of related transactions,
in which more than 50% of the voting power of the Company is disposed of.
10.3 Right to Convert Warrant into Stock: Net Issuance.
-------------------------------------------------
(a) Right to Convert. In addition to and without limiting the rights
----------------
of the holder under the terms of this Warrant, the holder shall have the right
to convert this Warrant or any portion thereof (the "Conversion Right") into
shares of Series Preferred (or Common Stock if the Series Preferred has been
automatically converted into Common Stock) as provided in this Section 10.3 at
any time or from time to time during the term of this Warrant. Upon exercise of
the Conversion Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) equal to the quotient obtained by dividing the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (Y) the fair market value of one share of Series Preferred (or
Common Stock if the Series Preferred has been automatically converted into
Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion (assuming the Series Preferred has
been automatically converted into Common Stock) shall be computed as follows:
X= B - A
-----
Y
Where: X = the number of shares of Common Stock that may
<PAGE>
be issued to holder
Y = the fair market value of one share of
Common Stock
A = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
B = the aggregate fair market value (i.e., fair market value x
Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the
------------------
holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in Section 10.3(a) hereof
as the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"), and, at the election of the holder
hereof, may be made contingent upon the closing of the sale of the Company's
Common Stock to the public in a public offering pursuant to a Registration
Statement under the Act (a "Public Offering"). Certificates for the shares
issuable upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the holder within
(30) days following the Conversion Date. Any conversion from Series Preferred
to Common Stock shall be in the ratio of one (1) share of Common Stock for each
share of Series Preferred (as adjusted herein and in the Charter). On the Date
of Grant, each share of the Series Preferred represented by this Warrant is
convertible into one share of Common Stock.
(c) Determination of Fair Market Value. For purposes of this Section
----------------------------------
10.3, "fair market value" of a share of Series Preferred (or Con=on Stock if the
Series Preferred has been automatically converted into Common Stock) as of a
particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering.
<PAGE>
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair market value of the
Common Stock shall be deemed to be the average of the closing prices of the
Common Stock on such exchange over the 30-day period ending five business
days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each
share of Series Preferred is then convertible;
(B) If traded over-the-counter, the fair market value of the Common
Stock shall be deemed to be the average of the closing bid prices of the
Common Stock over the 30-day period ending five business days prior to the
Determination Date, and the fair market value of the Series Preferred shall
be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Series
Preferred is then convertible; and
(C) If there is no public market for the Common Stock, then fair
market value shall be determined in good faith by the Company's Board of
Directors.
10.4 Exercise Prior to Expiration. To the extent this Warrant is not
----------------------------
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Series Preferred is greater than the Warrant
Price then in effect, this Warrant shall be deemed automatically exercised
pursuant to Section 10.3 above (even if not surrendered) immediately before its
expiration. For purposes of such automatic exercise, the fair market value of
one share of the Series Preferred upon such expiration shall be determined
pursuant to Section 10.3(c). To the extent this Warrant or any portion thereof
is deemed automatically exercised pursuant to this Section 10.4, the Company
agrees to promptly notify the holder hereof of the number of Shares, if any, the
holder hereof is to receive by reason of such automatic exercise.
11. Representations and Warranties. The Company represents and warrants
------------------------------
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
(b) The Shares have been or will be duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable;
(c) The rights, preferences, privileges and restrictions granted to
or imposed upon the Series Preferred and the holders thereof are as set forth in
the Charter, as
<PAGE>
amended to the Date of the Grant, a true and complete copy of which has been
delivered to the original holder of this Warrant and is attached hereto as
Exhibit B;
(d) The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized and reserved for issuance by the Company and, when
issued in accordance with the terms of the Charter will be validly issued, fully
paid and nonassessable;
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of any notices required pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
and
(f) There are no actions, suits, audits, investigations or
proceedings pending or to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request communication or other document required
-------
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by U.S. mail, postage prepaid, or recognized
overnight courier service to each such holder at its address as shown on the
books of the Company or to the Company at the address indicated therefor on the
signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation any right
to registration of the Shares) to which the holder hereof shall continue to be
entitled after such exercise or conversion in accordance with this Warrant;
provided, that the failure of the holder hereof to make any such request shall
- --------
not
<PAGE>
affect the continuing obligation of the Company to the holder hereof in respect
of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California, without regard to principles of conflicts of laws.
18. Survival of Representations, Warranties and Agreements. All
------------------------------------------------------
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
--------
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant.
21. Severability. The invalidity or unenforceability of any provision of
------------
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other proceeding
----------------------------
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach,
<PAGE>
default, or misrepresentation in connection with any of the provisions of this
Warrant, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
23. Entire Agreement; Modification. This Warrant constitutes the entire
------------------------------
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
CORSAIR COMMUNICATIONS, INC.
By:___________________________________
Title:________________________________
Address: 3408 Hillview Avenue
Palo Alto, California 94304
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: CORSAIR COMMUNICATIONS, INC.
1. The undersigned hereby:
G elects to purchase ___ shares of Series __ Preferred Stock of
CORSAIR COMMUNICATIONS, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase
price of such shares in full, or
G elects to exercise its net issuance rights pursuant to Section
10.3 of the attached Warrant with respect to ___ Shares of Series
__ Preferred Stock.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.
________________________________________________________________________________
(Signature)
(Date)
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
To: CORSAIR COMMUNICATIONS, INC. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S____, filed __________, 19__, the undersigned hereby:
G elects to purchase ___ shares of Series __ Preferred Stock of the
Company (or such lesser number of shares as may be sold on behalf
of the undersigned at the Closing) pursuant to the terms of the
attached Warrant, or
G elects to exercise its net issuance rights pursuant to Section
10.3 of the attached Warrant with respect to ___ Shares of Series
__ Preferred Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _________ shares.
________________________________________________________________________________
(Signature)
(Date)
<PAGE>
EXHIBIT B
CHARTER
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
Corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of a majority
of the outstanding shares in accordance with Section 228 thereof, and written
notice having been given in accordance with the requirements of such Section.
The Amended and Restated Certificate of Incorporation restates, integrates and
amends the provisions of the Certificate of Incorporation of this corporation.
3. The Certificate of Incorporation of the corporation is hereby amended
and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Corsair Communications, Inc..
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
<PAGE>
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
Twenty-Eight Million Two Hundred Forty-Seven Thousand Four Hundred and Ten
(28,247,410) shares. Eighteen Million (18,000,000) shares shall be Common
Stock, $.001 par value per share, and Ten Million Two Hundred Forty-Seven
Thousand Four Hundred and Ten (10,247,410) shares shall be Preferred Stock,
$.001 par value per share, of which Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock and Two Million One Hundred
Twenty-Seven Thousand Four Hundred and Ten (2,127,410) shares shall be Series B
Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock and Series
B Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this corporation) on the
Common Stock of this corporation, at the rate of $0.10 per share of Series A
Preferred Stock per annum and $0.22 per share of Series B Preferred Stock per
annum (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) payable when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative. No cash dividend
shall be declared or paid with respect to the Series A Preferred Stock or Series
B Preferred Stock unless at the same time a like proportionate cash dividend for
the same dividend period, ratably in proportion to the respective annual
dividend rates set forth above, is declared and paid with respect to the Series
A Preferred Stock and the Series B Preferred Stock.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
the holders of the Series A Preferred Stock and Series B Preferred Stock were
the holders of the number of shares of Common Stock of this corporation into
which their respective shares of Series A Preferred Stock and Series B Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of this corporation entitled to receive such
distribution.
-2-
<PAGE>
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock and Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to the sum of (i) $2.00 for each outstanding share of Series A
Preferred Stock, (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations and hereafter referred to as
the "Original Series A Issue Price"), (ii) $4.43 for each outstanding share of
Series B Preferred Stock (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations and hereafter referred
to as the "Original Series B Issue Price"), and (iii) an amount equal to
declared but unpaid dividends on such share of Series A Preferred Stock or
Series B Preferred Stock, as applicable. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series A
Preferred Stock and the Series B Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then,
the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and the Series B Preferred Stock in proportion to the aggregate
liquidation preferences of the respective series, and ratably among the holders
of that series in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Series A Preferred Stock and Series B Preferred Stock).
c. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement and the issuance of Series B Preferred Stock
pursuant to the Series B Preferred Stock Purchase Agreement), shall be deemed to
be a liquidation, dissolution or winding up within the meaning of this Section
2.
3. Conversion. The holders of the Series A Preferred Stock and
----------
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
a. Right to Convert.
----------------
(i) Subject to subsection (c), each share of Series A
Preferred Stock and Series B Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of this corporation or any transfer agent for the particular series
of Preferred Stock, into such number of fully paid and
-3-
<PAGE>
nonassessable shares of Common Stock as is determined by dividing (A) the
Original Series A Issue Price for each share of Series A Preferred Stock and (B)
the Original Series B Issue Price for each share of Series B Preferred Stock,
plus all declared but unpaid dividends thereon for each share of Series A
Preferred Stock or Series B Preferred Stock, by the Conversion Price at the time
in effect for such share. The initial Conversion Price per share for shares of
Series A Preferred Stock shall be the Original Series A Issue Price and the
initial Conversion Price per share for shares of Series B Preferred Stock shall
be the Original Series B Issue Price; provided, however, that the Conversion
Price for the Series A Preferred Stock and Series B Preferred Stock shall be
subject to adjustment as set forth in subsection 3(c).
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $7,500,000 in the aggregate or (B) the date upon which
the corporation obtains the consent of the holders of a majority of the then
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a single class on an as converted basis.
b. Mechanics of Conversion. Before any holder of Series A Preferred
-----------------------
Stock or Series B Preferred Stock shall be entitled to convert the same into
shares of Common Stock, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this corporation or of any transfer
agent for the particular series of Preferred Stock, and shall give written
notice by mail, postage prepaid, to this corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Preferred Stock and/or Series
B Preferred Stock, or to the nominee or nominees of such holder, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Series A Preferred Stock and/or Series B Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offer of securities registered
pursuant to the Securities Act, the conversion may, at the option of any holder
tendering Series A Preferred Stock and/or Series B Preferred Stock for
conversion, be conditioned upon the closing with the underwriter of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock issuable upon such conversion of the Series A Preferred
Stock and/or Series B Preferred Stock shall not be deemed to have converted
-4-
<PAGE>
such Series A Preferred Stock and/or Series B Preferred Stock until immediately
prior to the closing of such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. The Conversion
-----------------------------------------------
Prices of the Series A Preferred Stock and Series B Preferred Stock shall be
subject to adjustment from time to time as follows:
(i) A. If the corporation shall issue any Additional Stock (as
defined below) without consideration or for a consideration per share less than
the Conversion Price for the Series A Preferred Stock or the Conversion Price
for the Series B Preferred Stock in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for the Series A Preferred Stock or
Series B Preferred Stock, as the case may be, in effect immediately prior to
each such issuance shall forthwith (except as otherwise provided in this clause
(i)) be adjusted to a price equal to the quotient obtained by dividing the total
computed under clause (x) below by the total computed under clause (y) below as
follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock or Series B Preferred Stock
sold pursuant to the applicable agreements pursuant to which such
shares of Series A Preferred Stock or Series B Preferred Stock, as the
case may be, are first issued (the "Stock Purchase Agreements"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the dates of the applicable Stock Purchase Agreements (the
"Purchase Date") other than shares of Common Stock issued or issuable
with respect to the Series A Preferred Stock or Series B Preferred
Stock;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock or Series B Preferred Stock sold
pursuant to the applicable Stock Purchase Agreements divided by the
applicable Conversion Price for such shares in effect at the
applicable Purchase Date (or such higher or lower Conversion Price for
such series as results from the application of subsections 3(c)(iii)
and (iv) and assuming that this Certificate was in effect as of the
applicable Purchase Date) plus
(2) the number of shares of Additional Stock
issued since the applicable Purchase Date (increased or decreased to
the extent that the number of such shares of Additional Stock shall
have been increased or decreased as the result of the application of
subsections 3(c)(iii) and (iv)).
-5-
<PAGE>
B. No adjustment of the Conversion Price for the Series A
Preferred Stock or Series B Preferred Stock shall be made in an amount less than
one cent per share, provided that any adjustments which are not required to be
made by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to 3 years from the
date of the event giving rise to the adjustment being carried forward, or shall
be made at the end of 3 years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant
to this subsection 3(c)(i) shall have the effect of increasing the Conversion
Price above the Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or after
the applicable Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued at
the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in
subsections 3(c)(i)(C) and (c)(i)(D)), if any, received by the
corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
2. The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options
to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by
-6-
<PAGE>
the corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be
received by the corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
subsections 3(c)(i)(C) and (c)(i)(D)).
3. In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the
antidilution provisions thereof, the applicable Conversion Price of
the Series A Preferred Stock and Series B Preferred Stock, as
applicable, and to the extent in any way affected by or computed using
such options, rights or securities, shall be recomputed to reflect
such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or exchange
of such securities.
4. Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the Series
A Preferred Stock and Series B Preferred Stock, as applicable, to the
extent in any way affected by or computed using such options, rights
or securities or options or rights related to such securities, shall
be recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the
exercise of the options or rights related to such securities.
5. The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections
3(c)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either
subsection 3(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E)) by this
corporation before, on or after the applicable Purchase Date other than
A. shares of Common Stock issued pursuant to a transaction
described in subsection 3(c)(iii) hereof,
-7-
<PAGE>
B. shares of Common Stock issued upon conversion of
shares of Series A Preferred Stock or Series B Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly or
pursuant to a stock option plan or agreement or restricted stock plan
or agreement approved by the Board of Directors of this corporation,
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock and Series B Preferred Stock will
be converted to Common Stock or (II) upon exercise of warrants or
rights granted to underwriters in connection with such a public
offering, or
E. shares of Series B Preferred Stock issued or
issuable to Comdisco, Inc. pursuant to a Warrant dated August 31,
1995.
(iii) In the event the corporation should at any time or from
time to time after the applicable Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of the Series A Preferred Stock and Series B
Preferred Stock then in effect shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of the aggregate of
shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at any
time after the applicable Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock
and Series B Preferred Stock then in effect shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be decreased in proportion to such decrease in outstanding
shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection
-8-
<PAGE>
3(d), the holders of the Series A Preferred Stock and Series B Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of the corporation
into which their shares of Series A Preferred Stock and Series B Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of the corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3) provision shall be made so that the holders of the Series A
Preferred Stock and Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock and Series B Preferred
Stock, respectively, the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
Series A Preferred Stock and Series B Preferred Stock after the recapitalization
to the end that the provisions of this Section 3 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock and Series B
Preferred Stock against impairment.
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon conversion of
the Series A Preferred Stock and Series B Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded up to the nearest whole
share. Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of shares of Series A Preferred
Stock and Series B Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock and Series B Preferred Stock
pursuant to this Section 3, this corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder
-9-
<PAGE>
of Series A Preferred Stock and Series B Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. This corporation shall, upon the
written request at any time of any holder of Series A Preferred Stock or Series
B Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of Series A Preferred Stock or Series B
Preferred Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock and Series B
Preferred Stock at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock and Series B Preferred
Stock such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series A
Preferred Stock and Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred Stock
and Series B Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock or Series B Preferred
Stock, this corporation will take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock or
Series B Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of this corporation.
4. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock and Series B Preferred Stock shall have the right to one vote
for each share of Common Stock into which such Series A Preferred Stock and
Series B Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion
-10-
<PAGE>
basis being rounded to the nearest whole share), and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the Bylaws of this corporation, and shall be entitled to vote,
together as a single class with holders of Common Stock, with respect to any
question upon which holders of Common Stock have the right to vote; except for
the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be five (5). Notwithstanding 5(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis, shall be entitled to elect one (1)
director of the corporation. At any meeting held for the purpose of electing
directors, the presence in person or by proxy of the holders of a majority of
the Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the election of directors to be elected solely by
the holders of Series A Preferred Stock. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock and Common
Stock then outstanding, on an as converted basis, shall constitute a quorum of
the Series A Preferred Stock, Series B Preferred Stock and Common Stock for the
election of directors to be elected solely by the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock; and a vacancy in any directorship elected
by the holders of Series A Preferred Stock, Series B Preferred Stock and Common
Stock voting together shall be filled only by the vote of the holders of Series
A Preferred Stock, Series B Preferred Stock and Common Stock voting together as
provided above.
5. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock and/or Series B Preferred Stock are outstanding, this corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of a majority of the then outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, voting together as a
single class on an as converted basis:
a. sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock or Series B Preferred Stock so as to affect
adversely the shares;
-11-
<PAGE>
c. increase the authorized number of shares of Series A
Preferred Stock, Series B Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock or
Series B Preferred Stock with respect to voting, dividends, conversion rights or
upon liquidation, or (ii) having rights similar to any of the rights of the
Series A Preferred Stock and Series B Preferred Stock under this Section 5; or
e. change authorized number of directors from five (5).
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
-12-
<PAGE>
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The corporation shall have a perpetual existence.
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the Bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-13-
<PAGE>
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been signed under the seal of this corporation as of this 24th day of
October, 1995.
CORSAIR COMMUNICATIONS, INC.
By: /s/ Mary Ann Byrnes
--------------------------
Mary Ann Byrnes, President
ATTEST:
/s/ Kevin Compton
- -------------------------
Kevin Compton, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
CORSAIR COMMUNICATIONS, INC.
Corsair Communications, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That a resolution was duly adopted by the Board of Directors of the
Corporation setting forth a proposed amendment to the Amended and Restated
Certificate of Incorporation of the Corporation, and declaring said amendment to
be advisable and recommended for approval by the stockholders of the
Corporation. Subsection B.4.b. of Article IV of the Amended and Restated
Certificate of Incorporation is amended as follows:
"Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be seven (7). Notwithstanding 5(a)
above, the holders of Series A Preferred Stock, voting as a
separate class, shall be entitled to elect four (4)
directors of the corporation; and the holders of the Series
A Preferred Stock, Series B Preferred Stock and Common
Stock, voting together as a single class on an as converted
basis, shall be entitled to elect three (3) directors of the
corporation. At any meeting held for the purpose of electing
directors, the presence in person or by proxy of the holders
of a majority of the Series A Preferred Stock then
outstanding shall constitute a quorum of the Series A
Preferred Stock for the election of directors to be elected
solely by the holders of Series A Preferred Stock. At any
meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority
of the Series A Preferred Stock, Series B Preferred Stock
and Common Stock then outstanding, on an as converted basis,
shall constitute a quorum of the Series A Preferred Stock,
Series B Preferred Stock and Common Stock for the election
of directors to be elected solely by the holders of the
Series A Preferred Stock, Series B Preferred Stock and
Common Stock, voting together as a single class on an as
converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only
by vote of the holders of Series A Preferred Stock; and a
vacancy in any directorship elected by the holders of Series
A Preferred Stock, Series B Preferred
<PAGE>
Stock and Common Stock voting together shall be filled only
by the vote of the holders of Series A Preferred Stock,
Series B Preferred Stock and Common Stock voting together as
provided above."
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, said Corsair Communications, Inc. has caused this
certificate to be signed and attested by MaryAnn Byrnes, its President and Kevin
Compton, its Secretary this 10th day of November, 1995.
By: /s/ Mary Ann Byrnes
-------------------------
MaryAnn Byrnes, President
ATTEST:
By: /s/ Kevin Compton
------------------------
Kevin Compton, Secretary
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
<PAGE>
EXHIBIT D
July 31, 1996
Comdisco, Inc.
3000 Sand Hill Road
Four Embarcadero Center
Menlo Park, CA 94025
Attention: Peggy Parker
Ladies and Gentlemen:
This opinion letter is furnished to you pursuant to Section 8.01 of
the Loan and Security Agreement of even date herewith (the "Loan Agreement"),
between Corsair Communications, Inc. as borrower (the "Company") and Comdisco,
Inc., as lender (the "Lender"). We have acted as counsel for the Company in
connection with (i) the Loan Agreement and (ii) the issuance of warrants to
purchase 75,000 shares of the Company's Series B Preferred Stock, or in certain
circumstances Common Stock (the "Warrant"). Unless otherwise defined herein,
terms used herein shall have the meanings assigned to them in the Loan
Agreement.
In connection with this opinion letter, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates, including certificates of public officials, and
other instruments as we have deemed necessary or advisable for purposes of this
opinion letter, including those relating to the authorization, execution and
delivery of the Loan Agreement and the Warrant. In addition, we have examined
the following documents (the items referred to in subclauses (i) through (iii)
below herein referred to as the "Loan Documents"):
(i) an executed copy of the Loan Agreement;
(ii) the Secured Promissory Note executed by the Company in favor
of the Lender;
(iii) an executed copy of the Warrant;
(iv) the Amended and Restated Certificate of Incorporation and the
Bylaws of the Company, each as in effect on the date hereof;
<PAGE>
Comdisco, Inc. July 31, 1996
Page 2
(v) an executed copy of the certificate of the Chief Financial
Officer of the Company dated July 31, 1996 certifying a true copy of the
resolutions of the Board of Directors of the Company adopted on July 26,
1996, authorizing, among other things, the execution, delivery and
performance of the Loan Documents and the issuance of the Warrant.
(vi) an executed copy of the certificate (the "Officer's
Certificate") of the Chief Financial Officer of the Company, dated July 31,
1996; and
(vii) such other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed.
We have also examined photostatic copies of the agreements (the
"Material Agreements") identified in Exhibit A to the Officer's Certificate and
any consents in connection with the Material Agreements. In our examination and
review we have assumed the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of the documents submitted to us as originals,
the conformity to the original documents of all documents submitted to us as
certified or photostatic copies, and the authenticity of the originals of such
copies. As to any facts material to the opinions hereinafter expressed which we
did not independently establish or verify, we have relied without investigation
upon certificates, statements and representations of representatives of the
Company. We have also assumed that the Lender has filed any required California
state franchise, income or similar tax returns and has paid any such required
state franchise, income or similar taxes and that there are no extrinsic
agreements or understandings among the parties to the Loan Documents that would
modify or interpret the terms of the Loan Documents or the respective rights or
obligations of the parties thereunder. Regarding documents executed by parties
other than the Company, we have assumed (i) that each such other party had the
power to enter into and perform all its obligations thereunder, (ii) the due
authorization of, and the due execution and delivery of, such documents by each
such party, (iii) that such documents constitute the legal, valid and binding
obligations of each such party, and (iv) that the representations and warranties
made in such documents by such parties are true and correct.
With respect to our opinion in paragraph 1 below, we are relying
solely on our review and examination of the certificates received from the
Secretary of State of the State of Delaware, without further investigation of
the corporate records of the Company.
Based upon and subject to the foregoing, and except as set forth in
the Disclosure Schedule and subject to the further assumptions, limitations,
qualifications and exceptions set forth herein, we are of the opinion that:
<PAGE>
Comdisco, Inc. July 31, 1996
Page 2
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
2. The Company has the corporate power and authority to enter into
and perform the Loan Documents, and has taken all necessary corporate action to
authorize the execution, delivery and performance of the Loan Documents.
3. To our knowledge, no consents, approvals or authorizations of, or
notices to or filings with, any governmental authority or agency under the
Delaware General Corporation Law, the laws of the State of California or the
laws of the United States, as presently in effect and interpreted, are required
or necessary on the part of the Company in connection with the execution and
delivery by the Company of the Loan Documents, except for such filings as are
necessary in connection with the security interests in the Collateral granted by
the Company to the Lender and except for the filing required by Section 25102(f)
of the California Corporate Securities Law of 1968.
4. The Loan Documents are the legal, valid and binding obligations
of the Company, enforceable by the Lender against the Company in accordance with
their respective terms.
5. The execution and delivery by the Company of the Loan Documents
will not (i) violate or be in conflict with any provision of the Amended and
Restated Certifi cate of Incorporation or Bylaws of the Company, (ii) to our
knowledge, violate or be in conflict with any federal or California law having
applicability to the Company, or the Delaware General Corporation Law, as
presently in effect and interpreted, (iii) to our knowledge, violate or
contravene any judgment, decree, injunction or order of any federal or
California court, or any arbitrator or governmental agency or authority, having
jurisdiction over the Company or its properties or by which the Company may be
bound, or (iv) constitute a material breach of, or result in a material default
under, any term or provision of any of the Material Agreements.
6. The shares of Common Stock issuable upon exercise of the Warrant
(if no additional Series B Preferred Stock is authorized) have been duly and
validly reserved for issuance and, when and if issued in accordance with the
Company's Amended and Restated Certificate of Incorporation, upon receipt of the
exercise price therefor, will be validly issued, fully paid and nonassessable.
Whenever a statement herein is qualified by the expressions "known to
us," "to our knowledge," "we are not aware" or a similar phrase with respect to
our knowledge of matters of fact, it is intended to mean that our knowledge is
based upon the records, documents, instruments and certificates described above
and the current actual knowledge of the attorneys in this Firm who have devoted
substantive attention to the transactions con-
<PAGE>
Comdisco, Inc. July 31, 1996
Page 2
templated by the Loan Documents (but not including any constructive or imputed
notice of any information) and that we have not otherwise undertaken any
independent investigations for the purpose of rendering this opinion.
This opinion is limited to the laws of the State of California, the
General Corporation Law of the State of Delaware and applicable federal laws of
the United States, and we express no opinion herein with respect to the effect
or applicability of the laws of other jurisdictions.
Our opinions in paragraph 3 above and in clause (ii) of paragraph 5
above are limited to laws and regulations normally applicable to transactions of
the type contemplated in the Loan Documents and do not extend to licenses,
permits and approvals necessary for the conduct of the Company's business. In
addition and without limiting the previous sentence, we express no opinion
herein with respect to the effect of any land use, environmental or similar law,
any state or federal antitrust law, or any local law. Further, we express no
opinion as to compliance or noncompliance by the Lender with any federal, state
or other law (i) requiring the Lender to be licensed as a bank, finance company
or other type of financial institution, (ii) pertaining to matters regulating
the assets held by the Lender on the basis of portfolio requirements or the
Lender's capitalization, such as loan limits and capital adequacy requirements,
and (iii) otherwise applicable to the Lender and relating to its legal or
regulatory status or the nature of its business.
The opinions set forth above are subject to the following
qualifications, assumptions, limitations and exceptions:
(a) The validity, binding nature and enforceability of the Company's
obligations under the Loan Documents may be subject to or limited by (i)
bankruptcy, insol vency, reorganization, arrangement, moratorium, fraudulent
transfer and other similar laws affecting the rights of creditors generally;
(ii) general principles of equity (whether relief is sought in a proceeding at
law or in equity), including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and the discretion of any court of
competent jurisdiction in awarding specific performance or injunctive relief and
other equitable remedies; and (iii), without limiting the generality of the
foregoing, the effect of California court decisions and statutes which indicate
that
<PAGE>
Comdisco, Inc. July 31, 1996
Page 2
provisions of the Loan Documents which permit the Lender or any other person or
entity ("Person") to take action or make determinations may be subject to a
requirement that such action be taken or such determinations be made on a
reasonable basis in good faith or that it be shown that such action is
reasonably necessary for the protection of the Lender or such other Person.
(b) Our opinions are subject to the effect of the limitations imposed
by the California Uniform Commercial Code ("CUCC") relating to or affecting the
rights and remedies available to secured creditors.
(c) We express no opinion as to:
(1) the enforceability of provisions of the Loan Documents
pursuant to which the Company agrees to make payments without set-off, defense
or counterclaim;
(2) Article IX of the Loan Agreement insofar as the CUCC does not
specify the manner of foreclosure or exercise of remedies in respect of deposit
accounts;
(3) provisions purporting to require the award or payment of
attorneys' fees, expenses or costs in any action where the Lender is not the
prevailing party, or the impact of California Civil Code ("CC") (S)1717 et seq.
-- ----
on any such provisions;
(4) under certain circumstances, provisions to the effect that
rights or remedies are not exclusive, that every right or remedy is cumulative
and may be exercised in addition to or with any other right or remedy, that the
election of some particular remedy or remedies does not preclude recourse to one
or another remedy or that failure to exercise or delay in exercising rights or
remedies will not operate as a waiver of any such right or remedy;
(5) provisions prohibiting waivers of any terms or provisions of
any of the Loan Documents other than in writing, or prohibiting oral
modifications thereof or modification by course of dealing to the extent such
provisions are inconsistent with applicable law;
(6) the enforceability under certain circumstances of provisions
indemnifying a party against, or requiring contributions toward, that party's
liability for its own wrongful or negligent acts or where such indemnification
or contribution is contrary to public policy or prohibited by law;
(7) any provision providing for the exclusive jurisdiction of a
particular court or purporting to waive rights to trial by jury, service of
process or objections
<PAGE>
Comdisco, Inc. July 31, 1996
Page 2
to the laying of venue or to forum on the basis of forum non conveniens, in
--- ----------
connection with any litigation arising out of or pertaining to the Loan
Documents;
(8) Section 10.04 of the Loan Agreement;
(9) provisions providing for an increase in the rate of interest
or imposing a late charge or penalty in the event of delinquency or default;
(10) provisions imposing a prepayment charge, fee or penalty
based upon a percentage or fraction of the amount prepaid or the amount
outstanding under the Loan Agreement;
(11) provisions purporting to waive statutory or common law
rights, including the right to receive notice or to be allowed to cure,
reinstate or redeem in the event of default, and provisions expressly or by
implication waiving broadly or vaguely stated rights, unknown future rights and
defenses to obligations, in each case to the extent such rights or defenses are
not waivable under applicable law;
(12) provisions purporting to designate the Lender as the
Company's agent or attorney in fact;
(13) provisions purporting to waive any applicable statutes of
limitation;
(14) provisions authorizing the Lender to set off and apply any
deposits at any time held, and any other indebtedness at any time owing, by the
Lender to or for the account of the Company;
(15) provisions of the Loan Agreement purporting to limit the
standards imposed upon the Lender for the care of Collateral in the Lender's
possession to the extent such provisions are inconsistent with applicable
provisions of the CUCC;
(d) We invite the Lender's attention to the provisions of CUCC
(S)9313 providing for fixture filings with the applicable county recorder in
respect of any fixtures and to the benefits afforded to the Lender as a result
of such filing. Additionally, we note that the rights of the Lender in respect
of fixtures may be limited by CC (S)(S)1013, 1013.5 and 1019 and CUCC (S)9313
which concern fixtures and their removal except to the extent that appropriate
agreements are obtained from owners and encumbrancers of, and others claiming an
interest in, the real property on which such fixtures are located.
(e) Our opinions are subject to the effect of judicial decisions
which may permit the introduction of extrinsic evidence to interpret the terms
of written contracts.
<PAGE>
Comdisco, Inc. July 31, 1996
Page 7
(f) Insofar as this opinion letter concerns the law of the State of
California limiting the rates of interest legally chargeable or collectible, we
have relied upon our understanding that the Lender is a "finance lender"
licensed under the California Finance Lenders Law (with a currently effective
license that has not been revoked or suspended) and therefore within the class
of exempt persons contemplated by California Financial Code (S)22002 and that
all amounts provided to the Company pursuant to the Loan Agreement will be made
out of the licensed office of the Lender and, as a result thereof, is exempt
from the restrictions of Section 1 of Article XV of the Constitution of the
State of California relating to rates of interest upon the loan of money. We
further assume in this regard that all Advances have been and will be made by
the Lender for its own account and without intent to circumvent otherwise
applicable interest rate limitations under California law and that there is no
present express or implied agreement or plan to sell participations or any other
interest in the Advances or the Loan Agreement to any Person other than a Person
that also qualifies for an exemption from the interest rate limitations of
California law.
(g) We wish to point out that the Lender, as holder of the Secured
Promissory Note, may be required to prove the outstanding amount thereof.
(h) We express no opinion concerning the past, present or future fair
market value of any securities.
(i) The effect of subsequent issuances of securities of the Company,
to the extent that the Company may issue so many shares of Common Stock that
there are not enough remaining authorized but unissued shares of Common Stock
for the exercise of the Warrant.
(j) We express no opinion as to the title of the Company to any
Collateral or regarding the creation, attachment, perfection or priority of any
security interests in any Collateral.
The opinions expressed herein are solely for your benefit in
connection with the above transactions, and such opinions may not be relied on
in any manner or for any purpose by any other Person. In addition, this opinion
is rendered as of the date hereof, and we do not undertake to advise you of
matters which occur subsequent to the date hereof and which affect the opinions
expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT E
INTERCREDITOR AGREEMENT
THIS INTERNATIONAL AGREEMENT is entered into as of July 31, 1996, by and
between MMC/GATX PARTNERSHIP NO. 1, a California general partnership
("Partnership") and COMDISCO, INC. ("Comdisco"). Partnership and Comdisco are
sometimes referred to herein individually as a "Lender" and, collectively, as
"Lenders."
RECITALS
A. Partnership and Comdisco have each entered into a Loan and Security
Agreement, dated as of July 31, 1996 (each, individually, a "Loan Agreement"
and, collectively, the "Loan Agreements"), with Corsair Communications
("Borrower"). The Loan Agreements are identical except for the name of the
lender, the original principal amounts thereof and the amounts of the payments
thereunder. Unless otherwise defined herein, terms capitalized herein and
defined in the Loan Agreement shall have the meanings ascribed to them in such
Loan Agreements.
B. Comdisco and borrower are parties to a (1) Master Lease Agreement,
dated as of August 31, 1995 and Equipment Schedule(s) thereto, pursuant to which
Comdisco has leased certain equipment to Borrower, and (2) a Loan and Security
Agreement, dated as of August 31, 1995 (collectively, the "Comdisco Equipment
Financings").
C. Partnership and Comdisco desire to set forth in this Agreement their
respective rights and obligations with respect to the Loan Agreements (and the
related Loan Documents and the credit to be extended thereunder, and the
exercise of rights with respect to the collateral described therein.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following definitions:
"Bankruptcy Code" means the federal bankruptcy law of the United
States as from time to time in effect, currently as Title 11 of the United
States Code. Section references to current sections of the Bankruptcy Code
shall refer to comparable sections of any revised version thereof if section
numbering is changed.
"Claim" means the Partnership Claim and/or the Comdisco Claim, as
applicable.
"Comdisco Claim" means any and all present and future "claims" (used
in its broadest sense, as contemplated by and defined in Section 101(5) of the
Bankruptcy Code, but without regard to whether such claim would be disallowed
under the Bankruptcy Code) of Comdisco now or hereafter arising or existing
under or relating to Comdisco's Loan Agreement and related Loan Documents,
whether joint, several, or joint and several, whether fixed or indeterminate,
due or not yet due, contingent or non-contingent, matured or unmatured,
liquidated or unliquidated, or disputed or undisputed, whether under a guaranty
or a letter of credit, and whether arising under contract, in tort, by law, or
otherwise, any interest or fees thereon (including interest or fees that accrue
after the filing of a petition by or against Borrower under the Bankruptcy Code,
irrespective of whether allowable under the Bankruptcy Code), any costs of
Enforcement Actions, including reasonable attorneys' fees and costs, and any
prepayment or termination premiums.
<PAGE>
"Enforcement Action" means, with respect to any Lender and with
respect to any Claim of such Lender or any item of Collateral in which such
Lender has or claims a security interest, lien or right of offset, any action,
whether judicial or nonjudicial, to repossess, collect, accelerate, offset,
recoup, give notification to third parties with respect to, sell, dispose of,
foreclose upon, give notice of sale, disposition, or foreclosure with respect
to, or obtain equitable or injunctive relief with respect to, such Claim or
Collateral. The filing by any Lender of, or the joining in the filing by any
Lender of, an involuntary bankruptcy or insolvency proceeding against Borrower
also is an Enforcement Action.
"Insolvency Event" has the meaning given to such term in Section 4.4.
"Lender" or "Lenders" have the meanings given to such terms in the
introductory paragraph hereof.
"Loan Agreement(s)" has the meaning given to such term in Recital A.
"Partnership Claim" means any and all present and future "claims"
(used in its broadest sense, as contemplated by and defined in Section 101(5) of
the Bankruptcy Code, but without regard to whether such claim would be
disallowed under the Bankruptcy Code) of Partnership now or hereafter arising or
existing under or relating to the Partnership Loan Agreement and related Loan
Documents, whether joint, several, or joint and several, whether fixed or
indeterminate, due or not yet due, contingent or non-contingent, matured or
unmatured, liquidated or unliquidated, or disputed or undisputed, whether under
a guaranty or a letter of credit, and whether arising under contract, in tort,
by law, or otherwise, any interest or fees thereon (including interest or fees
that accrue after the filing of a petition by or against Borrower under the
Bankruptcy Code, irrespective of whether allowable under the Bankruptcy Code),
any costs of Enforcement Actions, including reasonable attorneys' fees and
costs, and any prepayment or termination premiums.
"Proceeds of Collection" has the meaning given to such term in Section
4.2.
1.2 Other Interpretive Provisions. References in this Agreement to
-----------------------------
"Recitals," "Sections," "Exhibits" and "Supplements" are to recitals, sections,
exhibits and supplements herein and thereto unless otherwise indicated.
References in this Agreement to any document, instrument or agreement shall
include (a) all exhibits, schedules, annexes and other attachments thereto, (b)
all documents, instruments or agreements issued or executed in replacement
thereof, and (c) such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and
in effect at any given time. The words "include" and "including" and words or
similar import when used in this Agreement shall not be construed to be limiting
or exclusive.
2. INTERCREDITOR ARRANGEMENTS
2.1 Proportionate Interests. Except as otherwise provided in this
-----------------------
Agreement, rights, interests and obligations of each Lender under each Lender's
Loan Agreement and related Loan Documents, including security interests in the
collateral under each Loan Agreement, shall be shared by the Lenders in the
ratio of (a) the original principal amount of such Lender's Loan to Borrower
under such Lender's Loan Agreement to (b) the aggregate original principal
amounts of both Lender's Loans to Borrower under the Loan Agreements. Any
reference in this Agreement to an allocation between or sharing by the Lenders
of any right, interest or obligation "ratably," "proportionally" or in similar
terms shall refer to this ratio. The provisions hereof shall apply irrespective
of the time or order of attachment or perfection of security interests, or the
time or order of filing or recording of financing statements.
2.2 Limitation on Further Loans. After the date hereof, neither Lender
---------------------------
may make loans to or otherwise extend credit to Borrower without notice to and
the consent of the other Lender, which consent will not be unreasonably
withheld.
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<PAGE>
2.3 Transfer of Interest in Loans.
-----------------------------
(a) Consent. Neither Lender may sell or otherwise transfer any of its
interest in its Loan Agreement, the related Loan Documents and its Loan
without the prior written consent of the other Lender, which consent shall
not be unreasonably withheld.
(b) Assumption of Obligations. The transferee shall assume all
obligations of the transferring Lender with respect to the portion of the
transferor's interest under this Agreement and the applicable Loan
Agreement.
(c) Legal Authority and Financial Ability. The transferee shall
provide to the remaining Lender evidence satisfactory to the remaining
Lender that the proposed transferee has the financial ability and legal
authority to assume and perform all obligations of the transferring Lender
under this Agreement and the applicable Loan Agreement.
(d) Voidability. Any sale or transfer of an interest in this
Agreement shall be voidable at the option of the remaining Lender unless
the provisions of this Section 2 are satisfied.
2.3 Amendments. Neither Lender may amend its Loan Agreement without the
----------
prior written consent of the other Lender, which consent shall not be
unreasonably withheld.
2.4 Possession of Collateral. If either Lender shall obtain possession of
------------------------
any Collateral, it shall hold such Collateral for itself and as agent and bailee
for the other Lender for purposes of perfecting such other Lender's security
interest therein.
3. ALLOCATION OF PAYMENTS PRIOR TO AN EVENT OF DEFAULT. All amounts received
by Lenders for the account of Borrower prior to an Event of Default (other than
scheduled payments to Comdisco on account of the Comdisco Equipment Financings),
whether by payment, set-off or otherwise shall be allocated ratably between the
Lenders. Each Lender shall promptly remit to the other Lender such sums as may
be necessary to ensure the ratable repayment of each Lender's Loan.
Notwithstanding the foregoing, a lender receiving a Scheduled Payment shall not
be responsible for determining whether the other Lender also received its
Scheduled Payment on such date; provided, however, if it is later determined
that one Lender received more than its ratable share of the Scheduled Payments
made on any date or dates, then such Lender shall remit to the other Lender such
sums as may be necessary to ensure the ratable payment of such Scheduled
Payments.
4. REMEDIES UPON AN EVENT OF DEFAULT
4.1 Decision to Exercise Remedies. Upon the occurrence of an Event of
-----------------------------
Default, Lender shall take such actions and only such actions as Lenders
mutually agree to take to enforce their rights and remedies under the Loan
Agreements; provided, however, that if after consultation, Lenders cannot
mutually agree on what action to take, then either Lender shall have the right
upon prior written notice to the other to accelerate its Loan and the other
Lender shall simultaneously accelerate its Loan. Upon such acceleration, the
Partnership shall have the right to determine and shall control the timing,
order and type of Enforcement Actions which will be taken and all other matters
in connection with any such Enforcement Actions. In taking such Enforcement
Actions pursuant to the previous sentence, the Partnership shall act reasonably
and in good faith and shall consult with and keep Comdisco informed thereof at
reasonable intervals; provided, however, that notwithstanding any such
consultations and provision of information to Comdisco, the Partnership shall
retain the right to make all determinations in the event of disagreements
between the Partnership and Comdisco. In all cases with respect to Enforcement
Actions, Partnership shall have the right to act both on its own behalf and as
agent for Comdisco with respect thereto. In addition, Comdisco shall take such
actions and execute such documents and instruments as Partnership may reasonably
request in connection with and to facilitate any such Enforcement Actions.
Notwithstanding the foregoing, in all cases, any material change in the terms of
the Lenders' Loan
-3-
<PAGE>
Documents (including any change in the terms of principal repayment, any change
of maturity dates, any interest rate reductions, or any release of Collateral or
guarantors) or any forbearance or waiver of rights under the Loan Agreements
shall require the written consent of both Lenders.
4.2 Application of Proceeds after an Event of Default. Notwithstanding
-------------------------------------------------
anything to the contrary in the Loan Agreements, as between the Lenders, the
proceeds of the Collateral, or any part thereof, and the proceeds of any remedy
under the Loan Agreements after the occurrence and during the continuance of an
Event of Default (collectively, the "Proceeds of Collection") shall upon receipt
by either Lender be paid to and applied as follows:
(a) First, to the payment of then outstanding out-of-pocket costs and
expenses of the Lenders (in proportion to such costs and expenses
theretofore incurred by each), including all amounts expended to preserve
the value of the Collateral, of foreclosure or suit, if any, and of such
sale and the exercise of any other rights or remedies, and of all proper
fees, expenses, liability and advances, including reasonable legal expenses
and attorneys' fees, incurred or made under the Loan Agreements by the
Lenders;
(b) Second, to the Lenders ratably, in an amount up to the sum of all
accrued interest owing to the Lenders on the Loans under the Loan
Agreements;
(c) Third, to the Lenders ratably, in an amount up to the sums of the
outstanding principal and premium, if any, owing to the Lenders from
Borrower on the Loans under the Loan Agreement; and
(d) Fourth, to Borrower, its successors and assigns, or to whomsoever
may be lawfully entitled to receive the same.
4.3 Waiver of Right to Require Marshaling. Each Lender hereby expressly
-------------------------------------
waives any right that it otherwise might have to require the other Lender to
marshal assets or to resort to Collateral in any particular order or manner,
whether provided for by common law or statute. Neither Lender shall be required
to enforce any guaranty or any security interest or lien given by any obligor as
a condition precedent or concurrent to the taking of any Enforcement Action with
respect to the Collateral.
4.4 Insolvency Events. In the event of any distribution, division, or
-----------------
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the property of Borrower or the proceeds
thereof to the creditors of Borrower, or the readjustment of the Partnership
Claim and the Comdisco Claim, whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding involving the readjustment of all or any part of the
Partnership Claim or the Comdisco Claim, or the application of the property of
Borrower to the payment or liquidation thereof, or upon the dissolution or other
winding up of Borrower's business, or upon the sale of all or any substantial
part of Borrower's property (any of the foregoing being hereinafter referred to
as an "Insolvency Event"), then, and in any such event, (a) all payments and
distributions of any kind or character, whether in cash or property or
securities in respect the Lenders' claims shall be distributed ratably between
the Lenders; (b) each Lender shall promptly file a claim or claims, on the form
required in such proceeding, for the full outstanding amount of such Lender's
Claim, and shall use its best efforts to cause said claim or claims to be
approved; (c) each of the Lenders hereby irrevocably agrees that, to the extent
that it fails timely to do so, the other Lender may in the name of the first
Lender, or otherwise, prove up any and all claims of the first Lender relating
to the first lender's Claim; and (d) in the event that, notwithstanding the
foregoing, any payment or distribution of any kind or character, whether in
cash, properties or securities, shall be received by a Lender in excess of its
ratable share, then the portion of such payment or distribution in excess of
such Lender's ratable share shall be received by such Lender in trust for and
shall be promptly paid over to the other Lender for application to the payments
of amounts due on the other Lender's Claim.
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<PAGE>
4.5 Return of Payments. To the extent any payment for the account of
------------------
Borrower is required to be returned as a voidable transfer or otherwise, the
Lenders shall contribute to one another as is necessary to ensure that such
return of payment is on a pro rata basis.
4.6 Foreclosure.
-----------
(a) Credit Bid By Lenders. Partnership shall have the exclusive right
to enter and determine the amount of a credit bid at any foreclosure sale
or other sale of any of the Collateral on behalf of both Lenders. If
Lenders are the successful bidders at the sale, then (i) the amount to be
credited against their respective Claims shall be allocated pro rata
between the Lenders according to the balances of such Claims, and (ii)
Lenders shall take title to the Collateral so purchased together, each
holding a pro rata undivided interest in such Collateral. Partnership shall
consult with Comdisco as to the most favorable disposition of any
Collateral purchased with any such credit bid.
(b) Cash Bid for Account of One Lender. Neither Lender shall make a
cash bid at any foreclosure sale or other sale of any of the Collateral
without the prior written consent of the other Lender. If a cash bid is
made and is successful, then (i) the proceeds of the sale shall be
allocated as set forth in Section 4.2, and (ii) the Lender that entered the
successful bid shall acquire the Collateral so purchased for its own
account, and the other Lender shall have no further interest in that
Collateral upon the payment to such other Lender of the share of the
proceeds in accordance with Section 4.2.
5. EXCULPATION; DELEGATION; AND INDEMNIFICATION OF PARTNERSHIP
5.1 Exculpation. In connection with any exercise of Enforcement Actions
-----------
hereunder, neither Partnership nor any of its partners, nor any of their
respective directors, officer, employees, attorneys, accountants, or agents
shall be liable as such for any action taken or omitted by it or them, except
for its or their own gross negligence or willful misconduct with respect to its
duties under this Agreement.
5.2 Delegation of Duties. Partnership may execute any of its powers and
--------------------
perform any duties hereunder either directly or by or through agents or
attorneys-in-fact. Partnership shall be entitled to advice of counsel
concerning all matters pertaining to such powers and duties. Partnership shall
not be responsible for the negligence or misconduct of any agents or attorneys-
in-fact selected by it without gross negligence or willful misconduct.
5.3 Indemnification. To the extent not reimbursed either by Borrower or
---------------
from the application of Collateral proceeds pursuant to Section 4.2, Comdisco
agrees to reimburse and indemnify Partnership for its pro rata share of the
following items:
(a) all reasonable out-of-pocket costs and expenses of Partnership
incurred by Partnership in connection with the discharge of its activities
under this Agreement or either Loan Agreement, including reasonable legal
expenses and attorneys' fees; provided, that the Partnership shall consult
with Comdisco regarding the incurrence of such costs and expenses at
reasonable intervals (but not more often than monthly) and any such
reasonable costs and expenses shall be "Claims" hereunder notwithstanding
any disagreement by Comdisco as to their incurrence; and
(b) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgment, suits, costs, expenses or
disbursements of any kind or nature whatever, which may be imposed on,
incurred by or asserted against Partnership in any way relating to or
arising out of this Agreement, or any action taken or omitted by
Partnership hereunder; provided that Comdisco shall not be liable for any
portion of such liabilities, obligations, losses, damages,
-5-
<PAGE>
penalties, actions, judgments, suits, costs, expenses or disbursements, if
the same results from Partnership's gross negligence or willful misconduct.
6. EXCULPATION; DELEGATION; AND INDEMNIFICATION OF COMDISCO
6.1 Exculpation. In connection with any exercise of Enforcement Actions
-----------
hereunder, neither Comdisco nor any of its directors, officer, employees,
attorneys, accountants, or agents shall be liable as such for any action taken
or omitted by it or them, except for its or their own gross negligence or
willful misconduct with respect to its duties under this Agreement.
6.2 Delegation of Duties. Comdisco may execute any of its powers and
--------------------
perform any duties hereunder either directly or by or through agents or
attorneys-in-fact. Comdisco shall be entitled to advice of counsel concerning
all matters pertaining to such powers and duties. Comdisco shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it without gross negligence or willful misconduct.
6.3 Indemnification. To the extent not reimbursed either by Borrower or
---------------
from the application of Collateral proceeds pursuant to Section 4.2, Partnership
agrees to reimburse and indemnify Comdisco for its pro rata share of the
following items:
(a) all reasonable out-of-pocket costs and expenses of Comdisco
incurred by Comdisco in connection with the discharge of its activities
under this Agreement or either Loan Agreement, including reasonable legal
expenses and attorneys' fees; provided, that the Comdisco shall consult
with the Partnership regarding the incurrence of such costs and expenses at
reasonable intervals (but not more often than monthly) and any such
reasonable costs and expenses shall be "Claims" hereunder notwithstanding
any disagreement by the Partnership as to their incurrence; and
(b) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgment, suits, costs, expenses or
disbursements of any kind or nature whatever, which may be imposed on,
incurred by or asserted against Comdisco in any way relating to or arising
out of this Agreement, or any action taken or omitted by Comdisco
hereunder; provided that Partnership shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements, if the same results
from Comdisco's gross negligence or willful misconduct.
7. RIGHTS IN THE WARRANTS. Notwithstanding anything to the contrary herein,
any Warrants issued to either Lender by Borrower, the stock issuable thereunder,
any amounts paid thereunder, any dividends, and any other rights in connection
therewith shall not be subject to the terms and conditions of this Agreement.
Nothing herein shall affect either Lender's rights under any such Warrants or
stock to administer, manage, transfer, assign, or exercise such Warrants or
stock for its own account.
8. NO RESPONSIBILITY FOR INVESTIGATION. Each Lender agrees that it will make
its own independent investigation of the financial condition and affairs of
Borrower in connection with the making of Loans pursuant to the Loan Agreements
and has made and shall continue to make its own appraisal of the
creditworthiness of Borrower. Neither Lender shall have any duty or
responsibility either initially or on a continuing basis to make any such
investigation or any such appraisal on behalf of both Lenders or to provide the
other Lender with any credit or other information with respect thereto whether
coming into its possession before the date hereof or any time or times
thereafter and shall further have no responsibility with respect to the accuracy
of or the completeness of the information provided to Lenders by Borrower.
-6-
<PAGE>
9. REPRESENTATIONS AND WARRANTIES
9.1 Due Organization and Qualification. Comdisco represents and warrants
----------------------------------
that it is a Delaware corporation duly existing and in good standing under the
laws of Illinois and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified, except for such states as to which
any failure so to qualify would not have a material adverse effect on Comdisco.
Partnership represents and warrants that is a California general partnership and
that it and each of its general partners is duly existing and is in good
standing under the laws of its respective state of incorporation or formation
and under the laws of California and is qualified and licensed to do business
in, and is in good standing in, any state in which the conduct of its business
or its ownership of property requires that it be so qualified, except for such
states as to which any failure so to qualify would not have a material adverse
effect on Partnership.
9.2 Authority. Each Lender represents and warrants that is has all
---------
necessary power and authority to execute, deliver and perform this Agreement in
accordance with the terms hereof and that it has all requisite power and
authority to own and operate its properties and to carry on its business as now
conducted.
9.3 Authorization; Enforceability. Each Lender represents and warrants
-----------------------------
that (a) the execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have each been duly authorized by all
necessary action on the part of such Lender and (b) this Agreement has been duly
executed and delivered and constitutes a legal, valid and binding obligation of
such Lender, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws of general application relating to or affecting the enforcement of
creditors' rights or by general principles of equity.
10. NOTICES. Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except informal documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by certified mail, postage prepaid, return receipt requested,
or by facsimile to Partnership or to Comdisco, as the case may be, at their
respective addresses or fax number set forth below:
If to Partnership: MMC/GATX Partnership No. 1
c/o GATX Capital Corporation
as General Partner and Agent
Four Embarcadero Center
Suite 220
San Francisco, California 94111
Attention: Contracts Administration
FAX: (415) 955-3288
with a copy to: Meier Mitchell & Company
4 Orinda Way
Suite 200-B
Orinda, California 94563
Attention: Contract Administration
FAX: (510) 253-9528
If to Comdisco: Comdisco, Inc.
6111 North River Road
Rosemont, Illinois 60018
Attn: Venture Lease
FAX: (847) 518-5465
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<PAGE>
with a copy to: Comdisco, Inc.
6111 North River Road
Rosemont, Illinois 60018
Attn: General Counsel
FAX: (847) 518-5088
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
In addition, each Lender agrees (a) to notify the other Lender promptly
upon receipt of any notice from any Borrower and (b) at the other Lender's
request, to send a copy of any such notice to the other Lender.
11. NO BENEFIT TO THIRD PARTIES. The terms and provisions of this Agreement
shall be for the sole benefit of Lenders and their respective successors and
assigns, and no other Person (including Borrower) shall have any right, benefit,
priority, or interest under, or because of this Agreement.
12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Comdisco or Partnership without the other party's prior
written consent, which consent shall not be unreasonably withheld.
12.2 Time of Essence. Time is of the essence for the performance of all
---------------
obligations set forth in this Agreement.
12.3 Severability of Provisions. Each provision of this Agreement shall be
--------------------------
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.4 Entire Agreement; Construction; Amendments and Waivers.
------------------------------------------------------
(a) This Agreement constitutes and contains the entire agreement
between the Lenders and supersedes any and all prior agreements,
negotiations, correspondence, understandings and communications between the
parties, whether written or oral, respecting the subject matter hereof.
(b) This Agreement is the result of negotiations between and has been
reviewed by each of the Lenders executing this Agreement as of the date
hereof and their respective counsel; accordingly, this Agreement shall be
deemed to be the product of the parties hereto, and no ambiguity shall be
construed in favor of or against either Lender. Lenders agree that they
intend the literal words of this Agreement and that no parol evidence shall
be necessary or appropriate to establish any Lender's actual intentions.
(c) Any and all amendments, modifications, discharges or waivers of,
or consents to any departures from any provision of this Agreement shall
not be effective without the written consent of each Lender. Any waiver or
consent with respect to any provision of this Agreement shall be effective
only in the specific instance and for the specific purpose for which it was
given. Any amendment, modifications, waiver or consent effected in
accordance with this Section 12.4 shall be binding upon each Lender.
12.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
-8-
<PAGE>
12.6 Termination. With respect to any particular Loan Agreement and the
-----------
Loans thereunder, upon payment in full to either Lender of all amounts owing to
such Lender with respect to such Loan Agreement, this Agreement shall terminate
as to such Loan Agreement.
12.7 Reinstatement. Notwithstanding any provision of this Agreement to the
-------------
contrary, the rights and obligations of the parties hereunder with respect to
any Borrower shall be reinstated and revived if and to the extent that for any
reason any payment by or on behalf of Borrower is rescinded, or must be
otherwise restored by Lenders, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, all as though such amount had not
been paid. To the extent any payment is rescinded or restored, the Obligations
shall be revived in full force and effect without reduction or discharge for
that payment.
12.8 Survival. All covenants, representations and warranties made in this
--------
Agreement shall continue in full force and effect so long as any obligation
remain outstanding hereunder. Notwithstanding the prior termination of this
Agreement with respect to any Loan Agreement, the respective obligations of
Lenders to indemnify each other shall survive until all applicable statute of
limitations periods with respect to actions that may be brought against Lenders
have run.
13. RELATIONSHIP OF PARTIES. The relationship between Partnership and Comdisco
is, and at all times shall remain solely that of co-lenders. Lenders shall not
under any circumstances be construed to be partners or joint venturers of each
other, nor shall the Lenders under any circumstances be deemed to be in a
relationship of confidence or trust or a fiduciary relationship with each other,
or to owe any fiduciary duty to each other. Lenders do not undertake or assume
any responsibility or duty to each other to select, review, inspect, supervise,
pass judgment upon or otherwise inform each other of any matter in connection
with Borrower's property, any Collateral held by any Lender or the operations of
Borrower. Each Lender shall rely entirely on its own judgment with respect to
such matters, and any review, inspection, supervision, exercise of judgment or
supply of information undertaken or assumed by any Lender in connection with
such matters is solely for the protection of such Lender.
14. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW, EACH OF THE LENDERS HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF CALIFORNIA.
LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company,
its general partner
By:__________________________
Name:________________________
Title:_______________________
COMDISCO, INC.
By:__________________________
Name:________________________
Title:_______________________
Corsair Communications, a California corporation, the Borrower referred to
in the foregoing Intercreditor Agreement, hereby acknowledges that it has
received a copy of the Intercreditor Agreement and consent thereto, and agrees
to recognize the rights granted thereby and will take no action that is not in
accordance with the agreements set forth in the Agreement.
CORSAIR COMMUNICATIONS
By:__________________________
Name:________________________
Title:_______________________
-10-
<PAGE>
EXHIBIT 10.27
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-
ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv)
OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
CORSAIR COMMUNICATIONS
----------------------
WARRANT TO PURCHASE 75,000 SHARES
OF SERIES B PREFERRED STOCK
THIS CERTIFIES THAT, for value received, Comdisco, Inc. and its assignees
are entitled to subscribe for and purchase [an aggregate of 75,000] shares of
the fully paid and nonassessable Series B Preferred Stock (as adjusted pursuant
to Section 4 hereof the "Shares") of CORSAIR COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), subject to the provisions and upon the terms and
conditions hereinafter set forth; provided, however, that in the event that at
-------- -------
the time of exercise of this Warrant there are insufficient authorized shares of
the Company's Series B Preferred Stock to allow issuance of the Shares, then
this Warrant shall be exercisable for the same number of shares of the Company's
Common Stock. The price per Share at which this Warrant is exercisable shall be
the lower of (i) $4.43 or (ii) the price per share at which the next sale of
equity securities of Borrower is made (such price and such other price as shall
result, from time to time, from the adjustments specified in Section 4 hereof is
herein referred to as the "Warrant Price"). As used herein, (a) the term
"Series Preferred" shall mean the Company's presently authorized Series B
Preferred Stock, and any stock into or for which such Series B Preferred Stock
may hereafter be converted or exchanged, (b) the term "Date of Grant" shall mean
July 31, 1996, and (c) the term "Other Warrants" shall mean any other warrants
issued by the Company in connection with the transaction with respect to which
this Warrant was issued, and any warrant issued upon transfer or partial
exercise of this Warrant. The term "Warrant" as used herein shall be deemed to
include Other Warrants unless the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
----
in whole or in part, at any time and from time to time from the Date of Grant
through the later of (i) ten (10) years after the Date of Grant or (ii) five (5)
years after the closing of the Company's initial public offering of its Common
Stock effected pursuant to a Registration Statement on Form S-1 (or its
successor) filed under the Securities Act of 1933, as amended (the "Act").
2 Method of Exercise; Payment; Issuance of New Warrant. Subject to
----------------------------------------------------
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased, or (b) exercise of the right provided for in Section 10.3 hereof.
The person or persons in whose name(s) any certificate(s) representing shares of
Series Preferred shall be issuable upon exercise of this Warrant shall be deemed
to have become the holder(s) of record of, and shall be treated for all purposes
as the record holder(s) of, the shares represented thereby (and such shares
shall be deemed to have been issued) immediately prior to the close of business
on the date or dates upon which this Warrant is exercised. In the event of any
exercise of the rights represented by this Warrant, certificates for the shares
of stock so purchased shall be delivered to
<PAGE>
the holder hereof as soon as possible and in any event within thirty (30) days
after such exercise and, unless this Warrant has been fully exercised or
expired, a new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof as soon as possible and in any event within such
thirty-day period.
3. Stock Fully Paid: Reservation of Shares. All Shares that may be
---------------------------------------
issued upon the exercise of the rights represented by this Warrant, upon
issuance pursuant to the terms and conditions herein and upon payment of the
Warrant Price multiplied by the number of shares to be issued either in cash or
pursuant to the terms of Section 10.3 hereof, will be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The Company agrees that prior to December 31, 1996, it will take
such actions as are necessary, including obtaining stockholder consent, to
authorize the issuance of a sufficient number of shares of Series B Preferred
Stock to allow the full exercise of this Warrant. During the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized, and reserved for the purpose of the issue upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Series Preferred or Common Stock to provide for the exercise of
the rights represented by this Warrant and, if applicable, a sufficient number
of shares of its Common Stock to provide for the conversion of the Series
Preferred into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification or
--------------------------
change of securities of the class issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in of
any merger of the Company with or into another corporation (other than a merger
with another corporation in which the Company is the acquiring and the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall duly
execute and deliver to the holder of this Warrant a new Warrant (in form and
substance reasonably satisfactory to the holder of this Warrant), so that the
holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the shares of Series Preferred theretofore issuable
upon exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of Series Preferred then purchasable
under this Warrant. Such new Warrant shall provide for adjustments that shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4 and, in the case of a new Warrant issuable after conversion of
the authorized shares of the Series Preferred into shares of Common Stock or
after the amendment of the terms of the antidilution protection of the Series
Preferred, shall provide for antidilution protection that shall be as nearly
equivalent as may be practicable to the antidilution provisions applicable to
the Series Preferred on the Date of Grant. The provisions of this subparagraph
(a) shall similarly apply to successive reclassifications, changes, mergers and
transfers.
(b) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
---------------------------------------
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution
specifically provided for in Sections 4(a) and 4(b)), of Series Preferred, then
the Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or
<PAGE>
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Series Preferred
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Series Preferred
outstanding immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price pursuant to Sections 4.01(b) or 4.01(c), the number of Shares of
Series Preferred purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of Shares purchasable
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately prior to such
adjustment and the denominator of which shall be the Warrant Price immediately
thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
-------------------
the Shares of Series Preferred purchasable hereunder are set forth in the
Company's Certificate of Incorporation, as amended through the Date of Grant, a
true and complete copy of which is attached hereto as Exhibit B (the "Charter").
The Company shall promptly provide the holder hereof with any restatement,
amendment, modification or waiver of the Charter promptly after the same has
been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
---------------------
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant. In addition, whenever the conversion price or
conversion ratio of the Series Preferred shall be adjusted, the Company shall
make a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
conversion price or ratio of the Series Preferred after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (without
regard to Section 13 hereof, by first class mail, postage prepaid) to the holder
of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Act; Disposition of Warrant or Shares of Series
---------------------------------------------------------------
Preferred.
- ---------
(a) Compliance with Act. The holder of this Warrant, by acceptance
-------------------
hereof, agrees that this Warrant, and the shares of Series Preferred to be
issued upon exercise hereof and any Common Stock issued upon conversion thereof
are being acquired for investment and not with a view to the sale or
distribution of any part thereof and the holder of this Warrant has no present
intention of selling or engaging in any public distribution of this Warrant, and
that such holder will not offer, sell or otherwise dispose of this Warrant or
any shares of Series Preferred to be issued upon exercise hereof or any Common
Stock issued upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state securities laws. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act and any applicable state securities laws or an exemption from such
registration is available, the holder hereof shall confirm in writing that the
shares of Series Preferred so purchased (and any shares of Common Stock issued
upon conversion thereof) are being acquired for investment and not with a view
toward distribution or resale in violation of the Act and shall confirm such
other matters related thereto as may be reasonably requested by the Company.
This Warrant and all shares of Series Preferred issued upon exercise of this
Warrant and all shares of Common Stock issued upon conversion thereof (unless
registered under the Act and any applicable state securities laws) shall be
stamped or imprinted with a
<PAGE>
legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder,
at such time as the restrictions on the transfer of the applicable security
shall have terminated. In addition, in connection with the issuance of this
Warrant, the holder specifically represents to the Company by acceptance of this
Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
in violation of the Act.
(2) The holder understands that this Warrant has not been registered under
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the holder's investment intent
as expressed herein.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. The holder is aware of the provisions of
Rule 144, promulgated under the Act.
(4) The holder has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment
and has the ability to bear the economic risks of its investment.
(5) The holder is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated under the Act, as presently in effect.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
--------------------------------
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of such holder's counsel, or other evidence, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state securities law then in effect) of this Warrant or such
shares of Series Preferred or Common Stock and indicating whether or not under
the Act certificates for this Warrant or such shares of Series Preferred to be
sold or otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such law.
Promptly upon receiving such written notice and reasonably satisfactory opinion
or other evidence, if so requested, the Company, as promptly as practicable but
no later than fifteen (15) days after receipt of the written notice, opinion or
other evidence, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such shares of Series Preferred or Common Stock, all
in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 7(b) that the opinion of
counsel for the holder or other evidence is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly with details thereof
after such determination has been made. Notwithstanding the
<PAGE>
foregoing, this Warrant or such shares of Series Preferred or Common Stock may,
as to such federal laws, be offered, sold or otherwise disposed of in accordance
with Rule 144 or 144A under the Act, provided that the Company shall have been
furnished with such information as the Company may reasonably request to provide
a reasonable assurance that the provisions of Rule 144 or 144A have been
satisfied. Each certificate representing this Warrant or the shares of Series
Preferred thus transferred (except a transfer pursuant to Rule 144 or 144A)
shall bear a legend as to the applicable restrictions on transferability in
order to ensure compliance with such laws, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to ensure
compliance with such laws. The Company may issue stop transfer instructions to
its transfer agent in connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any
-----------------------------
legend described in this Warrant nor the requirements of Section 7(b) above
shall apply to any transfer of, or grant of a security interest in, this Warrant
(or the Series Preferred or Common Stock obtainable upon exercise thereof) or
any part hereof (i) to a partner of the holder if the holder is a partnership,
(ii) to a partnership of which the holder is a partner, or (iii) to any
affiliate of the holder if the holder is a corporation; provided, however, in
-------- -------
any such transfer, if applicable, the transferee shall on the Company's request
agree in writing to be bound by the terms of this Warrant as if an original
signatory hereto.
8. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company
will transmit to the holder of this Warrant such information, documents and
reports as are generally distributed to the holders of any class or series of
the securities of the Company concurrently with the distribution thereof to the
shareholders.
9. Registration Rights. The Company grants registration rights to the
-------------------
holder of this Warrant for any Common Stock of the Company obtained upon
conversion of the Series Preferred, comparable to the registration rights
granted to the investors in that certain Investor Rights Agreement, dated as of
December 10, 1996, as amended, as of December 14, 1994 and October 31, 1995 (the
"Registration Rights Agreement"), with the following exceptions and
clarifications:
(1) The holder will have no demand registration rights pursuant to
Section 1.2 of the Registration Rights Agreement.
(2) The holder will be subject to the same provisions regarding
indemnification as contained in the Registration Rights
Agreement.
(3) The registration rights are freely assignable by the holder of
this Warrant.
10. Additional Rights.
-----------------
10.1 Secondary Sales. The Company agrees that it will not interfere with
---------------
the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available so long as such
sales are in accordance with all applicable state and federal securities laws.
10.2 Mergers. The Company shall provide the holder of this Warrant with at
-------
least twenty (20) days' notice of the terms and conditions of any of the
following potential transactions: (i) the sale, lease, exchange, conveyance or
other disposition of all or substantially all of the Company's property or
business, or (ii) its merger into or consolidation with any other corporation
(other than a wholly-owned subsidiary of the
<PAGE>
Company), or any transaction (including a merger or other reorganization) or
series of related transactions, in which more than 50% of the voting power of
the Company is disposed of.
10.3 Right to Convert Warrant into Stock: Net Issuance.
-------------------------------------------------
(a) Right to Convert. In addition to and without limiting the rights
----------------
of the holder under the terms of this Warrant, the holder shall have the right
to convert this Warrant or any portion thereof (the "Conversion Right") into
shares of Series Preferred (or Common Stock if the Series Preferred has been
automatically converted into Common Stock) as provided in this Section 10.3 at
any time or from time to time during the term of this Warrant. Upon exercise of
the Conversion Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) equal to the quotient obtained by dividing the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (Y) the fair market value of one share of Series Preferred (or
Common Stock if the Series Preferred has been automatically converted into
Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion (assuming the Series Preferred has
been automatically converted into Common Stock) shall be computed as follows:
X= B - A
-----
Y
Where: X = the number of shares of Common Stock that may
be issued to holder
Y = the fair market value of one share of
Common Stock
A = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
B = the aggregate fair market value (i.e., fair market value x
Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the
------------------
holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in Section 10.3(a) hereof
as the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"), and, at the election of the holder
hereof, may be made contingent upon the closing
<PAGE>
of the sale of the Company's Common Stock to the public in a public offering
pursuant to a Registration Statement under the Act (a "Public Offering").
Certificates for the shares issuable upon exercise of the Conversion Right and,
if applicable, a new warrant evidencing the balance of the shares remaining
subject to this Warrant, shall be issued as of the Conversion Date and shall be
delivered to the holder within (30) days following the Conversion Date. Any
conversion from Series Preferred to Common Stock shall be in the ratio of one
(1) share of Common Stock for each share of Series Preferred (as adjusted herein
and in the Charter). On the Date of Grant, each share of the Series Preferred
represented by this Warrant is convertible into one share of Common Stock.
(c) Determination of Fair Market Value. For purposes of this Section
----------------------------------
10.3, "fair market value" of a share of Series Preferred (or Con=on Stock if the
Series Preferred has been automatically converted into Common Stock) as of a
particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair market value of the
Common Stock shall be deemed to be the average of the closing prices of the
Common Stock on such exchange over the 30-day period ending five business
days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each
share of Series Preferred is then convertible;
(B) If traded over-the-counter, the fair market value of the Common
Stock shall be deemed to be the average of the closing bid prices of the
Common Stock over the 30-day period ending five business days prior to the
Determination Date, and the fair market value of the Series Preferred shall
be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Series
Preferred is then convertible; and
(C) If there is no public market for the Common Stock, then fair
market value shall be determined in good faith by the Company's Board of
Directors.
10.4 Exercise Prior to Expiration. To the extent this Warrant is not
----------------------------
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Series Preferred is greater than the Warrant
Price then in effect, this Warrant shall be deemed automatically exercised
pursuant to Section 10.3 above (even if not surrendered) immediately before its
expiration. For purposes of such automatic exercise, the fair market value of
one share of the Series Preferred upon such expiration shall be determined
pursuant to Section 10.3(c). To the extent this Warrant or any portion thereof
is deemed automatically exercised pursuant to this Section 10.4, the Company
agrees to promptly notify the holder hereof of the number of Shares, if any, the
holder hereof is to receive by reason of such automatic exercise.
11. Representations and Warranties. The Company represents and warrants
------------------------------
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
<PAGE>
(b) The Shares have been or will be duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable;
(c) The rights, preferences, privileges and restrictions granted to
or imposed upon the Series Preferred and the holders thereof are as set forth in
the Charter, as amended to the Date of the Grant, a true and complete copy of
which has been delivered to the original holder of this Warrant and is attached
hereto as Exhibit B;
(d) The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized and reserved for issuance by the Company and, when
issued in accordance with the terms of the Charter will be validly issued, fully
paid and nonassessable;
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of any notices required pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
and
(f) There are no actions, suits, audits, investigations or
proceedings pending or to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request communication or other document required
-------
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by U.S. mail, postage prepaid, or recognized
overnight courier service to each such holder at its address as shown on the
books of the Company or to the Company at the address indicated therefor on the
signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation any right
to registration of the Shares) to which the holder hereof shall continue to be
entitled after such exercise or conversion in accordance with this Warrant;
provided, that the failure of the holder hereof to make any such request shall
- --------
not affect the continuing obligation of the Company to the holder hereof in
respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an
<PAGE>
indemnity reasonably satisfactory to the Company, or in the case of any such
mutilation upon surrender and cancellation of such Warrant or stock certificate,
the Company will make and deliver a new Warrant or stock certificate, of like
tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
16. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant. The language in this Warrant shall be construed as to its fair meaning
without regard to which party drafted this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California, without regard to principles of conflicts of laws.
18. Survival of Representations, Warranties and Agreements. All
------------------------------------------------------
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
--------
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant.
21. Severability. The invalidity or unenforceability of any provision of
------------
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other proceeding
----------------------------
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
23. Entire Agreement; Modification. This Warrant constitutes the entire
------------------------------
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
CORSAIR COMMUNICATIONS, INC.
By:/s/ Martin J. Silver
-----------------------------------------
Title:CFO
--------------------------------------
Address: 3408 Hillview Avenue
Palo Alto, California 94304
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: CORSAIR COMMUNICATIONS, INC.
1. The undersigned hereby:
G elects to purchase ___ shares of Series __ Preferred Stock of
CORSAIR COMMUNICATIONS, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the
purchase price of such shares in full, or
G elects to exercise its net issuance rights pursuant to Section
10.3 of the attached Warrant with respect to ___ Shares of
Series __ Preferred Stock.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.
________________________________________________________________________________
(Signature)
(Date)
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
To: CORSAIR COMMUNICATIONS, INC. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S____, filed __________, 19__, the undersigned hereby:
G elects to purchase ___ shares of Series __ Preferred Stock of the
Company (or such lesser number of shares as may be sold on
behalf of the undersigned at the Closing) pursuant to the
terms of the attached Warrant, or
G elects to exercise its net issuance rights pursuant to Section
10.3 of the attached Warrant with respect to ___ Shares of
Series __ Preferred Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such __________________ shares.
________________________________________________________________________________
(Signature)
(Date)
<PAGE>
EXHIBIT B
CHARTER
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
Corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995. The original name was Phoneprint, Inc.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of a majority
of the outstanding shares in accordance with Section 228 thereof, and written
notice having been given in accordance with the requirements of such Section.
The Amended and Restated Certificate of Incorporation restates, integrates and
amends the provisions of the Certificate of Incorporation of this corporation.
3. The Certificate of Incorporation of the corporation is hereby amended
and restated in its entirety as follows:
ARTICLE IC
The name of this corporation is Corsair Communications, Inc..
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
<PAGE>
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the corporation is authorized to issue
is Twenty-Eight Million Two Hundred Forty-Seven Thousand Four Hundred and Ten
(28,247,410) shares. Eighteen Million (18,000,000) shares shall be Common
Stock, $.001 par value per share, and Ten Million Two Hundred Forty-Seven
Thousand Four Hundred and Ten (10,247,410) shares shall be Preferred Stock,
$.001 par value per share, of which Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock and Two Million One Hundred
Twenty-Seven Thousand Four Hundred and Ten (2,127,410) shares shall be Series B
Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock and Series
B Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this corporation) on the
Common Stock of this corporation, at the rate of $0.10 per share of Series A
Preferred Stock per annum and $0.22 per share of Series B Preferred Stock per
annum (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) payable when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative. No cash dividend
shall be declared or paid with respect to the Series A Preferred Stock or Series
B Preferred Stock unless at the same time a like proportionate cash dividend for
the same dividend period, ratably in proportion to the respective annual
dividend rates set forth above, is declared and paid with respect to the Series
A Preferred Stock and the Series B Preferred Stock.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
the holders of the Series A Preferred Stock and Series B Preferred Stock were
the holders of the number of shares of Common Stock of this corporation into
which their respective shares of Series A Preferred Stock and Series B Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of this corporation entitled to receive such
distribution.
-2-
<PAGE>
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock and Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to the sum of (i) $2.00 for each outstanding share of Series A
Preferred Stock, (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations and hereafter referred to as
the "Original Series A Issue Price"), (ii) $4.43 for each outstanding share of
Series B Preferred Stock (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations and hereafter referred
to as the "Original Series B Issue Price"), and (iii) an amount equal to
declared but unpaid dividends on such share of Series A Preferred Stock or
Series B Preferred Stock, as applicable. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series A
Preferred Stock and the Series B Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then,
the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and the Series B Preferred Stock in proportion to the aggregate
liquidation preferences of the respective series, and ratably among the holders
of that series in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Series A Preferred Stock and Series B Preferred Stock).
c. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement and the issuance of Series B Preferred Stock
pursuant to the Series B Preferred Stock Purchase Agreement), shall be deemed to
be a liquidation, dissolution or winding up within the meaning of this
Section 2.
3. Conversion. The holders of the Series A Preferred Stock and
----------
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
-3-
<PAGE>
a. Right to Convert.
----------------
(i) Subject to subsection (c), each share of Series A Preferred
Stock and Series B Preferred Stock shall be convertible, at the option of the
holder thereof, at any time after the date of issuance of such share, at the
office of this corporation or any transfer agent for the particular series of
Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (A) the Original Series A Issue Price
for each share of Series A Preferred Stock and (B) the Original Series B Issue
Price for each share of Series B Preferred Stock, plus all declared but unpaid
dividends thereon for each share of Series A Preferred Stock or Series B
Preferred Stock, by the Conversion Price at the time in effect for such share.
The initial Conversion Price per share for shares of Series A Preferred Stock
shall be the Original Series A Issue Price and the initial Conversion Price per
share for shares of Series B Preferred Stock shall be the Original Series B
Issue Price; provided, however, that the Conversion Price for the Series A
Preferred Stock and Series B Preferred Stock shall be subject to adjustment as
set forth in subsection 3(c).
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $7,500,000 in the aggregate or (B) the date upon which
the corporation obtains the consent of the holders of a majority of the then
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a single class on an as converted basis.
b. Mechanics of Conversion. Before any holder of Series A Preferred
-----------------------
Stock or Series B Preferred Stock shall be entitled to convert the same into
shares of Common Stock, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this corporation or of any transfer
agent for the particular series of Preferred Stock, and shall give written
notice by mail, postage prepaid, to this corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Preferred Stock and/or Series
B Preferred Stock, or to the nominee or nominees of such holder, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Series A Preferred Stock and/or Series B Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an
-4-
<PAGE>
underwritten offer of securities registered pursuant to the Securities Act, the
conversion may, at the option of any holder tendering Series A Preferred Stock
and/or Series B Preferred Stock for conversion, be conditioned upon the closing
with the underwriter of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive the Common Stock issuable upon
such conversion of the Series A Preferred Stock and/or Series B Preferred Stock
shall not be deemed to have converted such Series A Preferred Stock and/or
Series B Preferred Stock until immediately prior to the closing of such sale of
securities.
c. Conversion Price Adjustments of Preferred Stock. The Conversion
-----------------------------------------------
Prices of the Series A Preferred Stock and Series B Preferred Stock shall be
subject to adjustment from time to time as follows:
(i) A. If the corporation shall issue any Additional Stock (as
defined below) without consideration or for a consideration per share less than
the Conversion Price for the Series A Preferred Stock or the Conversion Price
for the Series B Preferred Stock in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for the Series A Preferred Stock or
Series B Preferred Stock, as the case may be, in effect immediately prior to
each such issuance shall forthwith (except as otherwise provided in this clause
(i)) be adjusted to a price equal to the quotient obtained by dividing the total
computed under clause (x) below by the total computed under clause (y) below as
follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the shares of
the Series A Preferred Stock or Series B Preferred Stock sold pursuant
to the applicable agreements pursuant to which such shares of Series A
Preferred Stock or Series B Preferred Stock, as the case may be, are
first issued (the "Stock Purchase Agreements"), plus
(2) the aggregate consideration, if any, received
by the corporation for all Additional Stock issued on or after the
dates of the applicable Stock Purchase Agreements (the "Purchase
Date") other than shares of Common Stock issued or issuable with
respect to the Series A Preferred Stock or Series B Preferred Stock;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the shares of
Series A Preferred Stock or Series B Preferred Stock sold pursuant to
the applicable Stock Purchase Agreements divided by the applicable
Conversion Price for such shares in effect at the applicable Purchase
Date (or such higher or lower Conversion Price for such series as
results from the application of subsections 3(c)(iii) and (iv) and
assuming that this Certificate was in effect as of the applicable
Purchase Date) plus
-5-
<PAGE>
(2) the number of shares of Additional Stock
issued since the applicable Purchase Date (increased or decreased to
the extent that the number of such shares of Additional Stock shall
have been increased or decreased as the result of the application of
subsections 3(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the Series A
Preferred Stock or Series B Preferred Stock shall be made in an amount less than
one cent per share, provided that any adjustments which are not required to be
made by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to 3 years from the
date of the event giving rise to the adjustment being carried forward, or shall
be made at the end of 3 years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant
to this subsection 3(c)(i) shall have the effect of increasing the Conversion
Price above the Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued at
the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in
subsections 3(c)(i)(C) and (c)(i)(D)), if any, received by the
corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereb y.
-6-
<PAGE>
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 3(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the applicable Conversion Price of
the Series A Preferred Stock and Series B Preferred Stock, as
applicable, and to the extent in any way affected by or computed using
such options, rights or securities, shall be recomputed to reflect
such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or exchange
of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the Series
A Preferred Stock and Series B Preferred Stock, as applicable, to the
extent in any way affected by or computed using such options, rights
or securities or options or rights related to such securities, shall
be recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the
exercise of the options or rights related to such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 3(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either
-7-
<PAGE>
subsection 3(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by this corporation before, on or after the applicable Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 3(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
shares of Series A Preferred Stock or Series B Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly or
pursuant to a stock option plan or agreement or restricted stock plan
or agreement approved by the Board of Directors of this corporation,
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock and Series B Preferred Stock will
be converted to Common Stock or (II) upon exercise of warrants or
rights granted to underwriters in connection with such a public
offering, or
E. shares of Series B Preferred Stock issued or
issuable to Comdisco, Inc. pursuant to a Warrant dated August 31,
1995.
(iii) In the event the corporation should at any time or from
time to time after the applicable Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of the Series A Preferred Stock and Series B
Preferred Stock then in effect shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of the aggregate of
shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at
any time after the applicable Purchase Date is decreased by a combination of the
-8-
<PAGE>
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock
and Series B Preferred Stock then in effect shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be decreased in proportion to such decrease in outstanding
shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock and Series B Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the corporation into which their shares
of Series A Preferred Stock and Series B Preferred Stock are convertible as of
the record date fixed for the determination of the holders of Common Stock of
the corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3) provision shall be made so that the holders of the Series A
Preferred Stock and Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock and Series B Preferred
Stock, respectively, the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
Series A Preferred Stock and Series B Preferred Stock after the recapitalization
to the end that the provisions of this Section 3 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock and Series B
Preferred Stock against impairment.
-9-
<PAGE>
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon conversion of
the Series A Preferred Stock and Series B Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded up to the nearest whole
share. Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of shares of Series A Preferred
Stock and Series B Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock and Series B Preferred Stock
pursuant to this Section 3, this corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series A Preferred Stock and Series B
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
This corporation shall, upon the written request at any time of any holder of
Series A Preferred Stock or Series B Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price at the time in effect, and (C) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of a share of Series A
Preferred Stock or Series B Preferred Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock and Series B
Preferred Stock at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock and Series B Preferred
Stock such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series A
Preferred Stock and Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred Stock
and Series B Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock or Series B Preferred
Stock, this corporation will take such corporate action as may, in the
-10-
<PAGE>
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock or
Series B Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of this corporation.
4. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock and Series B Preferred Stock shall have the right to one vote
for each share of Common Stock into which such Series A Preferred Stock and
Series B Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote, together as a single class with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be five (5). Notwithstanding 5(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis, shall be entitled to elect one (1)
director of the corporation. At any meeting held for the purpose of electing
directors, the presence in person or by proxy of the holders of a majority of
the Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the election of directors to be elected solely by
the holders of Series A Preferred Stock. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock and Common
Stock then outstanding, on an as converted basis, shall constitute a quorum of
the Series A Preferred Stock, Series B Preferred Stock and Common Stock for the
election of directors to be elected solely by the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock; and a vacancy in any directorship elected
by the holders of Series A Preferred Stock, Series B Preferred Stock and Common
Stock voting together shall be filled only by the vote of the holders of Series
A Preferred Stock, Series B Preferred Stock and Common Stock voting together as
provided above.
-11-
<PAGE>
5. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock and/or Series B Preferred Stock are outstanding, this corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of a majority of the then outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, voting together as a
single class on an as converted basis:
a. sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock or Series B Preferred Stock so as to affect
adversely the shares;
c. increase the authorized number of shares of Series A
Preferred Stock, Series B Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock or
Series B Preferred Stock with respect to voting, dividends, conversion rights or
upon liquidation, or (ii) having rights similar to any of the rights of the
Series A Preferred Stock and Series B Preferred Stock under this Section 5; or
e. change authorized number of directors from five (5).
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
-12-
<PAGE>
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The corporation shall have a perpetual existence.
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the Bylaws of the corporation.
-13-
<PAGE>
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-14-
<PAGE>
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been signed under the seal of this corporation as of this 24th day of
October, 1995.
CORSAIR COMMUNICATIONS, INC.
By:/s/ Mary Ann Byrnes
---------------------------------
Mary Ann Byrnes, President
ATTEST:
/s/ Kevin Compton
- ------------------------------------------
Kevin Compton, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
CORSAIR COMMUNICATIONS, INC.
Corsair Communications, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That a resolution was duly adopted by the Board of Directors of the
Corporation setting forth a proposed amendment to the Amended and Restated
Certificate of Incorporation of the Corporation, and declaring said amendment to
be advisable and recommended for approval by the stockholders of the
Corporation. Subsection B.4.b. of Article IV of the Amended and Restated
Certificate of Incorporation is amended as follows:
"Election of Directors. The authorized number of directors of
---------------------
this Corporation shall be seven (7). Notwithstanding 5(a) above,
the holders of Series A Preferred Stock, voting as a separate
class, shall be entitled to elect four (4) directors of the
corporation; and the holders of the Series A Preferred Stock,
Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis, shall be entitled to elect
three (3) directors of the corporation. At any meeting held for
the purpose of electing directors, the presence in person or by
proxy of the holders of a majority of the Series A Preferred
Stock then outstanding shall constitute a quorum of the Series A
Preferred Stock for the election of directors to be elected
solely by the holders of Series A Preferred Stock. At any meeting
held for the purpose of electing directors, the presence in
person or by proxy of the holders of a majority of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock then
outstanding, on an as converted basis, shall constitute a quorum
of the Series A Preferred Stock, Series B Preferred Stock and
Common Stock for the election of directors to be elected solely
by the holders of the Series A Preferred Stock, Series B
Preferred Stock and Common Stock, voting together as a single
class on an as converted basis. A vacancy in any directorship
elected by the holders of Series A Preferred Stock shall be
filled only
<PAGE>
by vote of the holders of Series A Preferred Stock; and a vacancy
in any directorship elected by the holders of Series A Preferred
Stock, Series B Preferred Stock and Common Stock voting together
shall be filled only by the vote of the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock voting
together as provided above."
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, said Corsair Communications, Inc. has caused this
certificate to be signed and attested by MaryAnn Byrnes, its President and Kevin
Compton, its Secretary this 10th day of November, 1995.
By:/s/ Maryann Byrnes
---------------------------------
MaryAnn Byrnes, President
ATTEST:
By: /s/ Kevin Compton
--------------------------------------
Kevin Compton, Secretary
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
<PAGE>
EXHIBIT 10.28
SECURED PROMISSORY NOTE
$2,000,000 Dated: July 31, 1996
FOR VALUE RECEIVED, the undersigned, CORSAIR COMMUNICATIONS, INC.
("Borrower"), a Delaware corporation, HEREBY PROMISES TO PAY to the order of
--------
COMDISCO, INC., a Delaware corporation ("Lender") the principal amount of Two
------
Million Dollars ($2,000,000) or such lesser amount as shall equal the aggregate
outstanding principal balance of the Loan made by Lender to Borrower pursuant to
the Loan and Security Agreement referred to below (the "Loan Agreement"), and to
--------------
pay all other amounts due with respect to the Loan on the dates and in the
amounts set forth in the Loan Agreement.
The principal amount of this Note shall be payable in 36 consecutive monthly
installments of 2.778% of the original principal amount of this Note per month
on the last day of each calendar month commencing on February 28, 1997. All
unpaid principal and interest shall, in any event, be payable no later than
January 31, 2000.
Interest on the unpaid principal amount of this Note from the date of this
Note until such principal amount is paid in full shall accrue at the Loan Rate
or, if applicable, the Default Rate. The Loan Rate for this Note is 14.55% per
annum (based on a year of 360 days and actual days elapsed). All accrued
interest shall be payable on the last day of each calendar month, commencing
July 31, 1996.
Whenever any payment due hereunder shall fall on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees, as
the case may be.
Principal, interest and all other amounts due with respect to the Loan, are
payable in lawful money of the United States of America to Lender as follows:
COMDISCO, INC., P.O. BOX 91744, Chicago, Illinois 60693, in immediately
available funds. The Loan made by Lender to Borrower and the interest rate
applicable thereto, and all payments made with respect thereto, shall be
recorded by Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Note.
This Note is the Note referred to in, and is entitled to the benefits of, the
Loan and Security Agreement, dated as of July 31, 1996, between Borrower and
Lender (the "Loan Agreement"). The Loan Agreement, among other things (a)
provides for the making of a secured Loan by Lender to Borrower from time to
time in an aggregate principal amount not to exceed at any time outstanding the
amount first above mentioned, the indebtedness of Borrower resulting from the
Loan being evidenced by a Note; and (b) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
Prior to the first anniversary of the date hereof, there shall be no
prepayment of the Loan evidenced by this Note in whole or in part. Borrower
may, at its option, at any time on or after the first anniversary of the date
hereof, prepay the Loan evidenced by this Note, either in whole or from time to
time in any part of the principal amount
<PAGE>
thereof equal to $500,000 or more, at a prepayment price equal to the principal
amount of the Loan so to be prepaid, plus interest accrued thereon through and
including the date of such prepayment, plus the Make-Whole Premium (as defined
in the Loan Agreement). If the maturity of this Note and the Loan evidenced
thereby is accelerated under the Loan Agreement, Borrower shall pay to Lender,
in addition to principal, interest and all other amounts due with respect to
this Note, as liquidated damages for loss of Lender's benefit of the bargain and
not as a penalty, an amount equal to the Make-Whole Premium (as defined in the
Loan Agreement).
This Note and the obligation of Borrower to repay the unpaid principal amount
of the Loan, interest on the Loan and all other amounts due Lender under the
Loan Agreement is secured under the Loan Agreement.
Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower's obligations hereunder not
performed when due. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one
of its officers thereunto duly authorized on the date hereof.
CORSAIR COMMUNICATIONS, INC.
By: /s/ Martin J. Silver
---------------------
Name: Martin J. Silver
-------------------
Title: CFO
----------------
<PAGE>
Sheet 1
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
CORSAIR COMMUNICATIONS
- -----------------------------------------------------------------------
SUBORDINATED PROMISSORY NOTE
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
<S> <C>
Loan Amount: 2,000,000
===========
- -----------------------------------------------------------------------
Interest rate: 14.550%
===========
- -----------------------------------------------------------------------
Payment Amount see below
===========
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
MENT NUM DATE PRINCIPAL INTEREST PAYMENT BALANCE
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2,000,000.00
- -----------------------------------------------------------------------
0 07/31/96 2,000,000.00
- -----------------------------------------------------------------------
1 08/31/96 0.00 24,250.00 24,250.00 2,000,000.00
- -----------------------------------------------------------------------
2 09/30/96 0.00 24,250.00 24,250.00 2,000,000.00
- -----------------------------------------------------------------------
3 10/31/96 0.00 24,250.00 24,250.00 2,000,000.00
- -----------------------------------------------------------------------
4 11/30/96 0.00 24,250.00 24,250.00 2,000,000.00
- -----------------------------------------------------------------------
5 12/31/96 0.00 24,250.00 24,250.00 2,000,000.00
- -----------------------------------------------------------------------
6 01/31/97 0.00 24,250.00 24,250.00 2,000,000.00
- -----------------------------------------------------------------------
7 02/28/97 55,556.00 24,250.00 79,806.00 1,944,444.00
- -----------------------------------------------------------------------
8 03/31/97 55,556.00 23,576.38 79,132.38 1,888,888.00
- -----------------------------------------------------------------------
9 04/30/97 55,556.00 22,902.77 78,458.77 1,833,332.00
- -----------------------------------------------------------------------
10 05/31/97 55,556.00 22,229.15 77,785.15 1,777,776.00
- -----------------------------------------------------------------------
11 06/30/97 55,556.00 21,555.53 77,111.53 1,722,220.00
- -----------------------------------------------------------------------
12 07/31/97 55,556.00 20,881.92 76,437.92 1,666,664.00
- -----------------------------------------------------------------------
13 08/31/97 55,556.00 20,208.30 75,764.30 1,611,108.00
- -----------------------------------------------------------------------
14 09/30/97 55,556.00 19,534.68 75,090.68 1,555,552.00
- -----------------------------------------------------------------------
15 10/31/97 55,556.00 18,861.07 74,417.07 1,499,996.00
- -----------------------------------------------------------------------
16 11/30/97 55,556.00 18,187.45 73,743.45 1,444,440.00
- -----------------------------------------------------------------------
17 12/31/97 55,556.00 17,513.84 73,069.84 1,388,884.00
- -----------------------------------------------------------------------
18 01/31/98 55,556.00 16,840.22 72,396.22 1,333,328.00
- -----------------------------------------------------------------------
19 02/28/98 55,556.00 16,166.60 71,722.60 1,277,772.00
- -----------------------------------------------------------------------
20 03/31/98 55,556.00 15,492.99 71,048.99 1,222,216.00
- -----------------------------------------------------------------------
21 04/30/98 55,556.00 14,819.37 70,375.37 1,166,660.00
- -----------------------------------------------------------------------
22 05/31/98 55,556.00 14,145.75 69,701.75 1,111,104.00
- -----------------------------------------------------------------------
23 06/30/98 55,556.00 13,472.14 69,028.14 1,055,548.00
- -----------------------------------------------------------------------
24 07/31/98 55,556.00 12,798.52 68,354.52 999,992.00
- -----------------------------------------------------------------------
25 08/31/98 55,556.00 12,124.90 67,680.90 944,436.00
- -----------------------------------------------------------------------
26 09/30/98 55,556.00 11,451.29 67,007.29 888,880.00
- -----------------------------------------------------------------------
27 10/31/98 55,556.00 10,777.67 66,333.67 833,324.00
- -----------------------------------------------------------------------
28 11/30/98 55,556.00 10,104.05 65,660.05 777,768.00
- -----------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
1 Sheet
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
29 12/31/98 55,556.00 9,430.44 64,986.44 722,212.00
- ------------------------------------------------------------------------
30 01/31/99 55,556.00 8,756.82 64,312.82 666,656.00
- ------------------------------------------------------------------------
31 02/28/99 55,556.00 8,083.20 63,639.20 611,100.00
- ------------------------------------------------------------------------
32 03/31/99 55,556.00 7,409.59 62,965.59 555,544.00
- ------------------------------------------------------------------------
33 04/30/99 55,556.00 6,735.97 62,291.97 499,988.00
- ------------------------------------------------------------------------
34 05/31/99 55,556.00 6,062.35 61,618.35 444,432.00
- ------------------------------------------------------------------------
35 06/30/99 55,556.00 5,388.74 60,944.74 388,876.00
- ------------------------------------------------------------------------
36 07/31/99 55,556.00 4,715.12 60,271.12 333,320.00
- ------------------------------------------------------------------------
37 08/31/99 55,556.00 4,041.51 59,597.51 277,764.00
- ------------------------------------------------------------------------
38 09/30/99 55,556.00 3,367.89 58,923.89 222,208.00
- ------------------------------------------------------------------------
39 10/31/99 55,556.00 2,694.27 58,250.27 166,652.00
- ------------------------------------------------------------------------
40 11/30/99 55,556.00 2,020.66 57,576.66 111,096.00
- ------------------------------------------------------------------------
41 12/31/99 55,556.00 1,347.04 56,903.04 55,540.00
- ------------------------------------------------------------------------
42 01/31/00 55,540.00 673.42 56,213.42 0.00
- ------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
EXHIBIT 10.29
LOAN AND SECURITY AGREEMENT
Agreement No. 30426 Dated as of July 31, 1996
-----
between
MMC/GATX PARTNERSHIP NO. I
Four Embarcadero Center
Suite 2200
San Francisco, CA 94111
as Lender
and
CORSAIR COMMUNICATIONS, INC.
a Delaware corporation
3408 Hillview Avenue
Palo Alto, California 94304
as Borrower
CREDIT AMOUNT: $3,000,000
Treasury Note Maturity: 42 months
----
Loan Margin: 805 basis points
-----
Commitment Termination Date: July 31, 1996
The defined terms and information set forth on this cover page are a
part of the LOAN AND SECURITY AGREEMENT, dated as of the date first written
above (this "Agreement"), entered into by and between MMC/GATX PARTNERSHIP NO. I
("Lender") and the borrower ("Borrower") set forth above. The terms and
conditions of this Agreement agreed to between Lender and Borrower are as
follows:
<PAGE>
ARTICLE I
INTERPRETATION
--------------
1.01. Certain Definitions. Unless otherwise indicated in this Agreement or
--------------------
any other Operative Document, the following terms, when used in this Agreement
or any other Operative Document, shall have the following respective meanings:
"Borrower's Home State" shall mean the state in which Borrower's
---------------------
principal place of business is located.
"Business Day" shall mean any day other than a Saturday, Sunday or public
-------------
holiday under the laws of California, Illinois or Borrower's Home State or other
day on which banking institutions are authorized or obligated to close in
California, Illinois or Borrower's Home State.
"Cash Equivalents" shall mean (i) cash, (ii) marketable direct
----------------
obligations issued or unconditionally guaranteed by the United States or any
agency thereof maturing within one year from the date of the acquisition
thereof, (iii) commercial paper currently having a rating of at least "AI" or
"P1" by a national credit rating agency and maturing not more than one (1) year
from the creation thereof, and (iv) certificates of deposit, maturing not more
than one year from the date of creation thereof, issued by commercial banks
incorporated under the laws of the United States or a state thereof having
combined capital and surplus of not less than $200,000,000.
"Change of Control" shall mean the occurrence of any of the following
-----------------
(i) the acquisition by any person or group of persons acting together of 50% or
more of the outstanding voting securities of Borrower, (ii) the sale or all or
substantially all of the assets of Borrower, or (iii) a merger or consolidation
in which the shareholders of Borrower immediately prior to the consummation of
such merger or consolidation do not own at least 50% of the outstanding voting
securities of the surviving corporation immediately after such merger or
consolidation.
"Claim" has the meaning given to that term in Section 10.03.
----- --------------
"Collateral" has the meaning given to that term in Motion 5.01(a).
---------- ---------------
"Commitment Fee" has the meaning given to that term in Section 2.04.
-------------- -------------
"Commitment Termination Date" shall mean the date specified on the cover
---------------------------
page of this Agreement.
"Credit Amount" shall mean the maximum amount that Lender is committed to
-------------
lend (if the conditions specified in Schedule 3 are satisfied), which amount is
set forth following such term on the cover page of this Agreement.
"Current Assets" shall mean the aggregate amount of all of the
--------------
consolidated assets of Borrower and its Subsidiaries that would, in accordance
with GAAP, be classified on a balance sheet as current assets.
"Current Liabilities" shall mean the aggregate amount of all of the
-------------------
consolidated liabilities of Borrower and its Subsidiaries that would, in
accordance with GAAP, be classified on a balance sheet as current liabilities.
"Debt" shall mean, with respect to Borrower or any Subsidiary, the
----
aggregate amount of, without duplication, (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of property or services (excluding
trade payables of less than 180 days), (d) all capital lease obligations of such
Person, (e) all obligations or liabilities of others secured by a lien on any of
such Person, whether or not such obligation or liability is assumed, and (Al all
obligations or liabilities of others guaranteed by such Person. Unless otherwise
indicated,the term "Debt" shall include all Debt of Borrower and its
----
Subsidiaries.
"Default" shall mean any event which with the passing of time or the
-------
giving of notice or both would become an Event of Default hereunder.
1
<PAGE>
"Default Rate" shall mean the per annum rate of interest equal to the
------------
higher of (i) 18% or (ii) the Prime Rate plus 6%, but such rate shall in no
event be more than the highest rate permitted by applicable law.
"Disclosure Schedule" has the meaning set forth in the definition of the
-------------------
term "Permitted Liens."
"Environmental Law" shall mean the Resource Conservation and Recovery
-----------------
Act of 1987, the Comprehensive Environmental Response, Compensation and
Liability Act, and any other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree (in each case having the force of law)
regulating or imposing liability or standards of conduct concerning any
Hazardous Material, as now or at any time hereafter in effect.
"Equipment" has the meaning given to that term in Section 5.01(a).
--------- ----------------
"Equity Securities" of any Person shall mean (a) all common stock,
-----------------
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"Event of Default" has the meaning given to that term in Section 9.01.
---------------- -------------
"Event of Loss" has the meaning given to that term in Section 6.01(e).
------------- ----------------
"Funding Date" shall mean any date on which the Loan is made to or on
------------
account of Borrower under this Agreement.
"GAAP" shall mean generally accepted accounting principles and practices
----
as in effect in the United States of America from time to time, consistently
applied.
"Hazardous Material" means any hazardous, dangerous or toxic constituent
------------------
material, pollutant, waste or other substance, whether solid, liquid or gaseous,
which is regulated by any federal, state or local governmental authority.
"Initial Public Offering" means the closing of the initial public
-----------------------
offering of Borrower's Common Stock effected pursuant to a registration
statement on Form S-I (or its successor) filed under the Securities Act of 1933,
as amended.
"Intellectual Property" shall mean all of Borrower's right, title and
---------------------
interest in and to patents, patent rights (and applications therefor),
trademarks and service marks (and applications and registrations therefor),
inventions, copyrights, mask works (and applications and registrations
therefor), trade names, trade styles, software.and computer programs, trade
secrets, methods, processes, know how, drawings, specifications, descriptions,
and all memoranda, notes, and records with respect to any research and
development, all whether now owned or subsequently acquired or developed by
Borrower and whether in tangible or intangible form or contained on magnetic
media readable by machine together with all such magnetic media.
"Landlord Consent" shall mean a consent in the form of Exhibit C or such
---------------- ---------
other form as Lender may agree to accept.
"Lien" shall mean any pledge, bailment, lease, mortgage, hypothecation,
----
conditional sales and title retention agreements, charge, claim, encumbrance or
other lien in favor of any Person.
"Loan"" shall mean the advance by Lender to Borrower under this
----
Agreement.
"Loan Margin" shall mean the number of basis points set forth following
------------
such term on the cover page of this Agreement.
"Loan Rate" shall mean, with respect to the Loan, the per annum rate of
---------
interest (based on a year of 360 days and actual days elapsed) equal to the sum
of (a) the U.S. Treasury note rate of a term equal to the Treasury
2
<PAGE>
Note Maturity as quoted in The Wall Street Journal on the date two (2) Business
-----------------------
Days prior to the requested Funding Date of the Loan plus (b) the Loan Margin.
"Make-Whole Premium" shall mean an amount equal to the greater of (i)
------------------
zero and (ii) the excess of (x) the sum of the present values, at the date of
prepayment of the amount of each remaining scheduled payment of interest on and
principal on the Loan, or portion of such payment, which will not be required to
be made as a result of such prepayment (each such payment an "Amount Payable")
--------------
(each such Amount Payable discounted separately at the Treasury Rate, determined
on the date three (3) Business Days before the date of prepayment, compounded
monthly, from the date such Amount Payable would be due), over (y) the principal
amount of such Note to be prepaid. The "Treasury Rate" shall be, prior to
Borrower's Initial Public Offering, the yield (as quoted in The Wall Street
---------------
Journal on the date which is three (3) Business Days prior to the date of
- -------
prepayment) on U.S. Treasury securities adjusted to a constant maturity equal
to the then remaining number of full months to maturity of the Note. After
Borrower's Initial Public Offering, the "Treasury Rate" shall be the rate
determined pursuant to the previous sentence plus 200 basis points.
"Note" or "Notes" shall mean the secured promissory note or notes, as
---- -----
applicable, of Borrower substantially in the form of Exhibit A.
---------
"Obligations" has the meaning given to that term in Section 5.01.
----------- -------------
"Operative Documents" shall mean this Agreement, the Note, the Warrant,
-------------------
the Landlord Waiver and Consent(s) and all other documents, instruments and
agreements executed and delivered in connection herewith or therewith or in
respect of the closing of the transactions contemplated hereby or thereby.
"Payment Date" means the last day of each calendar month.
-------------
"Permitted Liens" shall mean (a) the Lien created by this Agreement, (b)
----------------
Liens for fees, taxes, levies, imposts, duties or other governmental charges of
any kind which are not yet delinquent or which are being contested in good faith
by appropriate proceedings which suspend the collection thereof (provided,
--------
however, that such proceedings do not involve any substantial danger of the
- -------
sale, forfeiture or loss of any item of Equipment and that Borrower has
adequately bonded such Lien or reserves sufficient to discharge such Lien have
been provided on the books of Borrower), (c) Liens identified on the disclosure
schedule attached hereto as Schedule 2 ("Disclosure Schedule"), (d) Liens to
---------- -------------------
secure payment of worker's compensation, employment insurance, old age pensions
or other social security obligations of Borrower in the ordinary course of
business of Borrower, (e) Liens upon any equipment or other personal property
acquired by Borrower after the date hereof to secure (i) the purchase price of
such equipment or other personal property or (ii) lease obligations or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment or other personal property; provided that (A) such Liens are
--------
confined solely to the equipment or other personal property so acquired, and (B)
no such Lien shall be created, incurred, assumed or suffered to exist in favor
of Borrower's officers, directors or shareholders holding five percent (5%) or
more of Borrower's Equity Securities, (f) non-exclusive licenses of Intellectual
Property entered into in the ordinary course of business and licenses, Liens or
similar arrangements entered into in connection with joint ventures and
corporate collaborations, and (g) Liens referred to in and to which Lender has
agreed to be subordinated pursuant to Section 5.05.
-------------
"Person" shall mean and include an individual, a partnership, a
------
corporation, a business trust, a joint stock company, a limited liability
company, an unincorporated association or other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.
"Prime Rate" shall mean the interest rate per annum publicly announced
----------
from time to time by Bank of America NT & SA (or its successor) as its reference
rate, but such rate shall in no event be more than the highest interest rate
permitted by applicable law.
"Qualified Financing" shall mean the closing of the sale of the Equity
-------------------
Securities of Borrower having net proceeds to Borrower of not less than
$10,000,000.
3
<PAGE>
"Subsidiary" shall mean any corporation of which a majority of the
----------
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.
"Tangible Net Worth" shall mean Borrower's consolidated assets as
------------------
determined in accordance with GAAP minus (a) consolidated liabilities, as
determined in accordance with GAAP, (b) all intangible assets of Borrower,
including, but not limited to, all assets which should be classified as
intangible assets, such as goodwill, patents, trademarks, copyrights,
franchises, treasury stock and deferred charges (including unamortized debt
discount and research and development costs), (c) cash held in a sinking or
other similar fund established for the purpose of redemption or other retirement
of capital stock, (d) to the extent not already deducted from total assets,
reserves for depreciation, depletion, obsolescence or amortization of properties
and other reserves or appropriations of retained earnings which have been or
should be established in connection with the business conducted by Borrower, and
(e) unless approved by Borrower's auditors, any revaluation or other write-up in
book value of assets subsequent to Borrower's fiscal year last ended at the date
of this Agreement.
"Term" shall mean the period from and after the date hereof until the
----
payment or satisfaction in full of all Obligations under this Agreement and the
other Operative Documents.
"Treasury Note Maturity" shall mean the period of months set forth
-----------------------
following such term on the cover page of this Agreement.
"Warrant" shall mean a warrant to purchase securities of Borrower
-------
substantially in the form of Exhibit C.
---------
1.02. Headings. Headings in this Agreement and each of the other
--------
Operative Documents are for convenience of reference only and are not part of
the substance hereof or thereof.
1.03. Plural Terms. All terms defined in this Agreement or any other
------------
Operative Document in the singular form shall have comparable meanings when used
in the plural form and vice versa.
---- -----
1.04. Construction. This Agreement is the result of negotiations
-------------
among, and has been reviewed by, Borrower and Lender and their respective
counsel. Accordingly, this Agreement shall be deemed to be the product of all
parties hereto, and no ambiguity shall be construed in favor of or against
Borrower or Lender.
1.05. Entire Agreement. This Agreement, together with the terms set
----------------
forth in each of the other Operative Documents, taken together, constitute and,
contain the entire agreement of Borrower and Lender and, with regard to their
respective subject matters, supersede any and all prior agreements, term sheets,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, with respect to their respective subject
matters.
1.06. Other Interpretive Provisions. References in this Agreement to
--------------------------------
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other
Operative Documents to any document, instrument or agreement shall include (a)
all exhibits, schedules, annexes and other attachments thereto, (b) all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) such document, instrument or agreement, or replacement or predecessor
thereto, as amended, modified and supplemented from time to time and in effect
at any given time. The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any other Operative Document shall
refer to this Agreement or such other Operative Document, as the case may be, as
a whole and not to any particular provision of this Agreement or such other
Operative Document, as the case may be. The words "include" and "including" and
words of similar import when used in this Agreement or any other Operative
Document shall not be construed to be limiting or exclusive. Unless otherwise
indicated in this Agreement or any other Operative Document, all accounting
terms used in this Agreement or any other Operative Document shall be construed,
and all accounting and financial computations hereunder or thereunder shall be
computed, in accordance with generally accepted accounting principles as in
effect in the United States of America from time to time.
4
<PAGE>
ARTICLE II
THE CREDIT
----------
2.01. Credit Facility.
---------------
(a) Commitment. On the terms and subject to the conditions hereof and
----------
relying upon the representations and warranties herein set forth as and when
made or deemed to be made, Lender agrees to lend to Borrower a Loan in the
aggregate principal amount of Three Million Dollars ($3,000,000).
(b) Loan Interest Rate. Borrower shall pay interest on the unpaid
------------------
principal amount of the Loan from the date of the Loan until the Loan is paid in
full, at a per annum rate of interest equal to the Loan Rate determined in
accordance with the definition of Loan Rate. The Loan Rate applicable to the
Loan shall not be subject to change in the absence of manifest error. All
computations of interest on the Loan shall be based on a year of 360 days and
actual days elapsed. If Borrower pays interest on the Loan which is determined
to be in excess of the then legal maximum rate, then that portion of each
interest payment repressing an amount in excess of the then legal maximum rate
shall be deemed a payment of principal and applied against the principal of the
Loan.
(c) Payments Of Principal and Interest. Borrower shall make payments of
----------------------------------
accrued interest only on the aggregate outstanding principal amount of the Loan
on each Payment Date through and including January 31, 1996. Thereafter, on
each Payment Date, commencing on February 28, 1997, Borrower shall make thirty-
six (36) payments of principal equal to 2.7778% of the original principal amount
of the Loan, plus accrued interest on the unpaid principal balance of the Loan,
until the Loan is paid in full with the last payment to occur, unless the Loan
is earlier prepaid, on January 31, 2000. The Loan may not be prepaid except as
set forth in Section 2.02(f).
2.02. Use of Proceeds: the Loans and the Note: Disbursement.
-----------------------------------------------------
(a) Use of Proceeds. The proceeds of the Loan shall be used solely for
---------------
working capital or general corporate purposes of Borrower.
(b) The Loan and the Note. The obligation of Borrower to repay the
---------------------
aggregate unpaid principal amount of and interest on the Loan shall be evidenced
by the Note. Lender may, and is hereby authorized by Borrower to, endorse on a
grid annexed to the Note appropriate notations regarding the Loan; provided,
--------
however, that the failure to make, or an error in making, any such notation
- -------
shall not limit or otherwise affect the obligations of Borrower hereunder or
under the Note.
(d) Disbursement. Subject to the satisfaction of the conditions set
------------
forth in this Agreement, Lender shall disburse the Loan by wire transfer to
Borrower in same day immediately available funds unless otherwise directed in
writing by Borrower.
(e) Termination of Commitment to Lend. Notwithstanding anything to the
---------------------------------
contrary in the Operative Documents, Lender's obligation to lend to Borrower
hereunder shall terminate on the earlier of (i) the occurrence of any Event of
Default hereunder, and (ii) the Commitment Termination Date.
(f) Optional Prepayment with Premium. At any time after the first
--------------------------------
anniversary date hereof, upon three (3) Business Days' prior written notice to
Lender, Borrower may, at its option at any time, prepay the Loan either in whole
or from time to time in any part of the principal amount thereof equal to
$500,000 or more, at a prepayment price equal to the principal amount of the
Loan so to be prepaid, plus interest accrued thereon through and including the
date of such prepayment, plus a premium equal to the Make-Whole Premium.
(g) Mandatory Prepayment. Prior to any contemplated Change of Control,
--------------------
Borrower shall give Lender written notice of thereof together with a description
of the proposed transaction and financial information concerning the surviving
or acquiring entity or such entity's parent if applicable (and will deliver
additional information upon Lender's reasonable request). Lender shall notify
Borrower within thirty (30) days of receipt of such notice whether or not it
will consent (such consent not to be unreasonably withheld) to the assignment to
and the assumption by such surviving or acquiring entity or the continuation of
the Loan with the Borrower if the Borrower has become
5
<PAGE>
a Subsidiary of any such entity. If Lender does not so consent (and such
consent shall not be unreasonably withheld), then prior to the closing of the
Change of Control, Borrower shall prepay the principal, accrued interest and
other amounts due with respect to the Loan plus a premium equal to the Make-
Whole Premium.
2.03. Other Payment Terms.
-------------------
(a) Place and Manner. Borrower shall make all payments due to Lender in
----------------
lawful money of the United States, in immediately available funds, at the
address for payments and in the manner specified in Section 1 0.05(b).
------------------
(b) Date. Whenever any payment due hereunder shall fall due on a day
----
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be.
(c) Default Rate. If either (i) any amounts required to be paid by
------------
Borrower under this Agreement or the other Operative Documents (including
principal or interest payable on the Loan, any fees or other amounts) remain
unpaid for five (5) days after such amounts are due, or (ii) an Event of Default
has occurred and is continuing, Borrower shall pay interest on the aggregate,
outstanding principal balance hereunder from the date due or from the date of
the Event of Default, as applicable, until such past due amounts are paid in
full or until all Events of Defaults are cured, as applicable, at a per annum
rate equal to the Default Rate, such rate to change from time to time as the
Prime Rate shall change. All computations of such interest at the Default Rate
shall be based on a year of 360 days and actual days elapsed.
2.04. Commitment Fee. Lender has received a commitment fee from Borrower in
--------------
the amount of $15,000 (the "Commitment Fee"). Any portion of the Commitment Fee
---------- ---
not utilized to pay Lender's expenses in connection with the negotiation,
documentation and funding of the Loan (such expenses not to exceed $7,500) will
be applied by Lender to amounts due under the Note in the order in which such
amounts are due. If the Loan is not made, any remaining balance of the
Commitment Fee shall be retained by Lender.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.01. Representations and Warranties. Except as set forth in the Disclosure
------------------------------
Schedule, Borrower makes the following representations and warranties to Lender
as of the date hereof and again on each Funding Date:
(a) Organization and Qualification. Borrower is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of its state of
incorporation and is duly qualified to do business in Borrower's Home State.
Borrower has no Subsidiaries.
(b) Authority. Borrower has all necessary corporate power, authority and
---------
legal right and has obtained all approvals and consents and has given all
notices necessary to execute and deliver this Agreement and the other Operative
Documents and to perform the terms hereof and thereof. Borrower has all
requisite corporate power and authority to own and operate its properties and to
carry on its businesses as now conducted.
(c) Conflict with Other Instruments, etc. Neither the execution and
------------------------------------
delivery of any Operative Document to which Borrower is a party nor the
consummation of the transactions therein contemplated nor compliance with the
terms, conditions and provisions thereof will conflict with or result in a
breach of any of the terms, conditions or provisions of the charter or the
bylaws of Borrower or, to its knowledge, any law or any regulation, order, writ,
injunction or decree of any court or governmental instrumentality or any
material agreement or instrument to which Borrower is a party or by which it or
any of its properties is bound or to which it or any of its properties is
subject, or constitute a default thereunder or result in the creation or
imposition of any Lien, other than Permitted Liens.
(d) Title to Properties. Borrower has good and marketable title to the
-------------------
Collateral, free and clear of all Liens, other than Permitted Liens. Borrower
has title and ownership of, or is licensed under, all Intellectual
6
<PAGE>
Property, with no known infringement of the rights of others. Borrower has not
received any communications alleging that Borrower has violated, or by
conducting its business as proposed, would violate any proprietary rights of any
other Person. Borrower has no knowledge of any infringement or violation by it
of the intellectual property rights of any third party and has no knowledge of
any violation or infringement by a third party of any of its Intellectual
Property. The Collateral and the Intellectual Property constitute substantially
all of the assets and property of Borrower. Borrower does not own any right,
title or interest in or to any real property or motor vehicles, other than motor
vehicles leased to executives as part of a benefit arrangement.
(e) Authorization, Governmental Approvals etc. The execution and
-----------------------------------------
delivery by Borrower of each Operative Document, the granting of the security
interest in the Collateral, the issuance of the Warrant, the issuance of the
securities into which the Warrant is exercisable, the issuance of any securities
into which the securities issuable upon exercise of the Warrant are convertible,
and the performance of the obligations herein and therein contemplated have each
been duly authorized by all necessary action on the part of Borrower. No
authorization, consent, approval, license or exemption of, and no registration,
qualification, designation, declaration or filing with, or notice to, any Person
is, was or will be necessary to (i) the valid execution and delivery of any
Operative Document to which Borrower is a party, (ii) the performance of
Borrower's obligations under any Operative Document, or (iii) the granting of
the security interest in the Collateral, except for filings in connection with
the perfection of the security interest in any of the Collateral or the issuance
of the Warrant. The Operative Documents have been or will be duly executed and
delivered and constitute or will constitute legal, valid and binding obligations
of Borrower, enforceable in accordance with their respective terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws of general application relating to or affecting the enforcement of
creditors' rights or by general principles of equity.
(f) Litigation. There are no actions, suits, proceedings or
----------
investigations pending or, to the knowledge of Borrower, threatened against or
affecting Borrower, or the business or any property or asset owned by it, before
any court or governmental department, agency or instrumentality which, if
adversely determined, could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.
(g) Disclosure. Neither any Operative Document nor any other agreement,
----------
document or certificate furnished by Borrower to Lender, including, without
limitation, historical financial statements, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading. There is no fact known
to Borrower which materially adversely affects, or which could reasonably be
expected in the future to materially adversely affect, its ability to perform
its obligations under the Operative Documents to which it is a party.
(h) Security Interest. Assuming the proper filing of one or more
-----------------
financing statement(s) identifying the Collateral with the proper state and/or
local authorities, the security interests in the Collateral granted to Lender
pursuant to this Agreement (i) constitute and will continue to constitute first
priority security interests (except to the extent any other Permitted Lien
existing on the date of this Agreement may create any priority to Lender's Lien
under this Agreement) and (ii) are and will continue to be superior and prior to
the rights in the Collateral of all other creditors of Borrower (except to the
extent of such Permitted Liens).
(i) Executive Offices. The principal place of business and chief
-----------------
executive office of Borrower, and the office where Borrower will keep all
records and files regarding the Collateral, is set forth on the cover page of
this Agreement.
ARTICLE IV
REPORTING REQUIREMENTS
----------------------
4.01. Furnishing Reports. Borrower shall furnish to Lender:
------------------
(a) Financial Statements. So long as Borrower is not subject to the
--------------------
reporting requirements of Section 12 or Section 15 of the Securities and
Exchange Act of 1934, as amended, promptly as they are available, unaudited
monthly and audited annual financial statements of Borrower and such other
financial information as Lender may
7
<PAGE>
reasonably request from time to time. From and after such time as Borrower
becomes a publicly reporting company, promptly as they are available and in any
event: (i) at the time of filing of Borrower's Form 10-K with the Securities and
Exchange Commission after the end of each fiscal year of Borrower, the financial
statements of Borrower filed with such Form 10-K; and (ii) at the time of filing
of Borrower's Form 10-Q with the Securities and Exchange Commission after the
end of each of the first three fiscal quarters of Borrower, the financial
statements of Borrower filed with such Form 10-Q.
(b) Compliance Statements. Promptly as they are available and in any
---------------------
event within thirty (30) days of the end of each fiscal quarter of Borrower a
certificate of Borrower's Chief Financial Officer or other senior officer
stating that he or she has reviewed the provisions of this Agreement and that
Borrower is not in default in the observance or performance of any of the
provisions hereof, or if Borrower shall be so in default, specifying all such
defaults and events of which he or she may have knowledge and setting forth the
calculation of compliance or noncompliance with the financial covenant set forth
in Section 7.02.
(b) Notice of Defaults. As soon as possible, and in any event within five
------------------
(5) Business Days after the discovery of a Default or Event of Default provide
Lender with an Officer's Certificate of Borrower setting forth the facts
relating to or giving rise to such Default or Event of Default and the action
which Borrower proposes to take with respect thereto.
(c) Miscellaneous. Such other information as Lender may reasonably
-------------
request from time to time.
ARTICLE V
GRANT OF SECURITY INTEREST
GENERAL PROVISIONS CONCERNING SECURITY
--------------------------------------
5.01. Grant of Security Interest. Borrower, in order to secure the payment
--------------------------
of the principal and interest with respect to the Loan made pursuant to this
Agreement, all other sums due under and in respect hereof and of the other
Operative Documents, including fees, charges, expenses and attorneys' fees and
costs and the performance and observance by Borrower of all other terms,
conditions, covenants and agreements herein and in the other Operative Documents
(all such amounts and obligations being herein sometimes called the
"Obligations"), does hereby grant to Lender and its successors and assigns, a
-----------
security interest in and to the following property (collectively, the
"Collateral"): All right, title, interest, claims and demands of Borrower in and
----------
to:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all laboratory equipment, computer equipment, office
equipment, machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing;
(c) All cone act rights and general intangibles, including Intellectual
Property, now owned or hereafter acquired, including, without limitation,
goodwill, license agreements, franchise agreements, blueprints, drawings,
purchase orders, customer lists, route lists, infringements, claims, computer
programs, computer disks, computer tapes, literature, reports, catalogs, design
rights, income tax refunds, payments of insurance and rights to payment of any
kind;
(d) All now existing and hereafter arising accounts, royalties, license
rights and all other forms of obligations owing to Borrower arising out of the
sale or lease of goods, the licensing of technology or the rendering of services
by Borrower (subject, in each case, to the contractual rights of third parties
to require funds received
8
<PAGE>
by Borrower to be expended in a particular manner), whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
Borrower's books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's books relating to the foregoing; and
(f) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof, including,
without limitation, insurance, condemnation, requisition or similar payments and
proceeds of the sale or licensing of Intellectual Property to the extent such
proceeds no longer constitute Intellectual Property.
5.02. Duration of Security Interest. Subject to Section 5.06, Lender's
----------------------------- ------------
security interest in the Collateral shall continue until the payment in full and
the satisfaction of all Obligations, whereupon such security interest shall
terminate. Lender, upon payment in full and the satisfaction of the
Obligations, shall promptly execute such further documents and take such further
actions as may be necessary to effect the release and/or termination
contemplated by this Section 5.02, including duly executing and delivering
------------
termination statements for filing in all relevant jurisdictions.
5.03. Possession of Collateral. Except as set forth in Section 5.04, so
------------------------
long as no Event of Default has occurred and is continuing, Borrower shall
remain in full possession, enjoyment and control of the Collateral (except only
as may be otherwise required by Lender for perfection of its security interest
therein) and to manage, operate and use the same and each part thereof with the
rights and franchises appertaining thereto; provided, however, howler, that the
-------- -------
possession, enjoyment, control and use of the Collateral shall at all times be
subject to the observance and performance of the terms of this Agreement.
5.04 Location of Collateral. The Collateral is and shall remain in the
----------------------
possession of Borrower at Borrower's address stated on the cover page of this
Agreement.
5.05 Lien Subordination. Lender agrees that the Liens granted to it
------------------
hereunder shall be subordinate to the Liens of existing and future lenders
providing working capital financing; provided that such Liens are confined
--------
solely to inventory, accounts receivable (and instruments and general
intangibles related specifically to such inventory and accounts receivable) and
the proceeds thereof; and provided, further, that the Obligations hereunder
-------- -------
shall not be subordinate in right of payment to any obligations to working
capital lenders and Lender's rights and remedies hereunder shall not in any way
be subordinate to the rights and remedies of any such working capital lenders.
Lender agrees to execute and deliver such agreements and documents as may be
reasonably requested by Borrower from time to time which set forth the lien
subordination described in this Section 5.05 and are reasonably acceptable to
------------
Lender. Lender shall have no obligation to execute any agreement or document
which would impose obligations, restrictions or lien priority on Lender which
are less favorable than those described in this Section 5.05. In particular, so
------------
long as no Event of Default has occurred and is continuing, Lender agrees that
it will execute and deliver an Intercreditor Agreement with Silicon Valley Bank
in the form attached hereto as Exhibit E.
---------
5.06 Partial Release of Collateral. Upon receipt of evidence of the
-----------------------------
occurrence of a Qualified Financing, Lender shall release its security interest
in all of the items set forth in Section 5.01(c) which constitute Intellectual
---------------
Property.
5.07 Additional Covenants.
--------------------
(a) Landlord Waiver. In connection the execution and delivery of this
---------------
Agreement, Borrower has caused to be delivered to Lender a Sublessor's Waiver
and Consent from Syntex Corp. which is the sublessor of Borrower's facility.
Borrower agrees that within 30 days of the earlier of its expiration of its
sublease with Syntex Corp. or its entering into a new lease for its current or
another facility, it will obtain a Landlord Consent from the owner of the
premises which it is then occupying.
(b) Copyright Filings. Borrower agrees that in the event that it
-----------------
registers the copyrights to its software
9
<PAGE>
with the United States Copyright Office, it will promptly notify Borrower of
such registration and will at its expense execute and cause to be filed with the
United States Copyright Office such instruments or documents as Lender may
reasonably request to perfect and maintain Lender's security interest in such
copyrights.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
6.01. Affirmative Covenants.
---------------------
(a) Payment of Taxes, etc. Borrower shall pay and discharge all taxes,
----------------------
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon any of its properties; provided that there shall be no
--------
requirement to pay any such tax, assessment, charge, levy or claim (i) which is
being contested in good faith and by appropriate proceedings or which presents
no risk of seizure, forfeiture, levy or other event which could jeopardize any
Collateral or (ii) for which payment in full is bonded or reserved in Borrower's
financial statements.
(b) Inspection Rights. Borrower shall, at any reasonable time and from
-----------------
time to time, permit Lender or any of its agents or representatives to inspect
the Collateral, to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, Borrower and to discuss the
affairs, finances and accounts of Borrower with any of its officers or directors
relating in each case to Lender's capacity as lender and secured party hereunder
and with respect to the Collateral.
(c) Maintenance of Equipment and Similar Assets. Borrower shall keep and
-------------------------------------------
maintain all items of equipment and other similar types of personal property
that form any significant portion or portions of the Collateral in good
operating condition and repair and shall make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Borrower shall not permit any such
material item of Collateral to become a fixture to real estate or an accession
to other personal property, without the prior written consent of Lender.
Borrower shall not permit any such material item of Collateral to be operated or
maintained in violation of any applicable law, statute, rule or regulation.
With respect to items of leased equipment (to the extent Lender has any security
interest in any residual Borrower's interest in such equipment under the lease),
Borrower shall keep, maintain, repair, replace and operate such leased equipment
in accordance with the terms of the applicable lease.
(d) Insurance.
---------
(i) Borrower shall, obtain and maintain for the Term, at its own
expense, (x) "all risk" insurance against loss or damage to the Collateral, (y)
commercial general liability insurance (including contractual liability,
products liability and completed operations coverages) reasonably satisfactory
to Lender, and (z) such other insurance against such other risks of loss and
with such terms, as shall in each case be reasonably satisfactory to or
reasonably required by Lender (as to carriers, amounts and otherwise).
Borrower's insurance which has been reviewed and approved by Lender prior to the
making of the Loan hereunder shall be deemed to satisfy the requirements of this
Section 6.01 (d).
(ii) The deductible with respect to "all-risk" insurance required by
clause (x) above and product liability insurance required by clause (y) above
shall not exceed $25,000; otherwise the deductible with respect to any insurance
required to be maintained hereunder shall not exceed $5,000. The amount of
commercial general liability insurance (other than products liability coverage
and completed operations insurance) required by clause (y) above shall be at
least $5,000,000 per occurrence. The amount of the products liability and
completed operations insurance required by clause (y) above shall be at least
$5,000,000 per occurrence. Each "all risk" policy shall: (x) name Lender as
loss payee, (y) provide for each insurer's waiver of its right of subrogation
against Lender, and (z) provide that such insurance (A) shall not be invalidated
by any action of, or breach of warranty by, Borrower of a provision of any of
its insurance policies, and (B) shall waive set-off, counterclaim or offset
against Lender. Each liability policy shall (w) name Lender as an additional
insured and (x) provide that such insurance shall have
10
<PAGE>
cross-liability and severability of interest endorsements (which shall not
increase the aggregate policy limits of Borrower's insurance). All insurance
policies shall (y) provide that Borrower's insurance shall be primary without a
right of contribution of Lender's insurance, if any, or any obligation on the
part of Lender to pay premiums of Borrower, and (z) shall contain a clause
requiring the insurer to give Lender at least 30 days' prior written notice of
its cancellation (other than cancellation for non-payment for which 10 days'
notice shall be sufficient).. Borrower shall on or prior to the first Funding
Date and prior to each policy renewal, furnish to Lender certificates of
insurance or other evidence satisfactory to Lender that such insurance coverage
is in effect.
ARTICLE VII
NEGATIVE AND FINANCIAL COVENANTS
--------------------------------
7.01. Negative Covenants. So long as the Obligations remain outstanding,
------------------
Borrower shall not:
(a) Name; Location of Chief Executive Office and Collateral. Without
-------------------------------------------------------
thirty (30) days prior written notice to Lender, change its chief executive
office or principal place of business or remove or cause to be removed from the
location set forth on the cover page hereof or move any Collateral to a location
other than that set forth on the cover page hereof.
(b) Liens on Collateral. Create, incur, assume or suffer to exist any
-------------------
Lien of any kind upon any Collateral, whether now owned or hereafter acquired,
except Permitted Liens.
(c) Negative Pledge Regarding Intellectual Property. Create, incur,
-----------------------------------------------
assume or suffer to exist any Lien of any kind upon any Intellectual Property,
whether now owned or hereafter acquired, except Permitted Liens.
(d) Dispositions of Collateral or Intellectual Property. Convey, sell,
---------------------------------------------------
offer to sell, lease, transfer, exchange or otherwise dispose of (collectively,
a "Transfer") all or any part of the Collateral to any Person other than: (i)
---------
transfers of inventory in the ordinary course of business; (ii) transfers of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower in the ordinary course of business; or (iii) transfers of worn-out or
obsolete Equipment. It is expressly agreed and understood that the ordinary
course of Borrower's business includes entering into agreements and arrangements
with third parties for research, development, distribution, manufacturing, sale
or marketing of products and the licensing of Intellectual Property in
connection with such agreements and arrangements.
(e) Distributions. (i) Pay any dividends or make any distributions on its
-------------
Equity Securities; (ii) purchase, redeem, retire, defease or otherwise acquire
for value any of its Equity Securities (other than pursuant to the terms of
employee stock purchase plans, employee restricted stock agreements or similar
arrangements in an aggregate amount not to exceed $100,000); (iii) return any
capital to any holder of its Equity Securities as such; (iv) make any
distribution of assets, Equity Securities, obligations or securities to any
holder of its Equity Securities as such; or (v) set apart any sum for any such
purpose; provided, however, that Borrower may pay dividends payable solely in
Common Stock.
(f) Mergers or Acquisitions. Except with Lender's prior written consent
-----------------------
as set forth in Section 2.02(g), merge or consolidate with or into any other
---------------
Person or acquire all or substantially all of the capital stock or assets of
another Person.
(i) Transactions With Affiliates. Enter into any contractual obligation
----------------------------
with any affiliate or engage in any other transaction with any affiliate except
upon terms at least as favorable to Borrower or such Subsidiary as an arms-
length transaction with unaffiliated Persons.
(j) Maintenance of Accounts. Borrower shall not maintain any deposit
-----------------------
accounts or accounts holding securities owned by Borrower except (i) accounts
located at Silicon Valley Bank and (ii) other accounts with respect to which
Lender takes such action as it deems necessary to obtain a perfected security
interest in such account.
(k) Indebtedness. Prior to the closing of a Qualified Financing, Borrower
------------
shall not incur any Debt
11
<PAGE>
except Debt subordinated to the Obligations on terms and conditions satisfactory
to Lender.
7.02 Financial Covenant. From and after the occurrence of a Qualified
------------------
Financing, as of the last day of each calendar month, Borrower shall maintain a
ratio of Debt to Tangible Net Worth of not greater than 1.5:1.00.
ARTICLE VIII
CONDITIONS PRECEDENT
--------------------
8.01. Closing. At the time of execution and delivery of this Agreement,
-------
Borrower shall have duly executed and/or delivered to Lender the items set forth
in Part I of Schedule 3.
--------------------
8.02. Other Conditions. The obligation of Lender to make the Loan shall be
----------------
subject to the execution and/or delivery to Lender of each of the items set
forth in Part I of Schedule 3 and the satisfaction of by Borrower of each
--------------------
condition set forth in Part I of Schedule 3.
--------------------
8.03. Covenant to Deliver. Borrower agrees (not as a condition but as a
-------------------
covenant) to deliver to Lender each item required to be delivered to Lender as a
condition to the Loan, if the Loan is advanced. Borrower expressly agrees that
the extension of the Loan prior to the receipt by Lender of any such item shall
not constitute a waiver by Lender of Borrower's obligation to deliver such item.
ARTICLE IX
DEFAULT AND REMEDIES
--------------------
9.01. Events of Default. An "Event of Default" shall mean the occurrence of
-----------------
one or more of the following described events:
(a) Borrower shall (i) default in the payment of principal of or interest
on the Loan for five (5) days after the same is due, or (ii) default in the
payment of any expense or other amount payable hereunder or thereunder ten (10)
days after receipt of written notice from Lender that the same is due; or
(b) Borrower shall breach any provision of Section 7.01, Section 7.02 or
------------ ------------
Section 6.01(d); or
- ---------------
(c) Borrower shall default in the performance of any covenant, agreement
or obligation (other than a covenant, agreement or obligation referred to in
Section 9.01(a) or Section 9.01(b)) contained in any Operative Document and
- --------------- ---------------
Borrower shall fail to cure within thirty (30) days after receipt of written
notice from Lender any default in the performance of any such covenant,
agreement or obligation contained therein; or
(d) Any representation or warranty made herein or on a Funding Date by
Borrower in any Operative Document, or any certificate or financial statement
furnished pursuant to the provisions of any Operative Document, shall prove to
have been false or misleading in any material respect as of the time made or
furnished; or
(e) Borrower shall assert that any Operative Document is not, a legal,
valid and binding obligation of Borrower enforceable in accordance with its
terms; or
(f) A default shall exist under any agreement with (i) any third party or
parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any indebtedness or other obligations
of Borrower in an amount in excess of $250,000, or (ii) Comdisco, Inc.
resulting in a right by Comdisco, Inc., whether or not exercised, to accelerate
the maturity of any indebtedness; or
(g) A proceeding shall have been instituted in a court of competent
jurisdiction seeking a decree or order for relief in respect of Borrower in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee
12
<PAGE>
(or similar official) of Borrower or for any substantial part of its property,
or for the winding-up or liquidation of its affairs, and such proceeding shall
remain undismissed or unstayed and in effect for a period of thirty (30)
consecutive days or such court shall enter a decree or order granting the relief
sought in such proceeding; or
(h) Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian (or other similar official)
of Borrower or for any substantial part of its property, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action in furtherance of
any of the foregoing.
9.02. Consequences of Event of Default. (a) If an Event of Default
--------------------------------
specified under clauses (a) through (f) of Section 9.01 shall occur and be
----------------------- ------------
continuing, Lender may (i) declare the Loan, together with interest thereon,
plus the Make-Whole Premium and all other liabilities of Borrower hereunder and
under the other Operative Documents to be immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived, and (ii) terminate its commitment to make the Loan and
terminate any commitment to advance money or extend credit to or for the benefit
of Borrower pursuant to any other agreement or commitment extended by Lender to
Borrower.
(b) If an Event of Default specified under clause (g) or (h) of Section
----------------------------
9.01 shall occur, then immediately and without notice (i) the Loan, together
- ----
with interest thereon, plus premium, and all other liabilities of Borrower
hereunder and under the other Operative Documents shall automatically become due
and payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, and (ii) Lender's commitment hereunder make
the Loan and any other commitment of Lender to Borrower to advance money or
extend credit pursuant to any other agreement or commitment shall be terminated.
9.03. Rights Regarding Collateral. Borrower agrees that when any Event of
---------------------------
Default has occurred and is continuing, Lender shall have the rights, options,
duties and remedies of a secured party as permitted by law and, in addition to
and without limiting the foregoing, Lender may exercise any one or more or all,
and in any order, of the remedies herein set forth, including the following:
(a) Lender, personally or by agents or attorneys, shall have the right
(subject to compliance with any applicable mandatory legal requirements) to
require Borrower to assemble the Collateral and make it available to Lender at a
place to be designated by Lender or to take immediate possession of the
Collateral, or any portion thereof, and for that purpose may pursue the same
wherever it may be found, and may enter any of premises of Borrower, with or
without notice, demand, process of law or legal procedure, to the extent
permitted by applicable law, and search for, take possession of, remove, keep
and store the same, or use and operate or lease the same until sold. In
furtherance of Lender's rights hereunder, Borrower hereby grants to Lender an
irrevocable, non-exclusive license (exercisable without royalty or other payment
by Lender) to use, license or sublicense any patent, trademark, trade name,
copyright or other intellectual property in which Borrower now or hereafter has
any right, title or interest together with the right of access to all media in
which any of the foregoing may be recorded or stored; provided, however, that
such license shall only be exercisable in connection with the disposition of
Collateral upon Lender's exercise of its remedies hereunder.
(b) Lender may, if at the time such action may be lawful and always
subject to compliance with any mandatory legal requirements, either with or
without taking possession and either before or after taking possession, without
instituting any legal proceedings whatsoever, having first given notice of such
sale by registered or ratified mail to Borrower once at least ten (10) days
prior to the date of such sale, and having first given any other notice which
may be required by law, sell and dispose of the Collateral, or any part thereof,
at a private sale or at public auction, to the highest bidder, in one lot as an
entirety or in separate lots, and either for cash or on credit and on such terms
as Lender may determine, and at any place (whether or not it be the location of
the Collateral or any part thereof) designated in the notice referred to above.
To the extent permitted by applicable law, any such sale or sales may be
adjourned from time to time by announcement at the time and place appointed for
such sale or sales, or for any such adjourned sale or sales, without further
published notice, and Borrower, Lender or the holder or holders of the Note, or
of any interest therein, may bid and become the purchaser at any such sale.
13
<PAGE>
(c) Lender may proceed to protect and enforce this Agreement and the other
Operative Documents by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted;
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for any real property security or any part thereof, or for the recovery of
judgment for the Obligations or for the enforcement of any other proper, legal
or equitable remedy available under applicable law.
9.05. Effect of Sale. Any commercially reasonably sale, whether under any
--------------
power of sale available to Lender or by virtue of judicial proceedings, shall
operate to divest all right, title, interest, claim and demand whatsoever,
either at law or in equity, of Borrower in and to the property sold, and shall
be a perpetual bar, both at law and in equity, against Borrower, its successors
and assigns, and against any and all persons claiming the property sold or any
part thereof under, by or through Borrower, its successors or assigns.
9.06. Application of Collateral Proceeds. The proceeds and/or avails of the
----------------------------------
Collateral, any part thereof, and the proceeds and the avails of any remedy
hereunder (as well as any other amounts of any kind held by Lender at the time
of, or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows:
(a) First, to the payment of reasonable costs and expenses, including all
-----
amounts expended to preserve the value of the Collateral, of foreclosure or
suit, if any, and of such sale and the exercise of any other rights or remedies,
and of all proper fees, expenses, liability and advances, including reasonable
legal expenses and attorneys' fees, incurred or made hereunder by Lender;
(b) Second, to the payment to Lender of the amount then owing or unpaid on
------
the Note, and in case such proceeds shall be insufficient to pay in full the
whole amount so due, owing or unpaid upon the Note, then first, to the unpaid
-----
interest thereon, second, to unpaid principal thereof and third to the remaining
------ -----
balance of the Obligations under the Note; such application to be made upon
presentation of the Note, and the notation thereon of the payment, if partially
paid, or the surrender and cancellation thereof, if fully paid;
(c) Third, to the payment of other amounts then payable to Lender under
-----
any of the Operative Documents; and
(d) Fourth, to the payment of the surplus, if any, to Borrower, its
------
successors and assigns, or to whomsoever may be lawfully entitled to receive the
same.
9.07. Reinstatement of Rights. If Lender shall have proceeded to enforce
-----------------------
any right under this Agreement or any other Operative Document by foreclosure,
sale, entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then and in
every such case (unless otherwise ordered by a court of competent jurisdiction),
Lender shall be restored to its former position and rights hereunder with
respect to the property subject to the security interest created under this
Agreement.
ARTICLE X
MISCELLANEOUS
-------------
10.01. Modifications, Amendments or Waivers. The provisions of any
------------------------------------
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.
10.02. No Implied Waivers: Cumulative Remedies: Writing Required. No delay
---------------------------------------------------------
or failure of Lender in exercising any right, power or remedy hereunder shall
affect or operate as a waiver thereof; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such a right,
power or remedy preclude any further exercise thereof or of any other right,
power or remedy. The rights and remedies hereunder of Lender are cumulative and
not exclusive of any rights or remedies which it would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the part of
Lender of any breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing and shall be
14
<PAGE>
effective only in the specified instance and to the extent specifically set
forth in such writing.
10.03. Expenses; Indemnification. Borrower agrees upon demand to pay or
-------------------------
reimburse Lender for all liabilities, obligations and out-of-pocket expenses,
including reasonable fees and expenses of counsel for Lender, from time to time
arising in connection with the enforcement or collection of sums due under the
Operative Documents. Borrower shall indemnify, reimburse and hold Lender, each
of Lender's partners, and each of their respective successors, assigns, agents,
officers, directors, shareholders, servants, agents and employees harmless from
and against all liabilities, losses, damages, actions, suits, demands, claims of
any kind and nature (including claims relating to environmental discharge,
cleanup or compliance), all costs and expenses whatsoever to the extent they may
be incurred or suffered by such indemnified party in connection therewith
(including reasonable attorneys' fees and expenses), fines, penalties (and other
charges of applicable governmental authorities), licensing fees relating to any
item of Collateral, damage to or loss of use of property (including
consequential or special damages to third parties or damages to Borrower's
property), or bodily injury to or death of any person (including any agent or
employee of Borrower) (each, a "Claim"), directly or indirectly relating to or
-----
arising out of the use of the proceeds of the Loan or otherwise, the falsity of
any representation or warranty of Borrower or Borrower's failure to comply with
the terms of this Agreement or any other Operative Document during the Term.
The foregoing indemnity shall cover, without limitation, (i) any Claim in
connection with a design or other defect (latent or patent) in any item of
equipment included in the Collateral, (ii) any Claim for infringement of any
patent, copyright, trademark or other intellectual property right, (iii) any
Claim resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release of any Hazardous Materials on the
premises of Borrower, including any Claims asserted or arising under any
Environmental Law, or (iv) any Claim for negligence or strict or absolute
liability in tort; provided, however, that Borrower shall not indemnify Lender
-----------------
for any liability incurred by Lender as a direct and sole result of Lender's
gross negligence or willful misconduct. Such indemnities shall continue in full
force and effect, notwithstanding the expiration or termination of this
Agreement. Upon Lender's written demand, Borrower shall assume and diligently
conduct, at its sole cost and expense, the entire defense of Lender, each of its
partners, and each of their respective, agents, employees, directors, officers,
shareholders, successors and assigns against any indemnified Claim described in
this Section 10.03. Borrower shall not settle or compromise any Claim against
-------------
or involving Lender without first obtaining Lender's written consent thereto,
which consent shall not be unreasonably withheld.
10.04. Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
-------
AGREEMENT OR ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM LENDER
UNDER ANY THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.05. Notices: Payments. (a) All notices and other communications given to
-----------------
or made upon any party hereto in connection with this Agreement shall be in
writing (including telexed, telecopied or telegraphic communication) and mailed
(by certified or registered mail), telexed, telegraphed, telecopied or delivered
to the respective parties, as follows:
Borrower: At the address set forth on the cover page of this Agreement.
Lender: MMC/GATX PARTNERSHIP NO. I
c/o GATX Capital Corporation
Four Embarcadero Center
Suite 2200
San Francisco, California 94111
Telephone No.: 415-955-3200
Telecopier No.: 415-955-3493
Attention: Contract Administration
15
<PAGE>
with a copy of all financial information to:
MEIER MITCHELL & COMPANY
4 Orinda Way, Suite 200B
Orinda, California 94563
or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.
(b) Unless Lender specifies otherwise in writing, all payments shall be
made to:
MMC/GATX PARTNERSHIP NO. I
c/o GATX Capital Corporation, as Agent
Box 71316
Chicago, Illinois 60694
10.06. Termination. This Agreement shall terminate at the end of the Term;
-----------
provided, however, that the termination of this Agreement shall not affect any
- -------- -------
of the rights and remedies of either party hereunder, it being understood and
agreed that all such rights and remedies shall continue in full force and effect
until payment of all amounts owed to Lender under or in connection with the
Operative Documents, whether on account of principal, interest, fees or
otherwise.
10.07. Severability. If any provision of any Operative Document is held
------------
invalid or unenforceable to any extent or in any application, the remainder of
such Operative Document and all other Operative Documents, or the application of
such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.
10.08. Survival. All representations, warranties, covenants and agreements
--------
of the parties contained herein or made in writing in connection herewith shall
survive the execution and delivery of the Operative Documents, the making of
Loan hereunder, the granting of security and the issuance of the Note.
10.09. Governing Law. THIS AGREEMENT, THE OTHER OPERATIVE DOCUMENTS AND THE
-------------
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE GOVERNED AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
ANY ACTION TO ENFORCE THIS AGREEMENT MAY BE BROUGHT IN CALIFORNIA OR, WITH
REGARD TO COLLATERAL, MAY ALSO BE BROUGHT WHEREVER SUCH COLLATERAL IS LOCATED.
10.10. Successors and Assigns. This Agreement and the other Operative
----------------------
Documents shall be binding upon and inure to the benefit of Lender, all future
holders of the Note, Borrower and their respective successors and permitted
assigns, except that Borrower may not assign or transfer its rights hereunder or
any interest herein without the prior written consent of Lender. Lender may
sell to any other financial entity (a "Participant") participation interests in
-----------
Lender's rights under this Agreement and the other Operative Documents; provided
that notwithstanding the sale of participations, Lender shall remain solely
responsible for the performance of its obligations under this Agreement, Lender
shall remain the holder of the Note for all purposes under this Agreement and
Borrower shall continue to deal solely and directly with Lender in connection
with this Agreement and the other Loan Documents; and provided, further, that
Lender may not sell any participation interest to any entity which might be a
competitor of Borrower without Borrower's prior written consent. Lender may
disclose the Operative Documents and any other financial or other information
relating to Borrower or any Subsidiary to any potential Participant, provided
that such Participant agrees to protect the confidentiality of such documents
and information using the same measures that it uses to protect its own
confidential information.
10.11. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but
16
<PAGE>
all such counterparts shall together constitute one and the same instrument.
10.12. Further Assurances. Borrower will, at its own expense, from time to
------------------
time do, execute, acknowledge and deliver all further acts, deeds, conveyances,
transfers and assurances, and all financing and continuation statements and
similar notices, reasonably necessary or proper for the perfection of the
security interest being herein provided for in the Collateral, whether now owned
or hereafter acquired.
10.13. Power of Attorney in Respect of the Collateral. Borrower does hereby
----------------------------------------------
irrevocably appoint Lender (which appointment is coupled with an interest), the
true and lawful attorney-in-fact of Borrower with full power of substitution,
for it and in its name (a) to perform (but Lender shall not be obligated to and
shall incur no liability to Borrower or any third party for failure to perform)
any act which Borrower is obligated by this Agreement to perform, (b) to ask,
demand, collect, receive, receipt for, sue for, compound and give acquittance
for any and all rents, issues, profits, avails, distributions, income, payment
draws and other sums in which a security interest is granted under Section 5.01
------------
with full power to settle, adjust or compromise any claim thereunder as fully as
if Lender were Borrower itself, (c) to receive payment of and to endorse the
name of Borrower to any items of Collateral (including checks, drafts and other
orders for the payment of money) that come into Lender's possession or under
Lender's control, (d) to make all demands, consents and waivers, or take any
other action with respect to, the Collateral, (e) in Lender's discretion, to
file any claim or take any other action or institute proceedings, either in its
own name or in the name of Borrower or otherwise, which Lender may reasonably
deem necessary or appropriate to protect and preserve the right, title and
interest of Lender in and to the Collateral, and (f) to otherwise act with
respect thereto as though Lender were the outright owner of the Collateral;
provided, however, that the power of attorney herein granted shall be
- -------- -------
exercisable only upon the occurrence and during the continuation of an Event of
Default. Borrower agrees to reimburse Lender upon demand for all reasonable
costs and expenses, including attorneys' fees and expenses, which Lender may
incur while acting as Borrower's attorney in fact hereunder, all of which costs
and expenses are included within the Obligations.
10.14 Confidentiality. All information (other than periodic reports filed
---------------
by Borrower with the Securities and Exchange Commission) disclosed by Borrower
to Lender in writing or through inspection pursuant to this Agreement shall be
considered confidential. Lender agrees to use the same degree of care to
safeguard and prevent disclosure of such confidential information as Lender uses
with its own confidential information, but in any event no less than a
reasonable degree of care. Lender shall not disclose such information to any
third party (other than Lender's or Lender's partner's attorneys and auditors
subject to the same confidentiality obligation set forth herein) and shall use
such information only for purposes of evaluation of its investment in Borrower
and the exercise of Lender's rights and the enforcement of its remedies under
this Agreement and the other Operative Agreements. The obligations of
confidentiality shall not apply to any information that Lender can demonstrate
(a) was known to the public prior to disclosure by Borrower under this
Agreement, (b) becomes known to the public through no fault of Lender, (c) is
disclosed to Lender by a third party' having a legal right to make such
disclosure, or (d) is independently developed by Lender.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their offices thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
CORSAIR COMMUNICATIONS, INC.
By: /s/ Martin J. Silver
--------------------------------
Name: MARTIN J. SILVER
-----------------------------
Title: CHIEF FINANCIAL OFFICER
-----------------------------
MMC/GATX PARTNERSHIP NO. I
By: Meier Mitchell & Company, its General Partner
By: /s/ James V. Mitchell
-------------------------------
Name: JAMES V. MITCHELL
-----------------------------
Title: CFO
-----------------------------
18
<PAGE>
SCHEDULES
1 Funding Certificate
2 Disclosure Schedule
3 Conditions Precedent
EXHIBITS
A Form of Secured Promissory Note
B Form of Landlord Consent
C Form of Warrant
D Form of Opinion of Counsel
E Form of Intercreditor Agreement
19
<PAGE>
SCHEDULE 1
FUNDING CERTIFICATE
The undersigned, MARTIN J. SILVER , being the duly elected and
------------------------------
acting CHIEF FINANCIAL OFFICER of CORSAIR COMMUNICATIONS, INC., a Delaware
-----------------------------
corporation ("Borrower"), does hereby certify to MMC/GATX Partnership No. I, in
connection with that certain Loan and Security Agreement dated as of July 31,
1996 (the "Loan Agreement") with other capitalized terms used below having the
meanings ascribed thereto in the Loan Agreement) that:
1. The representations and warranties made by Borrower in Article III of
-----------
the Loan Agreement and in the other Operative Documents are true and
correct as of the date hereof.
2. No event or condition has occurred and is continuing that would
constitute a Default or an Event of Default under the Loan Agreement or
any other Operative Document.
3. Borrower is in compliance with the covenants and requirements contained
in Articles IV, VI and VII of the Loan Agreement.
-----------------------
4. All conditions referred to in Article VIII of the Loan Agreement to the
------------
making of the Loan to be made on or about the date hereof been
satisfied.
5. No material adverse change in the general affairs, management, results
of operations, condition (financial or otherwise) or prospects of
borrower, whether or not arising from transactions in the ordinary
course of business, has occurred.
Dated: July 31, 1996
CORSAIR COMMUNICATIONS, INC.
By: /s/ Martin J. Silver
------------------------------
Name: MARTIN J. SILVER
---------------------------
Title: CHIEF FINANCIAL OFFICER
--------------------------
20
<PAGE>
SCHEDULE 2
DISCLOSURE SCHEDULE
-------------------
The following matters are exceptions to the representations and warranties of
Corsair Communications, Inc., a Delaware corporation (the "Company") as set
forth in Article III of the Loan and Security Agreement dated July 31, 1996
between the Company and MMC/GATX Partnership No. 1 (the "Agreement"). The
section numbers in this Disclosure Schedule correspond to the section numbers in
the Agreement; however, any information disclosed herein under any section
number shall be deemed to be disclosed and incorporated into any other section
number under the Agreement where such disclosure would otherwise be appropriate.
Where the terms of a contract or other disclosure item have been summarized or
described in this Disclosure Schedule, such summary or description does not
purport to be a complete statement of the material terms of such contract or
other item. Any terms defined in the Agreement shall have the same meaning when
used in this Disclosure Schedule as when used in the Agreement unless the
context otherwise requires.
Section 3.01(d) Title to Properties.
--------------- -------------------
Pursuant to a Loan and Security Agreement dated August 31, 1995 between the
Company and Comdisco, Inc. ("Comdisco"), the Company borrowed $1,000,000 from
Comdisco and has granted to Comdisco a first priority security interest in and
to the following property: (i) the equipment and other property (the
"Equipment") described in Exhibit A attached hereto; and (ii) all proceeds,
products, replacements, additions to, substitutions for and accessions to any
and all Equipment including, without limitation, the proceeds applicable to
insurance covering the Equipment.
Pursuant to a Loan and Security Agreement of even date herewith between the
Company and Comdisco, Inc. ("Comdisco"), the Company borrowed $2,000,000 from
Comdisco, and has granted to Comdisco a security interest in the same collateral
as covered by the Agreement.
Section 3.01(f) Litigation.
--------------- ----------
Ronald H. Busch, Robert E. Hartmann, Michael B. Powell, James M. Simmons,
John Taylor, Sharen Blasquez-Guerra and Peter McCoy (collectively, the
"Plaintiffs") have filed a lawsuit in the superior court of the state of
California, county of San Francisco naming TRW, Inc., ESL Incorporated and the
Company as defendants. The claims contained in the Plaintiffs' complaint relate
to their dismissal on or about the time at which Corsair purchased the
PhonePrint assets from ESL Incorporated. Only two of the seven Plaintiffs were
ever employed by Corsair, and Corsair is seeking indemnification from TRW, Inc.
with regard to this matter.
<PAGE>
Section 3.01(h) Security Interest.
--------------- -----------------
See Section 3.01(d) above.
-2-
<PAGE>
Section 2.21 Patents and Trademarks.
------------ ----------------------
(1) Patents and Patent Applications.
-------------------------------
U.S. Patent No. 5,448,760, "Cellular Telephone Anti-Fraud
System," by Max Frederick, issued September 5, 1995. Corresponding foreign
counterpart applications are listed below.
<TABLE>
<CAPTION>
Country Serial No. Filing Date
------- ---------- -----------
<S> <C> <C>
Canada 2115796 February 16, 1994
China 94106543 June 8, 1994
EPO (designating Sweden, 93310493.7 December 23, 1993
Italy, France, Germany,
and United Kingdom)
Finland 940941 February 28, 1994
India 262/CAL/94 April 12, 1994
Japan 5-334108 December 28, 1993
Malaysia PI9401443 June 7, 1994
South Korea 94-12798 June 8, 1994
Taiwan 8305731 June 23, 1994
Thailand 022645 June 2, 1994
</TABLE>
(2) The Company has licensed certain rights to U.S. Patent No.
5,448,760, "Cellular Telephone Anti-Fraud System" to Airtouch Communications
Incorporated ("Airtouch") pursuant to that certain Development and License
Agreement dated October 4, 1993, as amended (the "Airtouch Agreement"). In
addition, the Company has licensed to Airtouch certain rights under any future
patents relating to the development conducted under the Airtouch Agreement.
(3) The Company has licensed the rights to U.S. Patent No. 5,420,910,
"Method and Apparatus for Fraud Control in Cellular Telephone Systems Utilizing
RF Comparisons" from Airtouch pursuant to the Airtouch Agreement.
-3-
<PAGE>
(4) The Company has licensed its rights in the patent and patent
applications set forth in Section 2.21(1) above and certain other inventions for
use in the military/intelligence field and for purposes outside the wireless
communication field to TRW Inc. pursuant to a certain License and Technical
Assistance Agreement dated December 14, 1994.
(5) See Section 2.9(b)(8) above.
(6) The Company currently utilizes certain inventions of its
employees made while employees of TRW Inc. The Company has acquired the right to
use each of these inventions from TRW Inc.
(7) A schedule of the Company's software licenses is attached hereto
as Schedule 2.21(7). Certain software licenses that were assigned to the Company
by TRW Inc. require the consent of the software licensor in order to effect a
proper assignment, and where indicated on Schedule 2.21(7), the Company has not
obtained this consent.
-4-
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
ASSETS GOING WITH PHONEPRINT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HP 7550A 231 CMPTR PLOTTER GRPH 86/01/21 C0012235 2520A20644 1
APPLE MACPLUS 686 COMPUTER PERSONAL 87-03-16 C0014120 F7101K2M00 1 2,294.63 2,294.63
APPLE MACPLUS 551 COMPUTER PERSONAL 87-4-28 C0014342 F6050CM0200 1 1,837.45 1,837.45
APPLE MACPLUS 452 COMPUTER PERSONAL 87-6-15 C0014542 F7232M2M00 1 1,508.13 1,508.13
APPLE MAC PLUS 745 COMPUTER PERSONAL 87-5-10 C0016103 F819350M00 1 1,460.17 1,460.17
AST PREMIUM 286 COMPUTER PERSONAL -- C0017172 38521 1 0.00
APPLE MAC II 459 COMPUTER PERSONAL 87-7-26 C0017215 F926DEM56 1 3,827.87 3,827.87
APPLE ? CMPTR MONITOR COLOR ? C0017806 1 0.00 0.00
APPLE MAC II 547 COMPUTER PERSONAL 91-9-5 C0019273 F51245N576 1 4,560.80 3,624.93
APPLE M0402 189 CMPTR MONITOR, MONO 91-9-05 C0019285 PH1238K35M 1 1,561.19 1,240.84
APPLE M0402 188 CMPTR MONITOR, MONO 91-8-20 C0019290 PH1239USA1 1 1,561.74 1,255.54
APPLE MAC II 505 COMPUTER PERSONAL 91-8-20 C0019291 F51270UG76 1 4,208.20 3,376.66
APPLE MAC II 408 COMPUTER PERSONAL 91-11-11 C0019589 F113881XC5 1 3,403.30 2,653.23
RADIUS 168 218 CMPTR, MONITOR 91-11-19 C0019590 DCH1410A00 1 1,395.30 1,068.23
APPLE MAC II ? MAC 11C1 W/EXT KYBD ? C0019941 F11441A1716 1 4,327.13 3,285.73
RADIUS TPD/19 CMPTR MONITOR 92-4-1 C0020185 DCH2040A01 1 1,305.13 341.43
245
APPLE MACII 11044 COMPUTER, PERSONAL 92-5-7 C0020195 F12176F971 1 4,353.50 3,085.11
RADIUS TPD/19 COMPTR MONITOR 92-12-14 C0021173 DCH26/ 1 1,109.13 687.66
2DA04
APPLE CENTRIS 1342 COMPUTER PERSONAL 93-4-5 C0021600 F1311CLDOC 1 4,194.11 2,246.18
DELL 1351 COMPUTER COMPUTER PERSONAL 93-6-16 C0021988 2KY12 1 4,221.88 2,082.79
S466/M
DELL 1351 COMPUTER COMPUTER PERSONAL 93-6-16 C0021989 2KY16 1 4,221.88 2,082.79
S466/M
APPLE CENTRIS COMPUTER PERSONAL 93-6-8 C0021990 F1305DAYOC 1 6,040.86 2,940.16
1933
APPLE CENTRIS COMPUTER PERSONAL 93-6-8 C0021991 F13050QYOC 1 6,040.88 2,940.17
1933
RADIUS CMPTR MONITOR, COLOR 93-7-13 C0021992 WTB324A105 1 2,247.53 1,061.33
719 350
RADIUS CMPTR MONITOR, COLOR 93-7-13 C0021993 WTB324A100 1 2,247.56 1,0051.34
719 350
TEXAS INSTR 531 2559821 CMPTR PRINTER LASER 93-6-15 C0021994 321030674 1,660.56 819.21
APPLE QUADRA 449 CENTRIS 650 C0022026 CK327000CG7 1 4,263.01 1,914.06
APPLE CENTRIS 1243 COMPUTER PERSONAL 93-6-24 C0022035 F1321D3550C 1 3,884.73 1,916.44
APPLE CENTRIS 1243 COMPUTER PERSONAL 93-6-24 C0022037 F1321DN90C 1 3,884.73 1,916.44
APPLE CENTRIS 473 COMPUTER PERSONAL 93-8-4 C0022137 F23075WSCN 1 3,281.96 1,480.93
APPLE CENTRIS 473 COMPUTER PERSONAL 93-8-4 C0022138 F23075WWCN 1 3,281.96 1,480.53
APPLE CENTRIS (610) COMUTER PERSONAL 93-8-4 C0022139 F2331HXMCN 1 3,281.96 1,480.51
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022140 F2307KB3CN 1 1,780.56 807.74
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022141 F2307W66CN 1 1,780.56 807.74
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022142 F2307KB5CN 1 1,780.56 807.74
290
APPLE CENTRIS (610) COMPUTER PERSONAL 93-8-4 C0022143 F23075NRCN 1 1,790.56 807.74
290
APPLE CENTRIS 573 COMPUTER PERSONAL 93-8-4 C0022145 F23073WUCN 1 1,790.56 807.74
RADIUS 770 348 CMPTR MONITOR COLOR 93-5-4 C0022145 HNC7190ADI 1 2,405.36 1,064.34
RADIUS 779 348 21" COLOR MONITOR 93-5-15 C0022146 HNC190ADI00A 1 2,463.40 1,099.15
APPLE PRO 630 814 CMPTR PTINER LASER 93-11-19 C0022147 F132614010 1 2,344.56 1,147.23
NCA 4542NT 717A CMPTR DRIVE DISK 94-3-11 C0022151 G9360753 1 1,406.17 634.32
NCA MXT1240S 660 CMPTR DRIVE DISK 94-3-1 C0022196 G93658772 1 1,234.67 584.04
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-21 C0022479 C03905VIC 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022480 CX3905VFI 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022481 CX371U8ZIC 1 3,236.95 1,255.22
(610)
</TABLE>
Page 1 of 10
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022482 CX337UZ1C 1 3,236.95 1,255.22
(610)
APPLE 504 QUADRA COMPUTER PERSONAL 93-11-9 C0022483 CX33725I1C 1 2,083.94 808.11
(610)
APPLE 504 QUADRA COMPUTER PERSONAL/21" CLR 93-11-9 C0022484 CX3371V21C 1 2,083.94 808.11
(610) MONITOR
RADIUS 448 381 CMPTR MONITOR COLOR 93-10-8 C0022485 SSG33ZA103 1 2,961.19 1,210.84
RADIUS 948 381 CMPTR MONITOR COLOR 93-10-5 C0022486 SSG33ZA103 1 2,961.19 1,210.84
DELL 1,269 COMPUTER COMPUTER PERSONAL 93-10-8 C0022528 30MW5 1 3,933.48 1,608.36
S466M
DELL 1,259 COMPUTER COMPUTER PERSONAL 93-10-8 C0022529 30MW6 1 3,933.50 1,606.37
S466M
CHAPLET SYS 1,627 COMPUTER PERSONAL LLPTR 2/OK C0022619 71263M347 1 5,068.67 1,872.50
NBD486T
SUN MICROSYS 10GXN-407 457 WORKSTATION 94-10-6 C0023073 35054623 1 4,621.40 4,873.50
SUN MICROSYS 10GXN-407,579 WORKSTATION 94-10-6 C0023074 35054632 1 4,469.30 4,795.38
SUN MICROSYS 4/1 5EC-32 177 WORKSTATION 94-10-6 C0023075 351F1078 1 5,656.06 1,385.36
SUN MICROSYS 4/1 5EC-32 177 WORKSTATION 94-1-6 C0023076 351F1068 1 5,656.06 1,385.36
SUN MICROSYS 4/10EC-8 199 WORKSTATION 94-10-6 C0023077 351F2559 1 2,837.55 975.38
SUN MICROSYS X547A-ST 9859 CMPTR DRIVE DISK 94-10-6 C0023078 35183300 1 4,439.00 1,476.53
SUN MICROSYS X547A-ST2 259 CMPTR, DRIVE DISK 94-10-6 C0023079 351U3356 1 2,961.53 1,416.53
</TABLE>
Page 2 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
APPLE 990 POWERBOOK COMPUTER PERSONAL LPTP 93-12-22 C0023101 PC3480MU44 1 3,094.63 1,134.70
APPLE 990 POWERBOOK COMPUTER PERSONAL LPTP 93-12-22 C0023102 PC347D0744 1 3,094.63 1,134.70
APPLE 990 POWERBOOK COMPUTER PERSONAL LPTP 93-12-72 C0023103 PC348DB444 1 3,094.63 1,134.70
APPLE 940 QUADRA COMPUTER PERSONAL 93-12-21 C0023104 PC3465LTIC 1 2,952.33 1,082.52
APPLE 940 POWERBOOK /OU COMPUTER PERSONAL 93-12-21 C0023105 PC3490QHIC 1 2,952.33 1,082.52
APPLE 445 POWERBOOK /OU COMPUTER PERSONAL 93-12-21 C0023106 PC3495C41C 1 2,952.33 1,082.52
APPLE 945 POWERBOOK /OU COMPUTER PERSONAL 93-12-21 C0023107 PC3495561C 1 2,952.33 1,082.52
APPLE 945 POWERBOOK /OU COMPUTER PERSONAL 93-12-21 C0023108 PC3490031C 1 2,952.33 1,082.52
APPLE 945 POWERBOOK /OU COMPUTER PERSONAL 93-12-21 C0023109 PC465NX1C 1 2,952.33 1,082.52
APPLE 945 POWERBOOK /OU COMPUTER PERSONAL 93-12-21 C0023110 PC49080IC 1 2,952.33 1,082.52
APPLE 945 QUADRA COMPUTER PERSONAL 93-12-21 C0023111 FC4504TIC 1 2,952.34 1,082.52
(610)
MICRONET SS-D16000 COMPUTER DRIVE TAPE DATE ? C0023115 5301768 1 1,749.32 734.72
486 COMPUTER - C0023197 1 2,919.93 724.73
HP 7550A 231 CMPTR, PLOTTER, GRPH - C0023308 2631A36846 1 2,080.04 534.68
DELL 1800 COMPUTER COMPUTER PERSONAL 94-3-4 C0023309 3DYPS 1 3,530.99 941.60
S486D
DELL 1800 COMPUTER COMPUTER PERSONAL 94-3-4 C0023310 3DYFM 1 3,530.99 941.60
S486D
DELL 1800 COMPUTER COMPUTER PERSONAL 94-3-4 C0023311 3DYRD 1 3,530.99 941.60
S486D
FR SYSTEMS COM-120A CMPTR, MONITOR 94-3-22 CC0023404 1686 1 13,201.89 3,520.50
6,733
IBM 800 425SX/SI COMPUTER PERSONAL 94-4-11 C0023529 FS02323KKP 1 1,367.70 365.80
IBM 744 425SX/SI COMPUTER PERSONAL 94-4-11 C0023530 PS02323KKI 1 1,457.46 351.95
APPLE 676 QUADRA COMPUTER PERSONAL 94-4-11 C0023531 PC3490E41C 1 5,949.25 1,224.36
APPLE 227 QUADRA COMPUTER PERSONAL 94-3-30 C0023532 PC406015U 1 2,404.99 641.33
APPLE ? QUADRA COMPUTER PERSONAL 94-3-30 C0023533 PC406006U 1 2,404.99 641.33
APPLE QUADRA COMPUTER PERSONAL --? C0023534 PC4060CXU 1 2,295.70 993.52
APPLE 1135 QUADRA COMPUTER PERSONAL 94-3-30 C0023535 PC40600HU 1 2,225.69 593.52
APPLE 1,135 QUADRA COMPUTER PERSONAL 94-3-30 C0023536 PC40600UU 1 2,225.70 593.52
APPLE 2,428 POWER MAC COMPUTER PERSONAL 94-4-14 C0023537 XB412CCNZQ 1 3,617.27 813.46
APPLE 2,428 POWER MAC COMPUTER PERSONAL 94-4-13 C0023538 XB412VDNZQ 1 3,617.28 815.46
APPLE 1,349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-21 C0023605 PC406SYI44 1 2,645.13 617.20
APPLE 1349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-21 C0023605 PC4065VY44 1 2,645.13 617.20
APPLE 1349 POWERMAC COMPUTER PERSONAL 94-4-21 C0023621 XB407LWP19 1 3,232.23 754.19
APPLE 1349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-28 C0023634 PC40458B44 1 2,938.53 676.17
APPLE 1349 POWERBOOK COMPUTER PERSONAL LPTP 94-4-28 C0003635 PC404TBY4 1 2,938.51 676.17
APPLE 1227 QUADRA COMPUTER PERSONAL 94-4-18 C0023647 PC404074U 1 2,404.99 641.33
APPLE 1227 QUADRA COMPUTER PERSONAL 94-4-18 C0023648 PC40603UU 1 2,404.99 641.33
APPLE 1227 QUADRA COMPUTER PERSONAL 94-4-18 C0023649 PC40413RU 1 2,404.99 641.33
APPLE 504 QUADRA610 COMPTR-PERSON 94-6-10 C0023782 DCL4100A01 1 2,774.56 462.43
PERSONAL COMPUTER C0023783 1 5,164.32 660.75
APPLE 2,229 PB DUO POWERBOOK DUO 280c w17" DISP - C0023903 PC429HNT230 1 5,096.67 509.67
280/280C
1224 POWERBOOK DUO 280c w17" DISP - C0023904 1 5,096.67 509.67
APPLE 1,751 M3077 COMPUTER PERSONAL 94-8-14 C0023906 PC4230602Q 1 3,434.08 343.41
(POWERm)
? 17 COLOR MONITOR - C0023907 1 1,017.55 101.76
APPLE M2017 179 CMPTR PERSONAL 94-9-8 C0023908 PC4131861U 1 351.18 23.41
APPLE M2612 1043 CMPTR MONITOR, COLOR 20 94-8-18 C0023909 114130091X 1 2,045.93 204.50
- - ? POWERBOOK 180 - C0023924 1 2,960.76 288.75
- - ? POWERBOOK 180 - C0023925 1 2,960.76 288.75
APPLE 1,239 6100 CMPTR PERSONAL 94-9-6 C0023926 XB432IR217 1 3,257.81 223.86
(POWERMAC)
</TABLE>
Page 3 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
APPLE 1,239 6100 CMPTR PERSONAL 94-9-6 C0023926 XB432IR217 1 3,257.81 223.86
(POWERMAC)
APPLE 670 M2464 MONITOR-CMPTR 94-9-6 C0023935 PC41316598 1 3,291.03 219.40
POWERMAC
APPLE 1,049 C0-890 MONITOR,COLOR (20) 94-9-6 C0023936 544290841XY 1 2,055.92 137.05
APPLE 1,678 M2464 MONITOR CMPTR 94-7-96 C0023937 PC4112YIU 1 3,291.06 219.40
(POWERPC)
APPLE 1049 C0890 MONOTIR, COLOR 94-9-6 C0023938 S44S98MIXY 1 2,055.92 137.06
APPLE 4128 8100 CMPTR PERSONAL 94-9-6 C0023939 XB42UYP50 1 2,094.18 539.62
SPARC STAT - C0023964 1 1,103.83 0.00
5 GB TAPE - C0023965 1 1,250.29 0.00
SUN MICROS 41OFC2-1825 WORKSTATION 94-10-10 C0023869 441F1232 1 1,577.59 119.25
SUN MICROS 415FC2-2359 WORKSTATION,CLASSIC 94-10-20 30023970 440F1652 1 4,624.53 154.15
RADIUS C0507 MONITOR, COLOR 17" - C0023971 SS1428A162 1 1,095.00 36.50
APPLE 418 QUADRA 605 CMPTR PERSONAL 94-10-10 C0023972 XB43502K2D 1 2,393.28 79.78
APPLE 418 QUADRA 605 COMPUTER PERSONAL 94-10-10 C0029273 XB43500D 1 2,393.28 79.78
SPORTSTER NA 1,172 CMPTR. PERSONAL 94-10-19 C0023974 N/A 1 2,295.85 276.61
APPLE 3125 M2332 POWERBOOK 94-10-20 C0023991 PC433HB823 1 6,127.52 204.25
APPLE 3125 M2332 POWERBOOK 94-20-20 C0023992 PC438HR023 1 6,127.52 20.25
INTEL 486 DXL 486 COMPUTER CO023995 1 4,1588 138.20
APPLE 7100 PERSONAL COMPUTER C0023996 1 4,912.14 163.74
APPLE 7100 PERSONAL COMPUTER C0023997 1 4,912.14 163.74
COMPAQ PROLINEA FOR PAYROLL C0024046 1 2,336.54 0.00
APPLE POWERBOOK 520 FOR FINANCE C0024047 1 3,089.08 0.00
APPLE POWERBOOK 520 FOR FINANCE C0024048 1 3,029.08 0.00
APPLE 7100 PERSONAL COMPUTER C0024049 FC4410CR3YK 1 4,420.45 0.00
APPLE 7100 PERSONAL COMPUTER C0024050 FC4410DW3YK 1 4,420.46 0.00
2500 PENTIUM 90 MHZ FOR STODDARD C0024111 1 4,600.62 0.00
2500 PENTIUM 90 MHZ FOR STODDARD C0024112 1 4,600.62 0.00
1932 POWERBOOK 123 C0024113 1 3,086.21 0.00
TEXTRONIX 7A18N SCOPE PN, DUAL 74-5-2 C0004026 B054254 2 531.20 525.89
TEXTRONIX 7A18N SCOPE PN, DUAL CH 74-5-2 C0004028 B054271 2 531.20 525.89
TEXTRONIX 7704 SCOPE GP, MF 75-9-22 C0004208 B143141 2 3,211.80 3,179.68
HP 6267B PWR SUPP. DC 75-9-1 C0004227 1512A02235 2 750.87 743.36
TEXTRONIX 475DM43 SCOPEPORTABLE 75-8-26 C0004280 252551 2 3,421.74 3,387.52
POWER DESIG TP325 POWER SUPPLY, TRIPLE 76-4-1 C0004357 602113 2 430.00 425.70
TEXTRONIX 7A26 SCOPE PN, DUAL CH 76-4-14 C000440 B129107 2 1,220.20 1,208.00
TEXTRONIX 7B80 SCOPE PN, TIME BASES 77-3-1 C0004649 B041473 2 794.74 786.79
TEXTRONIX 7B53A SCOPE PN DUAL 77-7-1 C0004879 B124703 2 1,039.80 1,029.40
HP 6002A PWR SUPP. DC 78-5-28 C0005290 1802A01049 2 1,251.43 1,238.92
TEXTRONIX 7B53A SCOPE PN, TIME BASE 78-5-30 C0005319 B189223 2 1,134.91 1,121.56
KROHN-HITE 3202R FILTER, TUNABLE 78-6-13 C0005370 3396 2 1,071.23 1,060.62
HP 3964A RCRDR INSTRUMENT 78-7-15 C0005438 1821A0701 2 7,116.18 7,045.02
TEXTRONIX 7A26 SCOPE PN DUAL CH 78-7-28 C0005452 B189524 2 1,412.59 1,394.47
TEXTRONIX 7B85 SCOPE PN TIME BASE 78-12-13 C0005598 B064025 2 1,093.22 1,062.29
SD TIME CODE READER 8132 C0005825 2
HP 436A METER, POWER, MW 19-10-5 C0006519 1930A05680 2 2,350.21 2,326.71
HP 8656A GEN SIGNAL 82-1-29 C0007157 2142A01924 2 7,203.40 7,203.40
HP 197B CAMERA SCOPE 83-3-15 C0007573 1905A04498 2 1,544.41 1,544.41
HP 8970A METER NOISE 83-4-12 C0007647 2221A01029 2 9,948.28 9,948.28
TEXTRONIX 485 SCOPE PORTABLE 83-5-4 C0007725 B191464 2 8,196.25 8,196.25
HP 5335A COUNTER ELEC C0007925 2321A04740 2 4,081.58 4,081.58
BSG PROJ 5110 MODULE AMPL BIAS C00116025 2321A04740 2 4,081.58 4,081.58
TEXTRONIX 2445 SCOPE PORTABLE C0011887 2
TEXTRONIX 2465CTS O'SCOPE SNB052750 C0012315 BCG0280 2 4,140.80 4,140.80
HP 160G LOGIC ANALYZER C0012426 2 15,070.21 15,070.21
HP 6024A POWER SUPPLY C0012969 2526A04501 2 1,335.36 1,335.16
IBM 6180-002 CMP FTR PLOTTER CLR 87-2-6 C0013809 11448 2
HP 3335A GEN SYNTHESIZER 87-2-24 C0014059 2516A04099 2 11,401.92 11,401.92
HP 5385A COUNTER ELEC 91-8-9 C0017628 2710A04821 2 2,054,05 2,016.58
HP HP 6632A PWR SUPP. DC 91-5-14 C0019030 2708A00130 2 1,244.82 932.48
FLUKE MFG 6080A GEN SIGNAL 91-7-19 C0019122 53115701 2 21,309.88 17,261.02
</TABLE>
Page 4 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HP 6632A PWR SUPP DC 91-6-14 C0019126 3002A0439 2 1,760.15 1,439.11
HP 6632A PWR SUPP DC 91-6-14 C0019128 3002A0424 2 1,760.15 1,439.11
HP 5087A AMPL DISTR 93-3-10 C0021441 2208A0474 2 2,929.02 1,630.49
IFR SYSTEMS COM120A MONITOR COMMUNCATION 93-3-16 C0021580 485001182 2 12,870.00 7,207.20
IFR SYSTEMS 120A RECEIVER COMM 93-7-23 C0021984 485001135 2 13,949.08 6,587.07
NCA PERIPHERAL MXT CHPTR DRIVE DISK 93-6-2 C0021985 G93657270 2 1,526.33 752.99
NCA PERIPHERAL MXT CMPTR DRIVE DISK 93-6-2 C021986 G93657272 2 1,526.32 752.99
II INC 2PB36A-006 CCADSP 93-6-18 C0022048 97273 2 1,618.34 809.14
BURR-BROWN 2PB1007-001 CONVERTER A/D 93-6-18 C0022049 98777 2 6,489.39 3,244.79
NCA 4542NT CMPTR DRIVE DISK 94-3-11 C0022150 G93660752 2 1,406.17 634.32
DIGITAL EQ 400090 SYSTEM VAC 94-3-1 C0022191 930169345 2 30,255.88 12,171.25
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022197 2 1,294.67 584.04
MAXTOR KOOCHOHE 1.2 GBYTE DISK DRIVES C0022198 2 1,294.67 584.04
STANFORD RE SR620 COUNTER UNIVERSAL 93-12-17 C0023118 1383 2 4,871.25 1,623.76
STANFORD RE FS700 FREQ STD LORAN 93-12-17 C0023119 405 2 5,737.25 1,912.42
LOW PHASE NOISE OSCL C0023196 2 3,412.95 1,023.75
PANASONIC KX-B8520 PRINT BOARD ELECTRONIC 9-4-11 C0023375 0733221A07 2 1,417.56 383.36
COMPBINET CB-400 BRIDGE ETHERNET 94-3-24 C0023433 A3-3127 2 2,319.91 611.65
NOISE COLM UFX7109 GEN NOISE PROGRAMMABLE 94-4-8 C0023434 2022 2 8,478.50 1,978.22
4MM TAPE DRIVE C0023551 2 1,369.96 319.66
HP 8560E ANAL SPECTRUM 94-7-26 C0023814 3425A01019 2 27,199.93 1,621.32
AUTOCAD SYSTEM C0023823 2 6,392.16 852.29
17 MONITOR C0023824 2 1,515.50 202.07
LASER PRINTER C0023825 2 4,912.02 654.93
2GB HD SCSI-II CABLE C0023963 2 1,216.73 81.12
4.2 GB MUL C0023966 2 3,196.77 0.00
4.2 GB MUL C0023967 2 3,196.77 0.00
4.2 GB MUL C0023963 2 3,196.77 0.00
CSC 1924EXT DRIVE DISK SCSI 94-10-10 C0023975 828315 2 1,093.30 36.44
CSC 1924EXT DRIVE DISK SCSI 94-10-10 C0023976 829405 2 1,093.30 36.44
RADIUS C0507 DRIVE DISK SCSI 94-10-10 C0023977 S91428A1E2 2 1,093.30 36.44
2 GB SCSI C0023978 2 1,093.30 36.44
2 GB SCSI C0023979 2 1,093.30 36.44
2 GB SCSI C0023980 2 1,093.30 36.44
2 GB SCSI C0023981 2 1,093.30 36.44
2 GB SCSI C0023982 2 1,093.30 36.44
2 GB SCSI C0023983 2 1,093.30 36.44
CSC 1924EXT DRIVE DISK SCSI C0023985 2 1,093.30 36.44
2 GB SCSI C0023986 2 1,093.30 36.44
19-2 GB HD & 13 TERMINATORS C0023987 2 1,093.30 36.44
2 GB SCSI C0023988 2 1,093.30 36.44
XYPLEX SERVER C0023999 2 2,209.19 0.00
SUN WORK STATION C0024096 2 7,035.93 0.00
PHONEMAID SIGNAL GENERATORS Self-Corrected 2 72,950.00 0.00
(2)
POWER DESIGN 3610ORF PWR SUPPLY DC 70-9-1 C0001464 810016 3
TEXTRONIX 2335 SCOPE PORTABLE 83-3-18 C0007583 8012536 3 2,715.75 2,715.79
TEXTRONIX 495P ANAL SPECT 83-6-23 C0007792 B010488 3 30,354.49 30,854.49
HP 6653A POWER SUPPLY 94-4-7 C0022979 3347A01177 3 3,076.98 717.57
HP 6653A POWER SUPPLY 94-4-7 C0022980 3347A01585 3 2,976.63 694.54
HP 6653A POWER SUPPLY 94-4-7 C0022981 3347A01182 3 2,976.62 694.56
HP 6653A POWER SUPPLY 94-4-15 C0022982 3345A00408 3 1,828.07 457.49
HP 6543A POWER SUPPLY 94-3-12 C0022983 3218400175 3 4,601.51 1,227.07
HP 6543A POWER SUPPLY 94-3-12 C0022984 3218A00139 3 1,828.07 4487.49
HP 6543A POWER SUPPLY 94-3-12 C0022985 3218A00172 3 1,828.07 487.49
HP 6543A POWER SUPPLY 94-3-12 C0022986 3218A00176 3 1,828.08 487.49
TEXTRONIX TA5475 SCOPE PORTABLE 94-3-22 C0023312 B011081 3 2,614.04 697.08
TEXTRONIX 2232 SCOPE PORTABLE 94-3-22 C0023314 B032127 3 6,748.34 1,789.56
HP 856B8 ANALSPECT 94-3-1 C0023405 2601A82551 3 19,903.88 4,641.24
HP 8482B SENSOR POWER 94-3-1 C0023406 2149A02159 3 18,943.75 5,681.16
</TABLE>
Page 5 of 10
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
MAKE MODEL DESCRIPTION ACQUIRE ASSET # SERIAL # TYPE PURCHASE ACC DEPT
DATE PRICE 30-NOV-94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HP 8657B GEN SIGNAL 94-3-12 C0023407 3133002203 3 16,957.72 4,522.66
HP 437B METER POWER MW 94-3-15 C0023408 3125U10460 3 2,898.80 869.64
HP 5385A COUNTER ELEC 94-6-6 C0023473 3242A07945 3 2,992.81 988.08
POWER SUPPLY 94-6-6 C0023574 3 4,001.51 613.53
HP 5385A COUNTER ELEC 94-5-27 C00235704 2730406273 3 2,130.88 355.15
DRIVE CONTROL C0023784 3 5,358.38 893.07
DSP32C BOARD C0023874 3 3,085.13 0.00
1924EXT DRIVE DISK SCSI C0023984 87898 3 1,093.30 36.44
MACRONI SIGNAL GENERATOR C0024035 3 24,023.92 0.00
RUGGED COMPUTERS C0024109 3 4,054.25 135.14
RUGGED COMPUTERS C0024110 3 3,907.83 781.57
IBM SEL III TYPEWRITER C0006472 4555133 4
APPLE PRO 630 LASERWRITER PRO 630 C0022148 F132614H108 4 2,544.57 1,147.89
HP FAX 950 FAX-EXPENSED C0023902 IPA4403940 4
HP 451MX LASERJET PRINTER C0024045 USGD517900 4 4,364.48 0.00
HP 8591E ANALSPECT PORTABLE 94-7-21 C0023831 3412A0597 5 12,052.43 1,740.32
SUN MYCROSY X8522A STORAGE PACKAGE 94-9-30 C0023954 43804220 5 1,254.29 83.62
SUN MYCROSY X569A DRIVE DISK 420B 94-9-30 C0023955 43603607 5 2,146.95 209.36
SUN MYCROSY X569A DRIVE DISK 4.2GB 94-9-30 C0023956 43631603 5 3,147.80 209.86
SUN MYCROSY X569A DRIVE DISK 4.2GB 94-930 C0023957 43603341 5 3,147.82 2209.86
XYPLEX SERVER C0023958 5 2,288.19 0.00
1 SUN 4.2GB DISK PACKS C0024122 5 2,857.20 0.00
1 SUN 4.2GB DISK PACKS C0024123 5 2,857.20 0.00
1 SUN 4.2GB DISK PACKS C0024124 5 2,857.80 0.00
1 SUN 4.2GB DISK PACKS C0024125 5 2,857.80 0.00
1 SUN 4.2GB DISK PACKS C0024126 5 2,257.20 0.00
XPLEX SERVER C0024127 5 2,972.73 0.00
XPLEX SERVER C0024128 5 2,972.73 0.00
ENGINEE XB024-10 PLATFORM LIFTER C0023120 62834-02 6 1,254.08 376.22
ENGINEE XB024-10 PLATFORM LIFTER C0023121 62818-01 6 1,254.08 376.22
ENGINEE XB024-10 PLATFROM TRUCK/LIFT C0023160 63956.02 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023161 67966-03 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023162 63966-04 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023163 63956-01 6 1,503.25 400.87
ENGINEE XB024-10 PLATFORM TRUCK/LIFT C0023164 63956-05 6 1,503.24 400.87
WORK BENCHES C0023539 6 4,799.63 959.93
WIRE SHELF CARTS C0023540 6 1,679.62 3335.93
FLOOR SCALE C0024036 6 2,803.68 0.00
INSTAPAK MODEL 750 PACKGING C0024129 6 3197.00 0.00
STOCKROOM SECURITY ENCODERS C0022850
HP 3100 C0023841 37,253.97 2,423.08
</TABLE>
* Does Not Include HP3100 Computer. Disposition of this unit is not yet
decided.
** Does not include rack units in cage (warehousing units) which may or may
not be removed when building is vacated. Disposition of this unit is not
yet decided.
Page 6 of 10
<PAGE>
CORSAIR 1995 FIXED ASSET PURCHASES THROUGH 6/30/95
<TABLE>
<CAPTION>
============================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Computer Equipment (1600)
- -------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Acropolis 950606002, 950606001, 6017 AS171-42801 SCSI disk pedestal w/kit 3954 $10,207.98 5/26/95
- ----------------------------------------------------------------------------------------------------------------------------
Arcom 3C509B 3COM Ethink III 16bit 20 pack 3959 $ 1,643.19 6/8/95
- ----------------------------------------------------------------------------------------------------------------------------
Arcom 000655-0 USROBO Total Control 6Slot Hub 4289 $15,550.58 6/26/95
- ----------------------------------------------------------------------------------------------------------------------------
Aroma Tech - SNM30254569 M586-90/100 SIS 586 90/100MHz 3477 $ 3,145.22 4/11/95
- ----------------------------------------------------------------------------------------------------------------------------
Cabletron SEHI-24 Stack ethernet hub intel 24p 3680 $ 6,716.41 5/5/95
- ----------------------------------------------------------------------------------------------------------------------------
Cabletron SEH-24 Stackable ethernet hub-24 3680 $ 3,029.47 5/9/95
- ----------------------------------------------------------------------------------------------------------------------------
Cabletron SEHI-24 Stack ethernet hub intel 24p 4220 $ 2,693.75 5/30/95
- ----------------------------------------------------------------------------------------------------------------------------
Cablerock CR5-85 Spare 5 System w/kit 3335 $ 5,732.92 3/21/95
- ----------------------------------------------------------------------------------------------------------------------------
Central Design - S519F01YC SSFX185322P46 17"C 32MB 1GB TGX 85 3972 $ 8,640.63 5/22/95
- ----------------------------------------------------------------------------------------------------------------------------
Central Design S20FX16132P46 17"C TGX 61 32MB 1GB 3735 $35,140.10 6/8/95
- ----------------------------------------------------------------------------------------------------------------------------
Central Design - S513F04, S513F04WD, S4C7032P44 S4 70 MHz 20" c32mb535 3792 $31,485.41 6/16/95
S513F04KY, S513F031W
- ----------------------------------------------------------------------------------------------------------------------------
Central Design - 6016869 EXAXEXB-8505 8MM Tape Drive 3869 $ 1,472.89 6/23/95
- ----------------------------------------------------------------------------------------------------------------------------
Central Design model 70,110 CD-SS4-70, Sun 1, CD-SS5-85, Sun 5 4182 $21,259.88 6/28/95
- ----------------------------------------------------------------------------------------------------------------------------
Ceram 64MB Simm for SS20 3769 $ 7,902.00 5/9/95
- ----------------------------------------------------------------------------------------------------------------------------
Computerland HPCD-E2039 Laserjet 4M plus toner 3388 $ 2,089.24 3/29/95
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7 of 10
<PAGE>
CORSAIR 1995 FIXED ASSET PURCHASES THROUGH 6/30/95
<TABLE>
<CAPTION>
============================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Computer Equipment (1600) cont'd
- --------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Computerland 755-C IBM Thinkpad 3603 $ 3,657.37 4/25/95
- ----------------------------------------------------------------------------------------------------------------------------
Computerland - XB5160N93YX APPL-A0848 PowerMac 8100/110C 16MB 2GB CD 3663 $ 6,768.51 5/2/95
- ----------------------------------------------------------------------------------------------------------------------------
Computerland - FC517361-446, APPL-A3642 Apple PowerMac 7100/80 16/700/cd 3975 $25,581.75 5/12/95
FC5173K2446,
FC5173P0446,FC5173LM446,
C5173KB446, FC51740T44H,
JPGK14205
- ----------------------------------------------------------------------------------------------------------------------------
Computerland -FC512HJ223L APPL-A0864 Powerbook 280C 4/320 w/monit. & pack 3740 4,758.19 5/12/95
- ----------------------------------------------------------------------------------------------------------------------------
Computerland - TF513DDT1Y5 APPL-H1485 Powerbook duo dock w/HD 3846 $ 825.40 5/16/95
- ----------------------------------------------------------------------------------------------------------------------------
Computerland 400012544503291, Patriot 2-Laptop 486/dx 3846 $ 5,314.75 5/26/95
40003244473172
- ----------------------------------------------------------------------------------------------------------------------------
Computerland RADI-C0504 Two page display / 20GS 3892 $ 3,523.17 6/23/95
DCL5090A0179
DCL5080A0048
DCL5090A0133
DCL5090A0173
- ----------------------------------------------------------------------------------------------------------------------------
Computerland King-B2320 20 MB module P/PB Duo 250 3975 $ 838.75 6/8/95
- ----------------------------------------------------------------------------------------------------------------------------
Computerland XB52200WT5PQ, APPL-A3642 PowerMac w/keyboard 3975 $33,743.60 6/12/95
XB5200WU5P0, XB5212EK5P0,
XB5212EX5P0, SB5212BJ5P0
- ----------------------------------------------------------------------------------------------------------------------------
Computerland APPL-A4273 (5) PowerMacs w/monit. & keybds. 4080 $14,873.82 6/21/95
- ----------------------------------------------------------------------------------------------------------------------------
DEL 90C/XPS Dimension Pentium-Mini tower base 3797 $ 3,245.41 6/16/95
- ----------------------------------------------------------------------------------------------------------------------------
ENS - SN25095490 CSCO-2501 Router package w/software 3033 $ 4,023.81 1/25/95
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 8 of 10
<PAGE>
CORSAIR 1995 FIXED ASSET PURCHASES THROUGH 6/30/95
<TABLE>
<CAPTION>
=======================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Computer Equipment (1600) cont'd
- --------------------------------
- -----------------------------------------------------------------------------------------------------------------------
ENS USROB-000826- Analog modem w/fax 3033 $ 6,021.31 1/30/95
0
- -----------------------------------------------------------------------------------------------------------------------
ENS - SN50004214 CSCO-7010 Cisco 7010 router package 3445 $ 27,202.20 4/3/95
- -----------------------------------------------------------------------------------------------------------------------
HDS Pentium 586 computer system 3034 $ 4,281.29 1/5/95
- -----------------------------------------------------------------------------------------------------------------------
HDS Pentium 586 computer system 3034 $ 4,281.29 1/10/95
- -----------------------------------------------------------------------------------------------------------------------
HDS HD Victoria System 3850 $ 6,249.50 5/20/95
- -----------------------------------------------------------------------------------------------------------------------
NCA - SN454505410766, 2100S Quantum Empire 2100s hard disk 3311 $ 1,960.41 3/9/95
SNBDOE5021LNY, SN 4360015888,
SN466504640442
- -----------------------------------------------------------------------------------------------------------------------
NCA EXT 4-868 HP 35480 3311 $ 1,059.77 3/16/95
- -----------------------------------------------------------------------------------------------------------------------
Network Assoc. Asante 12 port ethernet hub 3111 $ 1,179.90 3/21/95
- -----------------------------------------------------------------------------------------------------------------------
PDC X827A/S-XBT- 4MM Autoloader 4006 $ 3,831.20 6/13/95
4TS
- -----------------------------------------------------------------------------------------------------------------------
Seque Sys. 90 Pentium System 4119 $ 3,755.00 6/23/95
- -----------------------------------------------------------------------------------------------------------------------
TEL-LAN MX-1600-002 Multi-access remote server 3042 $ 7,028.95 1/24/95
- -----------------------------------------------------------------------------------------------------------------------
UUNET Tech. - 25130134-3092 Cisco-2501 Router & CSU/DSU 3721 $ 1,922.00 5/4/95
- -----------------------------------------------------------------------------------------------------------------------
Vanstar - SN SFC439MT61XN APPL-A2805 Powerbook 520 4/160 3044 $ 2,970.76 1/5/95
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $335,607.58
===========
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 9 of 10
<PAGE>
CORSAIR 1995 FIXED ASSET PURCHASERS THROUGH 6/30/95
<TABLE>
<CAPTION>
===========================================================================================================================
MAKE/VENDOR MODEL DESCRIPTION CORSAIR PURCHASE PURCHASE
CHECK # PRICE DATE
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Furniture Equipment (1640)
- --------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/rack kit 4069 $ 2,507.86 6/14/95
- ----------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/rack kits 3783 $ 5,794.24 6/16/95
- ----------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/kit 41277 $ 3,090.05 6/21/95
- ----------------------------------------------------------------------------------------------------------------------------
Arcom PM2E-10 Livingston portmaster w/rack kit 3891 $ 8,336.62 6/23/95
- ----------------------------------------------------------------------------------------------------------------------------
Art & Display Co. 1531 Legend kit w/LPCO3 capsule counter 3773 $ 4,595.54 6/15/95
- ----------------------------------------------------------------------------------------------------------------------------
Audio Graphic Sys. B 70x70 MW DALITE 3960 $ 118.53 5/30/95
- ----------------------------------------------------------------------------------------------------------------------------
Audio Graphic Sys. BB44E-5 Bretford big base 44" cart 3960 $ 210.12 6/13/95
- ----------------------------------------------------------------------------------------------------------------------------
Cabletron EPIM-X Enet port int. mod. dual in. w/kit 3791 $ 373.90 5/19/95
- ----------------------------------------------------------------------------------------------------------------------------
Cabletron 9300044-15 Assy. Cbl, XCVR, 802.3 28 AWG 3791 $ 282.74 5/23/95
- ----------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus Furnish. 7488 Paramount desk chair; #61 pewter 4181 $ 318.94 6/1/95
- ----------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. 7488 Office master chair 3418 $ 8,510.00 4/28/95
- ----------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. 15WAL-BL VERSA Stacking chair 3470 $ 13,410.00 5/9/95
- ----------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. 7488 Paramount desk chairs: #61 pewter 3693 $ 27,849.16 6/6/95
- ----------------------------------------------------------------------------------------------------------------------------
COG/Kelly Bus. Furnish. M211-1142 23 Office chairs; MB Sync, pneu, poly shell 4243 $ 8,624.31 6/26/95
- ----------------------------------------------------------------------------------------------------------------------------
Lightwave Comm. 5000 Serverswitch w/cables 4194 $ 6,583.50 6/30/95
- ----------------------------------------------------------------------------------------------------------------------------
Lindsay-Ferrari Tackable acoust. panels, worksurfaces 3576 $ 64,323.00 5/17/95
- ----------------------------------------------------------------------------------------------------------------------------
Lindsay-Ferrari Lindelve File-lateral, rec hdwd., 2drwr 3854 $ 1,082.89 5/23/95
- ----------------------------------------------------------------------------------------------------------------------------
Perimeter Install. of card render on lobby door 4136 $ 595.00 6/29/95
- ----------------------------------------------------------------------------------------------------------------------------
Perimeter Install. of sec. system 4156 $ 34,555.00 6/29/95
- ----------------------------------------------------------------------------------------------------------------------------
Pure Valley Water HTT-45RO Hydrotech w/tank & dispenser 4011 $ 1,403.61 6/27/95
- ----------------------------------------------------------------------------------------------------------------------------
Voice Pro SRX Phone system - Deliv. pymt. 4028 $ 17,443.06 6/29/95
- ----------------------------------------------------------------------------------------------------------------------------
VoicePro SRX/VMX 200S Telephone, call processing system 3426 $ 17,433.06 5/1/95
- ----------------------------------------------------------------------------------------------------------------------------
VoicePro SRX Phone system - Deliv. pymt. 4028 $ 52,042.79 6/30/95
- ----------------------------------------------------------------------------------------------------------------------------
VoicePro SRX Phone system -n Deliv. pymt. 4028 $ 12,887.93 6/30/95
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL $292,371.85
===========================================================================================================================
</TABLE>
Page 10 of 10
<PAGE>
SCHEDULE 3
CONDITIONS PRECEDENT
PART I:
- ------
At the time of execution and delivery of this Agreement, there shall also
have been duly executed and delivered to Lender:
(a) The Warrant to purchase the aggregate number of shares set forth in
Exhibit C hereto;
(b) A Sublessor's Waiver and Consent, executed by Syntex Corp., in form and
substance reasonably acceptable to Lender;
(c) A favorable opinion of counsel for Borrower, dated as of the closing
date, in the form attached hereto as Exhibit D;
---------
(d) Copies, certified by the Secretary, Assistant Secretary or Chief
Financial Officer of Borrower as of the closing date, of Borrower's
charter documents and bylaws and of all documents evidencing corporate
action taken by Borrower authorizing the execution, delivery and
performance of the Operative Documents to which Borrower is a party, in
form and substance satisfactory to Lender and its counsel;
(e) Good standing certificate from Borrower's state of incorporation and the
state in which Borrower's principal place of business is located,
together with certificates of the applicable governmental authorities
that Borrower is in compliance with the franchise tax laws of each such
state, each dated as of a recent date;
(f) Evidence of the insurance coverage required by Section 6.01(d) of this
---------------
Agreement;
(g) All necessary consents of shareholders and other third parties with
respect to the execution, delivery and performance of this Agreement,
the Warrant, the Note and the other Operative Documents; and
(h) Form UCC-1 Financing Statements, duly executed by Borrower, or other
documents, and Borrower shall have taken such actions, if any, as Lender
shall reasonably determine are necessary or desirable to perfect and
protect its security interest in the Collateral;
(i) Grants of Security Interest in Intellectual Property in the forms
provided by Lender;
(j) Notices of Security Interest to Depository Banks in the forms provided
by Lender; and
(i) All other documents as Lender shall have reasonably requested.
PART II:
- -------
On or prior to the Funding Date of the Loan, each of the items set forth in
Part I of this Schedule 3 shall have been delivered to Lender and the following
- -------------------------
conditions shall have been satisfied or waived by Lender:
(a) Borrower shall have provided to Lender such documents, instruments and
agreements as Lender shall reasonably request to evidence the perfection
and priority of the security interests granted to Lender pursuant to
Article V;
---------
(b) No Event of Default or Default shall have occurred and be continuing;
(c) Borrower shall have duly executed and delivered to Lender a Note
prepared by Lender with respect to the Loan;
(d) In Lender's sole discretion, there shall not have occurred any material
adverse change in the general affairs, management, results of
operations, condition (financial or otherwise) or prospects of Borrower,
whether or not arising from transactions in the ordinary course of
<PAGE>
business, and there shall not have occurred since the date first written
on the cover page of this Agreement any material adverse deviation by
Borrower from the Fiscal 1996 Operating Plan of Borrower presented to
Lender;
(e) The representations and warranties contained in this Agreement and the
other Operative Documents to which Borrower is a party shall be true and
correct in all material respects as if made on such Funding Date;
(f) Each of the Operative Documents remains in full force and effect;
(g) The funding Date of the requested Loan shall not be later than the
Commitment Termination Date; and
(h) Lender shall have received the Note, duly executed by Borrower.
<PAGE>
EXHIBIT A
SECURED PROMISSORY NOTE
$3,000,000 Dated: July 31, 1996
FOR VALUE RECEIVED, the undersigned, CORSAIR COMMUNICATIONS, INC.
("Borrower"), a Delaware corporation, HEREBY PROMISES TO PAY to the order of
--------
MMC/GATX PARTNERSHIP NO. 1, a California general partnership ("Lender") the
------
principal amount of Three Million Dollars ($3,000,000) or such lesser amount as
shall equal the aggregate outstanding principal balance of the Loan made by
Lender to Borrower pursuant to the Loan and Security Agreement referred to below
(the "Loan Agreement"), and to pay all other amounts due with respect to the
--------------
Loan on the dates and in the amounts set forth in the Loan Agreement.
The principal amount of this Note shall be payable in 36 consecutive monthly
installments of 2.778% of the original principal amount of this Note per month
on the last day of each calendar month commencing on February 28, 1997. All
unpaid principal and interest shall, in any event, be payable no later than
January 31, 2000.
Interest on the unpaid principal amount of this Note from the date of this
Note until such principal amount is paid in full shall accrue at the Loan Rate,
or, if applicable, the Default Rate. The Loan Rate for this Note is 14.55% per
annum (based on a year of 360 days and actual days elapsed). All accrued
interest shall be payable on the last day of each calendar month, commencing
July 31, 1996.
Whenever any payment due hereunder shall fall on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees, as
the case may be.
Principal, interest and all other amounts due with respect to the Loan, are
payable in lawful money of the United States of America to Lender as follows:
GATX Capital Corporation, P.O. Box 71316, Chicago, Illinois 60694, in
immediately available funds. The Loan made by Lender to Borrower and the
interest rate applicable thereto, and all payments made with respect thereto,
shall be recorded by Lender and, prior to any transfer hereof, endorsed on the
grid attached hereto which is part of this Note.
This Note is the Note referred to in, and is entitled to the benefits of, the
Loan and Security Agreement, dated as of July 31, 1996, between Borrower and
Lender (the "Loan Agreement"). The Loan Agreement, among other things, (a)
provides for the making of a secured Loan by Lender to Borrower from time to
time in an aggregate principal amount not to exceed at any time outstanding the
amount first above mentioned, the indebtedness of Borrower resulting from the
Loan being evidenced by a Note, and (b) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
Prior to the first anniversary of the date hereof, there shall be no
prepayment of the Loan evidenced by this Note in whole or in part. Borrower may,
at its option, at any time on or after the first anniversary of the date hereof,
prepay the Loan evidenced by this Note, either in whole or from time to time in
any part of the principal amount thereof equal to $500,000 or more, at a
prepayment price equal to the principal amount of the Loan so to be prepaid,
plus interest accrued thereon through and including the date of such prepayment,
plus the Make-Whole Premium (as defined in the Loan Agreement). If the maturity
of this Note and the Loan evidenced thereby is accelerated under the Loan
Agreement, Borrower shall pay to Lender, in addition to principal, interest and
all other amounts due with respect to this Note, as liquidated damages for loss
of Lender's benefit of the bargain and not as a penalty, an amount equal to the
Make-Whole Premium (as defined in the Loan Agreement).
<PAGE>
This Note and the obligation of Borrower to repay the unpaid principal amount
of the Loan, interest on the Loan and all other amounts due Lender under the
Loan Agreement is secured under the Loan Agreement.
Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower's obligations hereunder not
performed when due. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one
of its officers thereunto duly authorized on the date hereof.
CORSAIR COMMUNICATIONS, INC.
By: ___________________________________
Name: ________________________________
Title: _______________________________
-2-
<PAGE>
LOAN, INTEREST RATE AND PAYMENTS OF PRINCIPAL
PRINCIPAL SCHEDULED
DATE AMOUNT INTEREST RATE PAYMENT AMOUNT NOTATION BY
- ---- ------------- ----------------- ------------------ -----------
<PAGE>
Corsair Communications
Amortization Schedule
<TABLE>
<CAPTION>
Loan Amount: $3,000,000
Loan Interest Rate: 14.55%
- ---------------------------------------------------------------------------
Principal Interest Total Debt Principal
Date Repayment Payment Service Balance
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aug-96 0.00 $ 0.00 $ 0.00 $3,000,000.00
Sep-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Oct-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Nov-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Dec-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Jan-97 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Feb-97 $83,334.00 $36,375.00 $119,709.00 $2,916,666.00
Mar-97 $83,334.00 $35,364.58 $118,698.58 $2,833,332.00
Apr-97 $83,334.00 $34,354.15 $117,688.15 $2,749,998.00
May-97 $83,334.00 $33,343.73 $116,677.73 $2,666,664.00
Jun-97 $83,334.00 $32,333.30 $115,667.30 $2,583,330.00
July-97 $83,334.00 $31,322.88 $114,656.88 $2,499,996.00
Aug-97 $83,334.00 $30,312.45 $113,646.45 $2,416,662.00
Sep-97 $83,334.00 $29,302.03 $112,636.03 $2,333,328.00
Oct-97 $83,334.00 $28,291.60 $111,625.60 $2,249,994.00
Nov-97 $83,334.00 $27,281.18 $110,615.18 $2,166,660.00
Dec-97 $83,334.00 $26,270.75 $109,604.75 $2,083,326.00
Jan-98 $83,334.00 $25,260.33 $108,594.33 $1,999,992.00
Feb-98 $83,334.00 $24,249.90 $107,583.90 $1,916,658.00
Mar-98 $83,334.00 $23,239.48 $106,573.48 $1,833,324.00
Apr-98 $83,334.00 $22,229.05 $105,563.05 $1,749,990.00
May-98 $83,334.00 $21,218.63 $104,552.63 $1,666,656.00
Jun-98 $83,334.00 $20,208.20 $103,542.20 $1,583,322.00
July-98 $83,334.00 $19,197.78 $102,531.78 $1,499,988.00
Aug-98 $83,334.00 $18,187.35 $101,521.35 $1,416,654.00
Sep-98 $83,334.00 $17,176.93 $100,510.93 $1,333,320.00
Oct-98 $83,334.00 $16,166.51 $ 99,500.51 $1,249,986.00
Nov-98 $83,334.00 $15,156.08 $ 98,490.08 $1,166,652.00
Dec-98 $83,334.00 $14,145.66 $ 97,479.66 $1,083,318.00
Jan-99 $83,334.00 $13,135.23 $ 96,469.23 $ 999,984.00
Feb-99 $83,334.00 $12,124.81 $ 95,458.81 $ 916,650.00
Mar-99 $83,334.00 $11,114.38 $ 94,448.38 $ 833,316.00
Apr-99 $83,334.00 $10,103.96 $ 93,437.96 $ 749,982.00
May-99 $83,334.00 $ 9,093.53 $ 92,427.53 $ 666,648.00
Jun-99 $83,334.00 $ 8,083.11 $ 91,417.11 $ 583,314.00
July-99 $83,334.00 $ 7,072.68 $ 90,406.68 $ 499,980.00
Aug-99 $83,334.00 $ 6,062.26 $ 89,396.26 $ 416,646.00
Sep-99 $83,334.00 $ 5,051.83 $ 88,385.83 $ 333,312.00
Oct-99 $83,334.00 $ 4,041.41 $ 87,375.41 $ 249,978.00
Nov-99 $83,334.00 $ 3,030.98 $ 86,364.98 $ 166,644.00
Dec-99 $83,334.00 $ 2,020.56 $ 85,354.56 $ 83,310.00
Jan-00 $83,310.00 $ 1,010.13 484,320.13 $ 0.00
- ---------------------------------------------------------------------------
</TABLE>
This amortization schedule ("Amort") has been prepared at the Borrower's request
and is subject to the terms and conditions of the Loan and Security Agreement
dated as of July 31, 1996 ("Loan Agreement"). The Amort is provided for the
convenience of Corsair Communications and in no way modifies or amends the Loan
Agreement. The allocation of principal and interest and the principal balance
may or may not be in accordance with GAAP. Accordingly, you should not utilize
this Amort without consulting your accountant.
A3
<PAGE>
Revised August 9, 1996
Corsair Communications
Amortization Schedule
<TABLE>
<CAPTION>
Loan Amount: $ 3,000,000
Loan Interest Rate: 14.55%
- ---------------------------------------------------------------------------
Principal Interest Total Debt Principal
Date Repayment Payment Service Balance
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aug-96 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Sep-96 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Oct-96 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Nov-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Dec-96 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Jan-97 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Feb-97 $83,334.00 $33,950.00 $117,284.00 $2,916,666.00
Mar-97 $83,334.00 $36,543.39 $119,877.39 $2,833,332.00
Apr-97 $83,334.00 $34,354.15 $117,688.15 $2,749,998.00
May-97 $83,334.00 $34,455.18 $117,789.18 $2,666,664.00
Jun-97 $83,334.00 $32,333.30 $115,667.30 $2,583,330.00
July-97 $83,334.00 $32,366.97 $115,700.97 $2,499,996.00
Aug-97 $83,334.00 $31,322.87 $114,656.87 $2,416,662.00
Sep-97 $83,334.00 $29,302.03 $112,363.03 $2,333,328.00
Oct-97 $83,334.00 $29,234.66 $112,568.66 $2,249,994.00
Nov-97 $83,334.00 $27,281.18 $110,615.18 $2,166,660.00
Dec-97 $83,334.00 $27,146.44 $110,480.44 $2,083,326.00
Jan-98 $83,334.00 $26,102.34 $109,436.34 $1,999,992.00
Feb-98 $83,334.00 $22,633.24 $105,967.24 $1,916,658.00
Mar-98 $83,334.00 $24,014.13 $107,348.13 $1,833,324.00
Apr-98 $83,334.00 $22,229.05 $105,563.05 $1,749,990.00
May-98 $83,334.00 $21,925.92 $105,259.92 $1,666,656.00
Jun-98 $83,334.00 $20,208.20 $103,542.20 $1,583,322.00
July-98 $83,334.00 $19,837.71 $103,171.71 $1,499,988.00
Aug-98 $83,334.00 $18,793.60 $102,127.60 $1,416,654.00
Sep-98 $83,334.00 $17,176.93 $100,510.93 $1,333,320.00
Oct-98 $83,334.00 $16,705.39 $100,039.39 $1,249,986.00
Nov-98 $83,334.00 $15,156.08 $ 98,490.08 $1,166,652.00
Dec-98 $83,334.00 $14,617.18 $ 97,951.18 $1,083,318.00
Jan-99 $83,334.00 $13,573.07 $ 96,907.07 $ 999,984.00
Feb-99 $83,334.00 $11,316.49 $ 94,650.49 $ 916,650.00
Mar-99 $83,334.00 $11,484.86 $ 94,818.86 $ 833,316.00
Apr-99 $83,334.00 $10,103.96 $ 93,437.96 $ 749,982.00
May-99 $83,334.00 $ 9,396.65 $ 92,730.65 $ 666,648.00
Jun-99 $83,334.00 $ 8,083.11 $ 91,417.11 $ 583,314.00
July-99 $83,334.00 $ 7,308.44 $ 90,642.44 $ 499,980.00
Aug-99 $83,334.00 $ 6,264.33 $ 89,598.33 $ 416,646.00
Sep-99 $83,334.00 $ 5,051.83 $ 88,385.83 $ 333,312.00
Oct-99 $83,334.00 $ 4,176.12 $ 87,510.12 $ 249,978.00
Nov-99 $83,334.00 $ 3,030.98 $ 86,364.98 $ 166,644.00
Dec-99 $83,334.00 $ 2,087.91 $ 85,421.91 $ 83,310.00
Jan-00 $83,310.00 $ 1,043.80 $ 84,353.80 $ 0.00
- ---------------------------------------------------------------------------
</TABLE>
This amortization schedule ("Amort") has been prepared at the Borrower's request
and is subject to the terms and conditions of the Loan and Security Agreement
dated as of July 31, 1996 ("Loan Agreement"). The Amort is provided for the
convenience of Corsair Communications and in no way modifies or amends the Loan
Agreement. The allocation of principal and interest and the principal balance
may or may not be in accordance with GAAP. Accordingly, you should not utilize
this Amort without consulting your accountant.
A3
<PAGE>
EXHIBIT B
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MMC/GATX PARTNERSHIP NO. 1
c/o GATX CAPITAL CORPORATION, Agent
Four Embracadero Center, Suite 2200
San Francisco, CA 94111
Attn: Contract Administration
________________________________________________________________________________
SUBLESSOR'S WAIVER AND CONSENT
THIS SUBLESSOR'S WAIVER AND CONSENT (this "Waiver"), dated as of July
31, 1996, is executed by and between SYNTEX (U.S.A.) Inc., a Delaware
Corporation ("Sublessor") and MMC/GATX PARTNERSHIP NO. I, a California general
partnership ("Lender").
RECITALS
--------
A. Sublessor and CORSAIR COMMUNICATIONS, INC. ("Tenant") are parties
to a Sublease Agreement, dated as of March 31, 1995 (together with any other
agreement between Sublessor and Tenant relating to the Premises, as defined
below, all as amended from time to time, to be referred to herein collectively
as the "Lease"), pursuant to which Sublessor has leased to Tenant a portion of
that certain real property commonly known as 3408 Hilview Avenue, Palo Alto,
California, and more particularly described in Exhibit A hereto (the
---------
"Premises").
B. Tenant and Lender intend to or have entered into a Loan and
Security Agreement dated as of July 31, 1996 (the "Loan Agreement") pursuant to
which Lender has agreed or will agree to make loans to Tenant from time to time
secured by certain assets (the "Assets") which will be located on the Premises.
The Assets consist of personal property, business equipment, inventory and
machinery which are now, or in the future may be, located upon and/or affixed to
the Premises.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Sublessor and Lender hereby agree as follows:
1. Waiver and Consent. Sublessor hereby does subordinate any
------------------
interest of Sublessor in the Assets to Lender's interests therein, whether
Sublessor's interest arises by common law, statute or consensually (under the
Lease or otherwise) and whether now in existence or hereafter created. This
subordination shall survive the termination of the Lease. Sublessor further
agrees that (a) neither the Assets nor any item thereof shall become part of, or
otherwise be or become a fixture attached to, the premises, notwithstanding the
manner of the Assets' annexation, the Assets' adaptability to the uses and
purposes for which the Premises are used, and the intentions of the party making
the annexation; (b) the Assets (or any item thereof) may be repossessed by
Lender; (c) in connection with such repossession or otherwise, Lender, and any
of its agents and employees, may enter upon the connection with such
repossession or otherwise, Lender, and any of its agents and employees, may
enter upon the Premises for the purposes of preparing for transport,
disassembling, dismantling, loading and/or removing the Assets (or any item
thereof); and (d) the right of Lender to enter the Premises and the other rights
granted to Lender in this Waiver shall not terminate until up to thirty (30)
days after Lender receives written notice from Sublessor of the termination of
the Lease; provided, that if Lender exercises its rights hereunder, for any such
period after the termination of the Lease, Lender shall pay to Sublessor a
rental payment (at the last monthly rate
<PAGE>
payable by Tenant) for the period from (a) the later of (i) receipt of notice of
termination of the Lease or (ii) the actual termination of the Lease, until (b)
the date the Assets are removed. Notwithstanding the foregoing, a
representative of the Lender may examine the assets to determine their value
without assuming any liability for rent hereunder so long as the examination
takes place promptly after notice of the termination of the Lease.
2. Costs. Lender agrees to indemnify, defend, protect and hold the
-----
Sublessor harmless from any claim, cost, liability or expense which is asserted
against or incurred by Landlord which arises in connection with the exercise of
Lender's rights under clauses (b) or (c) of Paragraph 1 above.
3. Lease Defaults. Sublessor further agrees to provide Lender with
--------------
telephonic confirmation of any default or event of default under the Lease upon
inquiry by Lender.
4. Sublessor's Representations and Warranties. Sublessor hereby
------------------------------------------
warrants and represents to Lender that (a) Sublessor is the lessor under the
Lease; (b) there are no other agreements between the parties affecting or
relating to the Premises; (c) Sublessor has all requisite power and authority to
execute and deliver this Waiver and no consents from any third party are
required to do so; (d) no event of default (nor any event which with the passage
of time would constitute an event of default) has occurred under the Lease; (e)
there exists no litigation affecting title to the Premises or any adverse claim
with respect to the Premises of which Sublessor has received notice; and (f)
there is no condemnation proceeding pending with respect to any part of the
Premises, nor any threat thereof, of which the Sublessor has received notice.
5. Miscellaneous. This Waiver and all rights hereby granted to
-------------
Lender hereunder shall remain in effect so long as there are any obligations
owing by Tenant under the Loan Agreement or any present or future agreement
between Tenant and Lender which involves the Assets. All the terms and
provisions of this Waiver shall be binding on and inure to the benefit of the
respective successors and assigns of Sublessor and Lender. The rights and
benefits of this Waiver may be assigned or transferred by Lender or to third
parties who may become the lender, directly or indirectly, to Tenant. Lender
shall provide subsequent written notice to Sublessor and Tenant of the
assignment or transfer. Headings in this Waiver are for convenience of reference
only and are not part of the substance hereof. This Waiver shall be governed by
and construed in accordance with the laws of the State of California.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, Sublessor and Lender have executed this Waiver as
of the date and year first written above.
SUBLESSOR:
SYNTEX (U.S.A.) INC.
By: ________________________________________
Name: _____________________________________
Title: _____________________________________
LENDER:
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company, as General Partner
By: ________________________________________
Name: _____________________________________
Title: _____________________________________
-3-
<PAGE>
State of California )
)
County of Santa Clara )
On July 30, 1996, before me, the undersigned, personally appeared Theodore
W. Fowlkes, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _____________________ (Seal)
State of ________________ )
)
County of Contra Costa )
On _______________ 199__ before me, the undersigned, personally appeared
__________________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature ______________________ (Seal)
<PAGE>
EXHIBIT A
ALL THAT certain real property situate in the City of Palo Alto, County of Santa
Clara, State of California described as follows:
COMMENCING at the Northeasterly corner of Lot 5 of Tract #4781 entitled
"Stanford Industrial Park" as filed in the Office of the Recorder of Santa Clara
County on November 13, 1969 in Book 261 of maps at Pages 40 and 41. Said
Northeasterly corner lying on the Westerly line of Hillview Avenue (80 feet in
width); thence from said point of commencement along said Westerly line of
Hillview Avenue North 15 degrees 27' 55" West 720.00 feet to the TRUE POINT OF
BEGINNING of the Parcel to be described; thence from said TRUE POINT OF
BEGINNING and leaving said Westerly line of Hillview Avenue South 72 degrees 32'
05" West 685.00 feet to a point on the Easterly line of parcel C as said Parcel
is shown upon that certain parcel map filed in the Office of the Recorder of
Santa Clara County on May 22, 1969 in Book 254 of Parcel Maps at page 1; thence
along said Easterly line of Parcel C North 15 degrees 27' 55" West 360.37 feet;
thence leaving said Easterly line North 74 degrees 32' 05" East 685.00 feet to a
point on the aforementioned Westerly line of Hillview Avenue; thence along said
Westerly line South 15 degrees 27' 55" East 360.37 feet to the TRUE POINT OF
BEGINNING.
CONTAINING 5.667 Acres of land more or less
EXCEPTING therefrom an easement in favor of the Furissima Hills County Water
District for water line purposes 5.00 feet in width being the Easterly 5.00 feet
of the above described parcel and being more fully described in Volume 7952 of
Official Records of Santa Clara County at Page 197.
EXHIBIT A
<PAGE>
EXHIBIT C
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY
TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT
OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR
(iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS
WARRANT.
CORSAIR COMMUNICATIONS
----------------------
WARRANT TO PURCHASE 112,500 SHARES
OF SERIES B PREFERRED STOCK
THIS CERTIFIES THAT, for value received, MMC/GATX PARTNERSHIP NO. I and its
assignees are entitled to subscribe for and purchase 112,500 shares of the fully
paid and nonassessable Series B Preferred Stock (as adjusted pursuant to Section
4 hereof, the "Shares") of CORSAIR COMMUNICATIONS, INC., a Delaware corporation
(the "Company"), subject to the provisions and upon the terms and conditions
hereinafter set forth, provided, however, that in the event that at the time of
-----------------
exercise of this Warrant there are insufficient authorized shares of the
Company's Series B Preferred Stock to allow issuance of the Shares, then this
Warrant shall be exercisable for the same number of shares of the Company's
Common Stock. The price per Share at which this Warrant is exercisable shall be
the lower of (i) $4.43 or (ii) the price per share at which the next sale of
equity securities of Borrower is made (such price and such other price as shall
result, from time to time. from the adjustments specified in Section 4 hereof is
herein referred to as the "Warrant Price"). As used herein, (a) the term
"Series Preferred" shall mean the Company's presently authorized Series B
Preferred Stock, and any stock into or for which such Series B Preferred Stock
may hereafter be converted or exchanged, (b) the term "Date of Grant" shall mean
July 31, 1996, and (c) the term "Other Warrants" shall mean any other warrants
issued by the Company in connection with the transaction with respect to which
this Warrant was issued, and any warrant issued upon transfer or partial
exercise of this Warrant. The term "Warrant" as used herein shall be deemed to
include Other Warrants unless the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable, in
----
whole or in part, at any time and from time to time from the Date of Grant
through the later of (i) ten (10) days after the Date of Grant or (ii) five (5)
years after the closing of the Company's initial public offering of its Common
Stock effected pursuant to a Registration Statement on Form S-1 (or its
successor) filed under the Securities Act of 1933, as amended (the "Act").
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
----------------------------------------------------
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased, or (b) exercise of the right provided for in Section 10.3 hereof.
The person or persons in whose name(s) any certificate(s) representing shares of
Series Preferred shall be issuable upon exercise of this Warrant shall be deemed
to have become the holder(s) of record of, and shall be treated for all purposes
as the record holder(s) of, the
<PAGE>
shares represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
thirty (30) days after such exercise and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the holder hereof as soon as possible and in any event within
such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
---------------------------------------
upon the exercise of the rights represented by this Warrant, upon issuance
pursuant to the terms and conditions herein and upon payment of the Warrant
Price multiplied by the number of shares to be issued either in cash or pursuant
to the terms of Section 10.3 hereof, will be fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issue thereof. The
Company agrees that prior to December 31, 1996, it will take such actions as are
necessary, including obtaining stockholder consent, to authorize the issuance of
a sufficient number of shares of Series B Preferred Stock to allow the full
exercise of this Warrant. During the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series Preferred
or Common Stock to provide for the exercise of the rights represented by this
Warrant and, if applicable, a sufficient number of shares of its Common Stock to
provide for the conversion of the Series Preferred into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification or
--------------------------
change of securities of the class issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in case
of any merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance reasonably satisfactory to the holder of this Warrant), so that
the holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the shares of Series Preferred theretofore issuable
upon exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of Series Preferred then purchasable
under this Warrant. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4 and, in the case of a new Warrant issuable after conversion of
the authorized shares of the Series Preferred into shares of Common Stock or
after the amendment of the terms of the antidilution protection of the Series
Preferred, shall provide for antidilution protection that shall be as nearly
equivalent as may be practicable to the antidilution provisions applicable to
the Series Preferred on the Date of Grant. The provisions of this subparagraph
(a) shall similarly apply to successive reclassifications, changes, mergers and
transfers.
-2-
<PAGE>
(b) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any time
---------------------------------------
while this Warrant is outstanding and unexpired shall (i) pay a dividend with
respect to Series Preferred payable in Series Preferred, or (ii) make any other
distribution with respect to Series Preferred (except any distribution if
specifically provided for in Sections 4(a) and 4(b)), of Series Preferred, then
the Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of shares of Series Preferred outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of Series Preferred outstanding immediately after such dividend
or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant
------------------------------
Price pursuant to Sections 4.01(b) or 4.01(c), the number of Shares of Series
Preferred purchasable hereunder shall be adjusted, to the nearest whole share,
to the product obtained by multiplying the number of Shares purchasable
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately prior to such
adjustment and the denominator of which shall be the Warrant Price immediately
thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
-------------------
the Shares of Series Preferred purchasable hereunder are set forth in the
Company's Certificate of Incorporation, as amended through the Date of Grant, a
true and complete copy of which is attached hereto as Exhibit B (the "Charter").
The Company shall promptly provide the holder hereof with any restatement,
amendment, modification or waiver of the Charter promptly after the same has
been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
---------------------
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant. In addition, whenever the conversion price or
conversion ratio of the Series Preferred shall be adjusted, the Company shall
make a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
conversion price or ratio of the Series Preferred after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (without
regard to Section 13 hereof, by first class mail, postage prepaid) to the holder
of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will
-----------------
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Series Preferred on the date of exercise as reasonably
determined in good faith by the Company's Board of Directors.
7. Compliance with Act; Disposition of Warrant or Shares of Series
---------------------------------------------------------------
Preferred.
- ---------
(a) Compliance with Act. The holder of this Warrant, by acceptance
-------------------
hereof, agrees that this Warrant, and the shares of Series Preferred to be
issued upon exercise hereof and any Common Stock issued upon conversion thereof
are being acquired for investment and not with a view to the sale or
distribution of any part thereof and the holder of this Warrant has no present
intention of selling or engaging in any public distribution of this Warrant, and
that such holder will not offer, sell or otherwise dispose of this Warrant, or
any shares of Series Preferred to be issued upon exercise hereof or any Common
Stock issued upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state securities laws. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act and any applicable state securities laws or an exemption from such
registration is
-3-
<PAGE>
available, the holder hereof shall confirm in writing that the shares of Series
Preferred so purchased (and any shares of Common Stock issued upon conversion
thereof) are being acquired for investment and not with a view toward
distribution or resale in violation of the Act and shall confirm such other
matters related thereto as may be reasonably requested by the Company. This
Warrant and all shares of Series Preferred issued upon exercise of this Warrant
and all shares of Common Stock issued upon conversion thereof (unless registered
under the Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder, at
such time as the restrictions on the transfer of the applicable security shall
have terminated. In addition, in connection with the issuance of this Warrant,
the holder specifically represents to the Company by acceptance of this Warrant
as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
in violation of the Act.
(2) The holder understands that this Warrant has not been registered under
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the holder's investment intent
as expressed herein.
-4-
<PAGE>
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. The holder is aware of the provisions of
Rule 144, promulgated under the Act.
(4) The holder has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment.
and has the ability to bear the economic risks of its investment.
(5) The holder is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Act, as presently in effect.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
--------------------------------
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of such holder's counsel, or other evidence, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state securities law then in effect) of this Warrant or such
shares of Series Preferred or Common Stock and indicating whether or not under
the Act certificates for this Warrant or such shares of Series Preferred to be
sold or otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such law.
Promptly upon receiving such written notice and reasonably satisfactory opinion
or other evidence, if so requested, the Company, as promptly as practicable but
no later than fifteen (15) days after receipt of the written notice, opinion or
other evidence, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such shares of Series Preferred or Common Stock, all
in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 7(b) that the opinion of
counsel for the holder or other evidence is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly with details thereof
after such determination has been made. Notwithstanding the foregoing, this
Warrant or such shares of Series Preferred or Common Stock may, as to such
federal laws, be offered, sold or otherwise disposed of in accordance with Rule
144 or 144A under the Act, provided that the Company shall have been furnished
with such information as the Company may reasonably request to provide a
reasonable assurance that the provisions of Rule 144 or 144A have been
satisfied. Each certificate representing this Warrant or the shares of Series
Preferred thus transferred (except a transfer pursuant to Rule 144 or 144A)
shall bear a legend as to the applicable restrictions on transferability in
order to ensure compliance with such laws, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to ensure
compliance with such laws. The Company may issue stop transfer instructions to
its transfer agent in connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any
-----------------------------
legend described in this Warrant nor the requirements of Section 7(b) above
shall apply to any transfer of, or grant of a security interest in, this Warrant
(or the Series Preferred or Common Stock obtainable upon exercise thereof) or
any part hereof (1) to a partner of the holder if the holder is a partnership,
(ii) to a partnership of which the holder is a partner, or (iii) to any
affiliate of the holder if the holder is a corporation; provided, however, in
-------- -------
any such transfer, if applicable, the transferee shall on the Company's request
agree in writing to be bound by the terms of this Warrant as if an original
signatory hereto.
-5-
<PAGE>
8. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company
will transmit to the holder of this Warrant such information, documents and
reports as are generally distributed to the holders of any class or series of
the securities of the Company concurrently with the distribution thereof to the
shareholders.
9. Registration Rights. The Company grants registration rights to the
-------------------
holder of this Warrant for any Common Stock of the Company obtained upon
conversion of the Series Preferred, comparable to the registration rights
granted to the investors in that certain Investor Rights Agreement, dated as of
December 10, 1996, as amended, as of December 14, 1994 and October 31, 1995 (the
"Registration Rights Agreement"), with the following exceptions and
clarifications:
(1) The holder will have no demand registration rights pursuant to
Section 1.2 of the Registration Rights Agreement.
(2) The holder will be subject to the same provisions regarding
indemnification as contained in the Registration Rights Agreement.
(3) The registration rights are freely assignable by the holder of this
Warrant.
10. Additional Rights.
-----------------
10.1 Secondary Sales. The Company agrees that it will not interfere with the
---------------
holder of this Warrant in obtaining liquidity if opportunities to make secondary
sales of the Company's securities become available so long as such sales are in
accordance with all applicable state and federal securities laws.
10.2 Mergers. The Company shall provide the holder of this Warrant with at
-------
least twenty (20) days' notice of the terms and conditions of any of the
following potential transactions: (i) the sale, lease, exchange, conveyance or
other disposition of all or substantially all of the Company's property or
business, or (ii) its merger into or consolidation with any other corporation
(other than a wholly-owned subsidiary of the Company), or any transaction
(including a merger or other reorganization) or series of related transactions,
in which more than 50% of the voting power of the Company is disposed of.
10.3 Right to Convert Warrant into Stock; Net Issuance.
-------------------------------------------------
(a) Right to Convert. In addition to and without limiting the
----------------
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.3
at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) equal to the quotient obtained by dividing the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (Y) the fair market value of one share of Series Preferred (or
Common Stock if the Series Preferred has been automatically converted into
Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion (assuming the Series Preferred has
been automatically
-6-
<PAGE>
converted into Common Stock) shall be computed as follows:
X = B - A
-------
Y
Where: X = the number of shares of Common Stock that may
be issued to holder
Y = the fair market value of one share of
Common Stock
A = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
B = the aggregate fair market value (i.e., fair
market value x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion Right,
and, if the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the
------------------
holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in Section 10.3(a) hereof
as the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"), and, at the election of the holder
hereof, may be made contingent upon the closing of the sale of the Company's
Common Stock to the public in a public offering pursuant to a Registration
Statement under the Act (a "Public Offering"). Certificates for the shares
issuable upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the holder within
thirty (30) days following the Conversion Date. Any conversion from Series
Preferred to Common Stock shall be in the ratio of one (1) share of Common Stock
for each share of Series Preferred (as adjusted herein and in the Charter). On
the Date of Grant, each share of the Series Preferred represented by this
Warrant is convertible into one share of Common Stock.
(c) Determination of Fair Market Value. For purposes of this Section
----------------------------------
10.3, "fair market value" of a share of Series Preferred (or Common Stock if the
Series Preferred has been automatically converted into Common Stock) as of a
particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair market value of the
Common Stock shall be deemed to be the average of the closing prices of the
Common Stock on such exchange over the 30-day period ending five business
days prior to the Determination Date, and the fair market value of the Series
Preferred shall be deemed to be such fair market value of the Common Stock
multiplied by the number of shares of Common Stock into which each share of
Series Preferred is then convertible.
-7-
<PAGE>
(B) If traded over-the-counter, the fair market value of the Common
Stock shall be deemed to be the average of the closing bid prices of the
Common Stock over the 30-day period ending five business days prior to the
Determination Date, and the fair market value of the Series Preferred shall
be deemed to be such fair market value of the Common Stock multiplied by the
number of shares of Common Stock into which each share of Series Preferred is
then convertible; and
(C) If there is no public market for the Common Stock, then fair market
value shall be determined in good faith by the Company's Board of Directors.
10.4 Exercise Prior to Expiration. To the extent this Warrant is not
----------------------------
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Series Preferred is greater than the Warrant
Price then in effect, this Warrant shall be deemed automatically exercised
pursuant to Section 10.3 above (even if not surrendered) immediately before its
expiration. For purposes of such automatic exercise, the fair market value of
one share of the Series Preferred upon such expiration shall be determined
pursuant to Section 10.3(c). To the extent this Warrant or any portion thereof
is deemed automatically exercised pursuant to this Section 10.4, the Company
agrees to promptly notify the holder hereof of the number of Shares, if any, the
holder hereof is to receive by reason of such automatic exercise.
11. Representations and Warranties. The Company represents and warrants to
------------------------------
the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
(b) The Shares have been or will be duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable;
(c) The rights, preferences, privileges and restrictions granted to or
imposed upon the Series Preferred and the holders thereof are as set forth in
the Charter, as amended to the Date of the Grant, a true and complete copy of
which has been delivered to the original holder of this Warrant and is attached
hereto as Exhibit B;
(d) The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized and reserved for issuance by the Company and, when
issued in accordance with the terms of the Charter will be validly issued, fully
paid and nonassessable;
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of any notices required pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
and
(f) There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Company to perform its obligations under this Warrant.
12. Modification and Waiver. The Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
-8-
<PAGE>
13. Notices. Any notice, request, communication or other document required
-------
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by U.S. mail, postage prepaid, or recognized
overnight courier service to each such holder at its address as shown on the
books of the Company or to the Company at the address indicated therefor on the
signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the Shares) to which the holder hereof shall continue to be
entitled after such exercise or conversion in accordance with this Warrant;
provided, that the failure of the holder hereof to make any such request shall
- --------
not affect the continuing obligation of the Company to the holder hereof in
respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language IN this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California, without regard to principles of conflicts of laws.
18. Survival of Representations, Warranties and Agreements. All
------------------------------------------------------
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
--------
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant.
-9-
<PAGE>
21. Severability. The invalidity or unenforceability of any provision of
------------
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other proceeding
----------------------------
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
23. Entire Agreement; Modification. This Warrant constitutes the entire
------------------------------
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
CORSAIR COMMUNICATIONS, INC.
By __________________________________________
Title: _______________________________________
Address: 3408 Hillview Avenue
Palo Alto, California 94304
-10-
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: CORSAIR COMMUNICATIONS, INC.
1. The undersigned hereby:
[_] elects to purchase ___ shares of Series __ Preferred Stock of
CORSAIR COMMUNICATIONS, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase
price of such shares in full, or
[_] elects to exercise its net issuance rights pursuant to Section
10.3 of the attached Warrant with respect to __ Shares of Series
__ Preferred Stock.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
_________________________________
(Name)
_________________________________
_________________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
_________________________________
(Signature)
_____________________________
(Date)
-11-
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
To: CORSAIR COMMUNICATIONS, INC. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the
Company's public offering contemplated by the Registration Statement on Form S-
_______, filed
___________________, 19__, the undersigned hereby:
[_] elects to purchase __ shares of Series __ Preferred Stock of
the Company (or such lesser number of shares as may be sold
on behalf of the undersigned at the Closing) pursuant to the
terms of the attached Warrant, or
[_] elects to exercise its net issuance rights pursuant to
Section 10.3 of the attached Warrant with respect to __
Shares of Series __ Preferred Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such ____________ shares.
_________________________________
(Signature)
____________________________
(Date)
-12-
<PAGE>
EXHIBIT B
CHARTER
-13-
<PAGE>
CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
CORSAIR COMMUNICATIONS, INC.
Corsair Communications, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That a resolution was duly adopted by the Board of Directors of the
Corporation setting forth a proposed amendment to the Amended and Restated
Certificate of Incorporation of the Corporation, and declaring said amendment to
be advisable and recommended for approval by the stockholders of the
Corporation. Subsection B.4.b. of Article IV of the Amended and Restated
Certificate of Incorporation is amended as follows:
"Election of Directors. The authorized number of directors of this
---------------------
Corporation shall be seven (7). Notwithstanding 5(a) above, the
holders of Series A Preferred Stock, voting as a separate class, shall
be entitled to elect four (4) directors of the corporation; and the
holders of the Series A Preferred Stock, Series B Preferred Stock and
Common Stock, voting together as a single class on an as converted
basis, shall be entitled to elect three (3) directors of the
corporation. At any meeting held for the purpose of electing
directors, the presence in person or by proxy of the holders of a
majority of the Series A Preferred Stock then outstanding shall
constitute a quorum of the Series A Preferred Stock for the election
of directors to be elected solely by the holders of Series A Preferred
Stock. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of the
Series A Preferred Stock, Series B Preferred Stock and Common Stock
then outstanding, on an as converted basis, shall constitute a quorum
of the Series A Preferred Stock, Series B Preferred Stock and Common
Stock for the election of directors to be elected solely by the
holders of the Series A Preferred Stock, Series B Preferred Stock and
Common Stock, voting together as a single class on an as converted
basis. A vacancy in any directorship elected by the holders of Series
A Preferred Stock shall be filled only by vote of the holders of
Series A Preferred Stock; and a
<PAGE>
vacancy in any directorship elected by the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock voting
together shall be filled only by the vote of the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock voting
together as provided above."
SECOND: That, thereafter, the stockholders approved the foregoing amendment
by written consent in accordance with Section 228 of the Delaware General
Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, said Corsair Communications, Inc. has caused this
certificate to be signed and attested by MaryAnn Byrnes, its President and Kevin
Compton, its Secretary this 10th day of November, 1995.
By: /s/ MaryAnn Byrnes
--------------------------------
MaryAnn Byrnes, President
ATTEST:
By: /s/ Kevin Compton
-----------------------
Kevin Compton, Secretary
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
Corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of a majority
of the outstanding shares in accordance with Section 228 thereof, and written
notice having been given in accordance with the requirements of such Section.
The Amended and Restated Certificate of Incorporation restates, integrates and
amends the provisions of the Certificate of Incorporation of this corporation.
3. The Certificate of Incorporation of the corporation is hereby amended
and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Corsair Communications, Inc..
ARTICLE II
The address of this corporation's registered office in the State of Delaware
is 15 East North Street, City of Dover, County of Kent 19901. The name of its
registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
<PAGE>
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
Twenty-Eight Million Two Hundred Forty-Seven Thousand Four Hundred and Ten
(28,247,410) shares. Eighteen Million (18,000,000) shares shall be Common
Stock, $.001 par value per share, and Ten Million Two Hundred Forty-Seven
Thousand Four Hundred and Ten (10,247,410) shares shall be Preferred Stock,
$.001 par value per share, of which Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock and Two Million One Hundred
Twenty-Seven Thousand Four Hundred and Ten (2,127,410) shares shall be Series B
Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock and Series B
Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this corporation) on the
Common Stock of this corporation, at the rate of $0.10 per share of Series A
Preferred Stock per annum and $0.22 per share of Series B Preferred Stock per
annum (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) payable when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative. No cash dividend
shall be declared or paid with respect to the Series A Preferred Stock or Series
B Preferred Stock unless at the same time a like proportionate cash dividend for
the same dividend period, ratably in proportion to the respective annual
dividend rates set forth above, is declared and paid with respect to the Series
A Preferred Stock and the Series B Preferred Stock.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
the holders of the Series A Preferred Stock and Series B Preferred Stock were
the holders of the number of shares of Common Stock of this corporation into
which their respective shares of Series A Preferred Stock and Series B Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of this corporation entitled to receive such
distribution.
-2-
<PAGE>
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up of
this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock and Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to the sum of (i) $2.00 for each outstanding share of Series A
Preferred Stock, (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations and hereafter referred to as
the "Original Series A Issue Price"), (ii) $4.43 for each outstanding share of
Series B Preferred Stock (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations and hereafter referred
to as the "Original Series B Issue Price"), and (iii) an amount equal to
declared but unpaid dividends on such share of Series A Preferred Stock or
Series B Preferred Stock, as applicable. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series A
Preferred Stock and the Series B Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then,
the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and the Series B Preferred Stock in proportion to the aggregate
liquidation preferences of the respective series, and ratably among the holders
of that series in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above have
been paid, the remaining assets of the corporation available for distribution to
stockholders shall be distributed among the holders of Series A Preferred Stock,
Series B Preferred Stock and Common Stock pro rata based on the number of shares
of Common Stock held by each (assuming conversion of all such Series A Preferred
Stock and Series B Preferred Stock).
c. A consolidation or merger of this corporation with or into any
other corporation or corporations, or a sale, conveyance or disposition of all
or substantially all of the assets of this corporation or the effectuation by
the corporation of a transaction or series of related transactions in which more
than 50% of the voting power of the corporation is disposed of (excluding the
issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement and the issuance of Series B Preferred Stock
pursuant to the Series B Preferred Stock Purchase Agreement), shall be deemed to
be a liquidation, dissolution or winding up within the meaning of this Section
2.
3. Conversion. The holders of the Series A Preferred Stock and Series
----------
B Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
-3-
<PAGE>
a. Right to Convert.
----------------
(i) Subject to subsection (c), each share of Series A
Preferred Stock and Series B Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of this corporation or any transfer agent for the particular series
of Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (A) the Original Series A Issue Price
for each share of Series A Preferred Stock and (B) the Original Series B Issue
Price for each share of Series B Preferred Stock, plus all declared but unpaid
dividends thereon for each share of Series A Preferred Stock or Series B
Preferred Stock, by the Conversion Price at the time in effect for such share.
The initial Conversion Price per share for shares of Series A Preferred Stock
shall be the Original Series A Issue Price and the initial Conversion Price per
share for shares of Series B Preferred Stock shall be the Original Series B
Issue Price; provided, however, that the Conversion Price for the Series A
Preferred Stock and Series B Preferred Stock shall be subject to adjustment as
set forth in subsection 3(c).
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $7,500,000 in the aggregate or (B) the date upon which
the corporation obtains the consent of the holders of a majority of the then
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a single class on an as converted basis.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock or Series B Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the particular series of Preferred Stock, and shall give
written notice by mail, postage prepaid, to this corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock and/or Series B Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Series A Preferred Stock and/or
Series B Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
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<PAGE>
underwritten offer of securities registered pursuant to the Securities Act, the
conversion may, at the option of any holder tendering Series A Preferred Stock
and/or Series B Preferred Stock for conversion, be conditioned upon the closing
with the underwriter of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive the Common Stock issuable upon
such conversion of the Series A Preferred Stock and/or Series B Preferred Stock
shall not be deemed to have converted such Series A Preferred Stock and/or
Series B Preferred Stock until immediately prior to the closing of such sale of
securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Prices of the Series A Preferred Stock and Series B Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) A. If the corporation shall issue any Additional Stock (as
defined below) without consideration or for a consideration per share less than
the Conversion Price for the Series A Preferred Stock or the Conversion Price
for the Series B Preferred Stock in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for the Series A Preferred Stock or
Series B Preferred Stock, as the case may be, in effect immediately prior to
each such issuance shall forthwith (except as otherwise provided in this clause
(i)) be adjusted to a price equal to the quotient obtained by dividing the total
computed under clause (x) below by the total computed under clause (y) below as
follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock or Series B Preferred Stock sold
pursuant to the applicable agreements pursuant to which such shares of
Series A Preferred Stock or Series B Preferred Stock, as the case may
be, are first issued (the "Stock Purchase Agreements"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or after
the dates of the applicable Stock Purchase Agreements (the "Purchase
Date") other than shares of Common Stock issued or issuable with respect
to the Series A Preferred Stock or Series B Preferred Stock;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock or Series B Preferred Stock sold
pursuant to the applicable Stock Purchase Agreements divided by the
applicable Conversion Price for such shares in effect at the applicable
Purchase Date (or such higher or lower Conversion Price for such series
as results from the application of subsections 3(c)(iii) and (iv) and
assuming that this Certificate was in effect as of the applicable
Purchase Date) plus
-5-
<PAGE>
(2) the number of shares of Additional Stock
issued since the applicable Purchase Date (increased or decreased to the
extent that the number of such shares of Additional Stock shall have
been increased or decreased as the result of the application of
subsections 3(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the Series
A Preferred Stock or Series B Preferred Stock shall be made in an amount less
than one cent per share, provided that any adjustments which are not required to
be made by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to 3 years from the
date of the event giving rise to the adjustment being carried forward, or shall
be made at the end of 3 years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant
to this subsection 3(c)(i) shall have the effect of increasing the Conversion
Price above the Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to
the consideration (determined in the manner provided in subsections
3(c)(i)(C) and (c)(i)(D)), if any, received by the corporation upon the
issuance of such options or rights plus the minimum exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
-6-
<PAGE>
2. The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options
to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be deemed
to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the corporation for any such
securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the corporation
(without taking into account potential antidilution adjustments) upon
the conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subsections 3(c)(i)(C) and
(c)(i)(D)).
3. In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the antidilution
provisions thereof, the applicable Conversion Price of the Series A
Preferred Stock and Series B Preferred Stock, as applicable, and to the
extent in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any
payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
4. Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the Series A
Preferred Stock and Series B Preferred Stock, as applicable, to the
extent in any way affected by or computed using such options, rights or
securities or options or rights related to such securities, shall be
recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable securities which remain in
effect) actually issued upon the exercise of such options or rights,
upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
5. The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections
3(c)(i)(E)(1) and (2) shall be appropriately adjusted to reflect
-7-
<PAGE>
any change, termination or expiration of the type described in either
subsection 3(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by this corporation before, on or after the applicable Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 3(c)(iii) hereof,
B. shares of Common Stock issued upon conversion
of shares of Series A Preferred Stock or Series B Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly or
pursuant to a stock option plan or agreement or restricted stock plan or
agreement approved by the Board of Directors of this corporation,
D. shares of Common Stock issued or issuable (I)
in a public offering before or in connection with which all outstanding
shares of Series A Preferred Stock and Series B Preferred Stock will be
converted to Common Stock or (II) upon exercise of warrants or rights
granted to underwriters in connection with such a public offering, or
E. shares of Series B Preferred Stock issued or
issuable to Comdisco, Inc. pursuant to a Warrant dated August 31, 1995.
(iii) In the event the corporation should at any time or
from time to time after the applicable Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of the Series A Preferred Stock and Series B
Preferred Stock then in effect shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of the aggregate of
shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
-8-
<PAGE>
(iv) If the number of shares of Common Stock outstanding at
any time after the applicable Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock
and Series B Preferred Stock then in effect shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be decreased in proportion to such decrease in outstanding
shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock and Series B Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the corporation into which their shares
of Series A Preferred Stock and Series B Preferred Stock are convertible as of
the record date fixed for the determination of the holders of Common Stock of
the corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3) provision shall be made so that the holders of the Series A
Preferred Stock and Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock and Series B Preferred
Stock, respectively, the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
Series A Preferred Stock and Series B Preferred Stock after the recapitalization
to the end that the provisions of this Section 3 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock and Series B
Preferred Stock against impairment.
-9-
<PAGE>
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon conversion
of the Series A Preferred Stock and Series B Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded up to the nearest whole
share. Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of shares of Series A Preferred
Stock and Series B Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock and Series B Preferred Stock
pursuant to this Section 3, this corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series A Preferred Stock and Series B
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
This corporation shall, upon the written request at any time of any holder of
Series A Preferred Stock or Series B Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price at the time in effect, and (C) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of a share of Series A
Preferred Stock or Series B Preferred Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock and Series B
Preferred Stock at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock and Series B Preferred
Stock such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series A
Preferred Stock and Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred Stock
and Series B Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock or Series B Preferred
Stock, this corporation will take such corporate action as may, in the
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<PAGE>
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock or
Series B Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of this corporation.
4. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock and Series B Preferred Stock shall have the right to one vote
for each share of Common Stock into which such Series A Preferred Stock and
Series B Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote, together as a single class with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be five (5). Notwithstanding 5(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis, shall be entitled to elect one (1)
director of the corporation. At any meeting held for the purpose of electing
directors, the presence in person or by proxy of the holders of a majority of
the Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the election of directors to be elected solely by
the holders of Series A Preferred Stock. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock and Common
Stock then outstanding, on an as converted basis, shall constitute a quorum of
the Series A Preferred Stock, Series B Preferred Stock and Common Stock for the
election of directors to be elected solely by the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock; and a vacancy in any directorship elected
by the holders of Series A Preferred Stock, Series B Preferred Stock and Common
Stock voting together shall be filled only by the vote of the holders of Series
A Preferred Stock, Series B Preferred Stock and Common Stock voting together as
provided above.
-11-
<PAGE>
5. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock and/or Series B Preferred Stock are outstanding, this corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of a majority of the then outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, voting together as a
single class on an as converted basis:
a. sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock or Series B Preferred Stock so as to affect
adversely the shares;
c. increase the authorized number of shares of Series A
Preferred Stock, Series B Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock or
Series B Preferred Stock with respect to voting, dividends, conversion rights or
upon liquidation, or (ii) having rights similar to any of the rights of the
Series A Preferred Stock and Series B Preferred Stock under this Section 5; or
e. change authorized number of directors from five (5).
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
-12-
<PAGE>
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The corporation shall have a perpetual existence.
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the Bylaws of the corporation.
-13-
<PAGE>
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-14-
<PAGE>
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been signed under the seal of this corporation as of this 24th day of
October, 1995.
CORSAIR COMMUNICATIONS, INC.
By: /s/ Mary Ann Byrnes
--------------------------------
Mary Ann Byrnes, President
ATTEST:
/s/ Kevin Compton
- ---------------------------
Kevin Compton, Secretary
<PAGE>
EXHIBIT D
July 31, 1996
MMC/GATX Partnership No. I
c/o GATX Capital Corporation, Agent
Four Embarcadero Center
Suite 2200
San Francisco, California 94111
Ladies and Gentlemen:
This opinion letter is furnished to you pursuant to Section 8.01 of
the Loan and Security Agreement of even date herewith (the "Loan Agreement"),
between Corsair Communications, Inc. as borrower (the "Company") and MMC/GATX
Partnership No. I, as lender (the "Lender"). We have acted as counsel for the
Company in connection with (i) the Loan Agreement and (ii) the issuance of
warrants to purchase 112,500 shares of the Company's Series B Preferred Stock,
or in certain circumstances Common Stock (the "Warrant"). Unless otherwise
defined herein, terms used herein shall have the meanings assigned to them in
the Loan Agreement.
In connection with this opinion letter, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates, including certificates of public officials, and
other instruments as we have deemed necessary or advisable for purposes of this
opinion letter, including those relating to the authorization, execution and
delivery of the Loan Agreement and the Warrant. In addition, we have examined
the following documents (the items referred to in subclauses (i) through (iii)
below herein referred to as the "Loan Documents"):
(i) an executed copy of the Loan Agreement;
(ii) the Secured Promissory Note executed by the Company in favor of
the Lender;
(iii) an executed copy of the Warrant;
(iv) the Amended and Restated Certificate of Incorporation and the
Bylaws of the Company, each as in effect on the date hereof;
<PAGE>
MMC/GATX Partnership No. I July 31,1996
Page 2
(v) an executed copy of the certificate of the Chief Financial
Officer of the Company dated July 31, 1996 certifying a true copy of the
resolutions of the Board of Directors of the Company adopted on July 26,
1996, authorizing, among other things, the execution, delivery and
performance of the Loan Documents and the issuance of the Warrant.
(vi) an executed copy of the certificate (the "Officer's
Certificate") of the Chief Financial Officer of the Company, dated July 31,
1996; and
(vii) such other documents as we have deemed necessary or appropriate
as a basis for the opinions hereinafter expressed.
We have also examined photostatic copies of the agreements (the
"Material Agreements") identified in Exhibit A to the Officer's Certificate and
any consents in connection with the Material Agreements. In our examination and
review we have assumed the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of the documents submitted to us as originals,
the conformity to the original documents of all documents submitted to us as
certified or photostatic copies, and the authenticity of the originals of such
copies. As to any facts material to the opinions hereinafter expressed which we
did not independently establish or verify, we have relied without investigation
upon certificates, statements and representations of representatives of the
Company. We have also assumed that the Lender has filed any required California
state franchise, income or similar tax returns and has paid any such required
state franchise, income or similar taxes and that there are no extrinsic
agreements or understandings among the parties to the Loan Documents that would
modify or interpret the terms of the Loan Documents or the respective rights or
obligations of the parties thereunder. Regarding documents executed by parties
other than the Company, we have assumed (i) that each such other party had the
power to enter into and perform all its obligations thereunder, (ii) the due
authorization of, and the due execution and delivery of, such documents by each
such party, (iii) that such documents constitute the legal, valid and binding
obligations of each such party, and (iv) that the representations and warranties
made in such documents by such parties are true and correct.
With respect to our opinion in paragraph 1 below, we are relying
solely on our review and examination of the certificates received from the
Secretary of State of the State of Delaware, without further investigation of
the corporate records of the Company.
<PAGE>
MMC/GATX Partnership No. I July 31,1996
Page 3
Based upon and subject to the foregoing, and except as set forth in
the Disclosure Schedule and subject to the further assumptions, limitations,
qualifications and exceptions set forth herein, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
2. The Company has the corporate power and authority to enter into
and perform the Loan Documents, and has taken all necessary corporate action to
authorize the execution, delivery and performance of the Loan Documents.
3. To our knowledge, no consents, approvals or authorizations of, or
notices to or filings with, any governmental authority or agency under the
Delaware General Corporation Law, the laws of the State of California or the
laws of the United States, as presently in effect and interpreted, are required
or necessary on the part of the Company in connection with the execution and
delivery by the Company of the Loan Documents, except for such filings as are
necessary in connection with the security interests in the Collateral granted by
the Company to the Lender and except for the filing required by Section 25102(f)
of the California Corporate Securities Law of 1968.
4. The Loan Documents are the legal, valid and binding obligations
of the Company, enforceable by the Lender against the Company in accordance with
their respective terms.
5. The execution and delivery by the Company of the Loan Documents
will not (i) violate or be in conflict with any provision of the Amended and
Restated Certificate of Incorporation or Bylaws of the Company, (ii) to our
knowledge, violate or be in conflict with any federal or California law having
applicability to the Company, or the Delaware General Corporation Law, as
presently in effect and interpreted, (iii) to our knowledge, violate or
contravene any judgment, decree, injunction or order of any federal or
California court, or any arbitrator or governmental agency or authority, having
jurisdiction over the Company or its properties or by which the Company may be
bound, or (iv) constitute a material breach of, or result in a material default
under, any term or provision of any of the Material Agreements.
6. The shares of Common Stock issuable upon exercise of the Warrant
(if no additional Series B Preferred Stock is authorized) have been duly and
validly reserved for issuance and, when and if issued in accordance with the
Company's Amended and Restated Certificate of Incorporation, upon receipt of the
exercise price therefor, will be validly issued, fully paid and nonassessable.
<PAGE>
MMC/GATX Partnership No. I July 31, 1996
Page 4
Whenever a statement herein is qualified by the expressions "known to
us," "to our knowledge," "we are not aware" or a similar phrase with respect to
our knowledge of matters of fact, it is intended to mean that our knowledge is
based upon the records, documents, instruments and certificates described above
and the current actual knowledge of the attorneys in this Firm who have devoted
substantive attention to the transactions contemplated by the Loan Documents
(but not including any constructive or imputed notice of any information) and
that we have not otherwise undertaken any independent investigations for the
purpose of rendering this opinion.
This opinion is limited to the laws of the State of California, the
General Corporation Law of the State of Delaware and applicable federal laws of
the United States, and we express no opinion herein with respect to the effect
or applicability of the laws of other jurisdictions.
Our opinions in paragraph 3 above and in clause (ii) of paragraph 5
above are limited to laws and regulations normally applicable to transactions of
the type contemplated in the Loan Documents and do not extend to licenses,
permits and approvals necessary for the conduct of the Company's business. In
addition and without limiting the previous sentence, we express no opinion
herein with respect to the effect of any land use, environmental or similar law,
any state or federal antitrust law, or any local law. Further, we express no
opinion as to compliance or noncompliance by the Lender with any federal, state
or other law (i) requiring the Lender to be licensed as a bank, finance company
or other type of financial institution, (ii) pertaining to matters regulating
the assets held by the Lender on the basis of portfolio requirements or the
Lender's capitalization, such as loan limits and capital adequacy requirements,
and (iii) otherwise applicable to the Lender and relating to its legal or
regulatory status or the nature of its business.
The opinions set forth above are subject to the following
qualifications, assumptions, limitations and exceptions:
(a) The validity, binding nature and enforceability of the Company's
obligations under the Loan Documents may be subject to or limited by (i)
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
transfer and other similar laws affecting the rights of creditors generally;
(ii) general principles of equity (whether relief is sought in a proceeding at
law or in equity), including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and the discretion of any court of
competent jurisdiction in awarding specific performance or injunctive relief and
other equitable remedies; and (iii), without limiting the generality of the
foregoing, the effect of California court decisions and statutes which indicate
that
<PAGE>
MMC/GATX Partnership No. I July 31, 1996
Page 5
provisions of the Loan Documents which permit the Lender or any other person or
entity ("Person") to take action or make determinations may be subject to a
requirement that such action be taken or such determinations be made on a
reasonable basis in good faith or that it be shown that such action is
reasonably necessary for the protection of the Lender or such other Person.
(b) Our opinions are subject to the effect of the limitations imposed
by the California Uniform Commercial Code ("CUCC") relating to or affecting the
rights and remedies available to secured creditors.
(c) We express no opinion as to:
(1) the enforceability of provisions of the Loan Documents
pursuant to which the Company agrees to make payments without set-off, defense
or counterclaim;
(2) Article IX of the Loan Agreement insofar as the CUCC does
not specify the manner of foreclosure or exercise of remedies in respect of
deposit accounts;
(3) provisions purporting to require the award or payment of
attorneys' fees, expenses or costs in any action where the Lender is not the
prevailing party, or the impact of California Civil Code ("CC") (S)1717 et seq.
-- ----
on any such provisions;
(4) under certain circumstances, provisions to the effect that
rights or remedies are not exclusive, that every right or remedy is cumulative
and may be exercised in addition to or with any other right or remedy, that the
election of some particular remedy or remedies does not preclude recourse to one
or another remedy or that failure to exercise or delay in exercising rights or
remedies will not operate as a waiver of any such right or remedy;
(5) provisions prohibiting waivers of any terms or provisions of
any of the Loan Documents other than in writing, or prohibiting oral
modifications thereof or modification by course of dealing to the extent such
provisions are inconsistent with applicable law;
(6) the enforceability under certain circumstances of provisions
indemnifying a party against, or requiring contributions toward, that party's
liability for its own wrongful or negligent acts or where such indemnification
or contribution is contrary to public policy or prohibited by law;
<PAGE>
MMC/GATX Partnership No. I July 31, 1996
Page 6
(7) any provision providing for the exclusive jurisdiction of a
particular court or purporting to waive rights to trial by jury, service of
process or objections to the laying of venue or to forum on the basis of forum
non conveniens, in connection with any litigation arising out of or pertaining
- --- ----------
to the Loan Documents;
(8) Section 10.04 of the Loan Agreement;
(9) provisions providing for an increase in the rate of interest
or imposing a late charge or penalty in the event of delinquency or default;
(10) provisions imposing a prepayment charge, fee or penalty
based upon a percentage or fraction of the amount prepaid or the amount
outstanding under the Loan Agreement;
(11) provisions purporting to waive statutory or common law
rights, including the right to receive notice or to be allowed to cure,
reinstate or redeem in the event of default, and provisions expressly or by
implication waiving broadly or vaguely stated rights, unknown future rights and
defenses to obligations, in each case to the extent such rights or defenses are
not waivable under applicable law ;
(12) provisions purporting to designate the Lender as the
Company's agent or attorney in fact;
(13) provisions purporting to waive any applicable statutes of
limitation;
(14) provisions authorizing the Lender to set off and apply any
deposits at any time held, and any other indebtedness at any time owing, by the
Lender to or for the account of the Company;
(15) provisions of the Loan Agreement purporting to limit the
standards imposed upon the Lender for the care of Collateral in the Lender's
possession to the extent such provisions are inconsistent with applicable
provisions of the CUCC;
(d) We invite the Lender's attention to the provisions of CUCC
(S)9313 providing for fixture filings with the applicable county recorder in
respect of any fixtures and to the benefits afforded to the Lender as a result
of such filing. Additionally, we note that the rights of the Lender in respect
of fixtures may be limited by CC (S)(S)1013, 1013.5 and 1019 and CUCC (S)9313
which concern fixtures and their removal except to
<PAGE>
MMC/GATX Partnership No. I July 31, 1996
Page 7
the extent that appropriate agreements are obtained from owners and
encumbrancers of, and others claiming an interest in, the real property on which
such fixtures are located.
(e) Our opinions are subject to the effect of judicial decisions
which may permit the introduction of extrinsic evidence to interpret the terms
of written contracts.
(f) Insofar as this opinion letter concerns the law of the State of
California limiting the rates of interest legally chargeable or collectible, we
have relied upon our understanding that the Lender is a "finance lender"
licensed under the California Finance Lenders Law (with a currently effective
license that has not been revoked or suspended) and therefore within the class
of exempt persons contemplated by California Financial Code (S)22002 and that
all amounts provided to the Company pursuant to the Loan Agreement will be made
out of the licensed office of the Lender and, as a result thereof, is exempt
from the restrictions of Section 1 of Article XV of the Constitution of the
State of California relating to rates of interest upon the loan of money. We
further assume in this regard that all Advances have been and will be made by
the Lender for its own account and without intent to circumvent otherwise
applicable interest rate limitations under California law and that there is no
present express or implied agreement or plan to sell participations or any other
interest in the Advances or the Loan Agreement to any Person other than a Person
that also qualifies for an exemption from the interest rate limitations of
California law.
(g) We wish to point out that the Lender, as holder of the Secured
Promissory Note, may be required to prove the outstanding amount thereof.
(h) We express no opinion concerning the past, present or future fair
market value of any securities.
(i) The effect of subsequent issuances of securities of the Company,
to the extent that the Company may issue so many shares of Common Stock that
there are not enough remaining authorized but unissued shares of Common Stock
for the exercise of the Warrant.
(j) We express no opinion as to the title of the Company to any
Collateral or regarding the creation, attachment, perfection or priority of any
security interests in any Collateral.
The opinions expressed herein are solely for your benefit in
connection with the above transactions, and such opinions may not be relied on
in any manner or
<PAGE>
MMC/GATX Partnership No. I July 31, 1996
Page 8
for any purpose by any other Person. In addition, this opinion is rendered as
of the date hereof, and we do not undertake to advise you of matters which occur
subsequent to the date hereof and which affect the opinions expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT E
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT is entered into as of July 31, 1996, by and
between MMC/GATX PARTNERSHIP NO. 1, a California general partnership
("Partnership") and COMDISCO, INC. ("Comdisco"). Partnership and Comdisco are
sometimes referred to herein individually as a "Lender" and, collectively, as
"Lenders."
RECITALS
A. Partnership and Comdisco have each entered into a Loan and Security
Agreement, dated as of July 31, 1996 (each, individually, a "Loan Agreement"
and. collectively, the "Loan Agreements"), with Corsair Communications
("Borrower"). The Loan Agreements are identical except for the name of the
lender, the original principal amounts thereof and the amounts of the payments
thereunder. Unless otherwise defined herein, terms capitalized herein and
defined in the Loan Agreements shall have the meanings ascribed to them in such
Loan Agreements.
B. Comdisco and Borrower are parties to a (i) Master Lease Agreement,
dated as of August 31, 1995 and Equipment Schedule(s) thereto, pursuant to which
Comdisco has leased certain equipment to Borrower, and (ii) a Loan and Security
Agreement, dated as of August 31, 1995 (collectively, the "Comdisco Equipment
Financings").
C. Partnership and Comdisco desire to set forth in this Agreement their
respective rights and obligations with respect to the Loan Agreements (and the
related Loan Documents and the credit to be extended thereunder) and the
exercise of rights with respect to the collateral described therein.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following definitions:
"Bankruptcy Code" means the federal bankruptcy law of the United States as
from time to time in effect, currently as Title II of the United States Code.
Section references to current sections of the Bankruptcy Code shall refer to
comparable sections of any revised version thereof if section numbering is
changed.
"Claim" means the Partnership Claim and/or the Comdisco Claim, as
applicable.
"Comdisco Claim" means any and all present and future "claims" (used in its
broadest sense, as contemplated by and defined in Section 101(5) of the
Bankruptcy Code, but without regard to whether such claim would be disallowed
under the Bankruptcy Code) of Comdisco now or hereafter arising or existing
under or relating to Comdisco's Loan Agreement and related Loan Documents,
whether joint, several, or joint and several, whether fixed or indeterminate,
due or not yet due, contingent or non-contingent, matured or unmatured,
liquidated or unliquidated, or disputed or undisputed. whether under a guaranty
or a letter of credit, and whether arising under contract, in tort, by law, or
otherwise, any interest or fees thereon (including interest or fees that accrue
after the filing of a petition by or against Borrower under the Bankruptcy Code,
irrespective of whether allowable under the Bankruptcy Code), any costs of
Enforcement Actions, including reasonable attorneys' fees and costs, and any
prepayment or termination premiums.
<PAGE>
"Enforcement Action" means, with respect to any Lender and with respect to
any Claim of such Lender or any item of Collateral in which such Lender has or
claims a security interest, lien or right of offset, any action, whether
judicial or nonjudicial, to repossess, collect, accelerate, offset, recoup, give
notification to third parties with respect to, sell, dispose of foreclose upon,
give notice of sale, disposition, or foreclosure with respect to, or obtain
equitable or injunctive relief with respect to, such Claim or Collateral. The
filing by any Lender of or the joining in the filing by any Lender of an
involuntary bankruptcy or insolvency proceeding against Borrower also is an
Enforcement Action.
"Insolvency Event" has the meaning given to such term in Section 4.4.
"Lender" or "Lenders" have the meanings given to such terms in the
introductory paragraph hereof.
"Loan Agreement(s)" has the meaning given to such term in Recital A.
"Partnership Claim" means any and all present and future "claims" (used in
its broadest sense, as contemplated by and defined in Section 101(5) of the
Bankruptcy Code, but without regard to whether such claim would be disallowed
under the Bankruptcy Code) of Partnership now or hereafter arising or existing
under or relating to the Partnership Loan Agreement and related Loan Documents,
whether joint several. or joint and several, whether fixed or indeterminate, due
or not yet due, contingent or non-contingent. matured or unmatured. liquidated
or unliquidated, or disputed or undisputed, whether under a guaranty or a letter
of credit, and whether arising under contract in tort, by law, or otherwise, any
interest or fees thereon (including interest or fees that accrue after the
filing of a petition by or against Borrower under the Bankruptcy Code,
irrespective of whether allowable under the Bankruptcy Code), any costs of
Enforcement Actions, including reasonable attorneys' fees and costs, and any
prepayment or termination premiums.
"Proceeds of Collection " has the meaning given to such term in Section
4.2.
1.2 Other Interpretive Provisions. References in this Agreement to
-----------------------------
"Recitals," "Sections," "Exhibits" and "Supplements" are to recitals, sections,
exhibits and supplements herein and hereto unless otherwise indicated.
References in this Agreement to any document, instrument or agreement shall
include (a) all exhibits, schedules, annexes and other attachments thereto, (b)
all documents, instruments or agreements issued or executed in replacement
thereof and (c) such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and
in effect at any given time. The words "include" and "including" and words or
similar import when used in this Agreement shall not be construed to be limiting
or exclusive.
2. INTERCREDITOR ARRANGEMENTS
2.1 Proportionate Interest. Except as otherwise provided in this
----------------------
Agreement, rights, interests and obligations of each Lender under each Lender's
Loan Agreement and related Loan Documents, including security interests in the
Collateral under each Loan Agreement, shall be shared by the Lenders in the
ratio of (a) the original principal amount of such Lender's Loan to Borrower
under such Lender's Loan Agreement to (b) the aggregate original principal
amounts of both Lender's Loans to Borrower under the Loan Agreements. Any
reference in this Agreement to an allocation between or sharing by the Lenders
of any right, interest or obligation "ratably," "proportionally" or in similar
terms shall refer to this ratio. The provisions hereof shall apply irrespective
of the time or order of attachment or perfection of security interests, or the
time or order of filing or recording of financing statements.
2.2 Limitation on Further Loans. After the date hereof, neither Lender may
---------------------------
make loans to or otherwise extend credit to Borrower without notice to and the
consent of the other Lender, which consent will not be unreasonably withheld.
-2-
<PAGE>
2.3 Transfer of Interest in Loans.
-----------------------------
(a) Consent. Neither Lender may sell or otherwise transfer any of its
interest in its Loan Agreement, the related Loan Documents and its Loan
without the prior written consent of the other Lender, which consent shall
not be unreasonably withheld.
(b) Assumption of 0bligations. The transferee shall assume all
obligations of the transferring Lender with respect to the portion of the
transferor's interest under this Agreement and the applicable Loan
Agreement.
(c) Legal Authority and Financial Ability. The transferee shall
provide to the remaining Lender evidence satisfactory to the remaining
Lender that the proposed transferee has the financial ability and legal
authority to assume and perform all obligations of the transferring Lender
under this Agreement and the applicable Loan Agreement.
(d) Voidability. Any sale or transfer of an interest in this
Agreement shall be voidable at the option of the remaining Lender unless
the provisions of this Section 2 are satisfied.
2.3 Amendments. Neither Lender may amend its Loan Agreement without the
----------
prior written consent of the other Lender, which consent shall not be
unreasonably withheld.
2.4 Possession of Collateral. If either Lender shall obtain possession of
------------------------
any Collateral, it shall hold such Collateral for itself and as agent and bailee
for the other Lender for purposes of perfecting such other Lender's security
interest therein.
3. ALLOCATION OF PAYMENTS PRIOR TO AN EVENT OF DEFAULT. All amounts received
by Lenders for the account of Borrower prior to an Event of Default (other than
scheduled payments to Comdisco on account of the Comdisco Equipment Financings),
whether by payment, set-off or otherwise shall be allocated ratably between the
Lenders. Each Lender shall promptly remit to the other Lender such sums as may
be necessary to ensure the ratable repayment of each Lender's Loan.
Notwithstanding the foregoing, a Lender receiving a Scheduled Payment shall not
be responsible for determining whether the other Lender also received its
Scheduled Payment on such date; provided. however. if it is later determined
that one Lender received more than its ratable share of the Scheduled Payments
made on any date or dates, then such Lender shall remit to the other Lender such
sums as may be necessary to ensure the ratable payment of such Scheduled
Payments.
4. REMEDIES UPON AN EVENT OF DEFAULT
4.1 Decision to Exercise Remedies. Upon the occurrence of an Event of
-----------------------------
Default, Lenders shall take such actions and only such actions as Lenders
mutually agree to take to enforce their rights and remedies under the Loan
Agreements; provided, however, that if after consultation, Lenders cannot
mutually agree on what action to take, then either Lender shall have the right
upon prior written notice to the other to accelerate its Loan and the other
Lender shall simultaneously accelerate its Loan. Upon such acceleration, the
Partnership shall have the right to determine and shall control the timing,
order and type of Enforcement Actions which will be taken and all other matters
in connection with any such Enforcement Actions. In taking such Enforcement
Actions pursuant to the previous sentence, the Partnership shall act reasonably
and in good faith and shall consult with and keep Comdisco informed thereof at
reasonable intervals; provided however, that notwithstanding any such
consultations and provision of information to Comdisco, the Partnership shall
retain the right to make all determinations in the event of disagreements
between the Partnership and Comdisco. In all cases with respect to Enforcement
Actions, Partnership shall have the right to act both on its own behalf and as
agent for Comdisco with respect thereto. In addition, Comdisco shall take such
actions and execute such documents and instruments as Partnership may reasonably
request in connection with and to facilitate any such Enforcement Actions.
Notwithstanding the foregoing, in all cases, any material change in the terms of
the Lenders'
-3-
<PAGE>
Loan Documents (including any change in the terms of principal repayment any
change of maturity dates, any interest rate reductions, or any release of
Collateral or guarantors) or any forbearance or waiver of rights under the Loan
Agreements shall require the written consent of both Lenders.
4.2 Application of Proceeds after an Event of Default. Notwithstanding
-------------------------------------------------
anything to the contrary in the Loan Agreements, as between the Lenders, the
proceeds of the Collateral. or any part thereof, and the proceeds of any remedy
under the Loan Agreements after the occurrence and during the continuance of an
Event of Default (collectively, the "Proceeds of Collection") shall upon receipt
by either Lender be paid to and applied as follows:
(a) First, to the payment of then outstanding out-of-pocket costs and
expenses of the Lenders (in proportion to such costs and expenses
theretofore incurred by each), including all amounts expended to preserve
the value of the Collateral, of foreclosure or suit, if any, and of such
sale and the exercise of any other rights or remedies, and of all proper
fees, expenses. liability and advances, including reasonable legal expenses
and attorneys' fees, incurred or made under the Loan Agreements by the
Lenders;
(b) Second, to the Lenders ratably, in an amount up to the sum of all
accrued interest owing to the Lenders on the Loans under the Loan
Agreements;
(c) Third, to the Lenders ratably in an amount up to the sums of the
outstanding principal and premium, if any, owing to the Lenders from
Borrower on the Loans under the Loan Agreement; and
(d) Fourth, to Borrower, its successors and assigns, or to whomsoever
may be lawfully entitled to receive the same.
4.3 Waiver of Right to Require Marshaling. Each Lender hereby expressly
-------------------------------------
waives any right that it otherwise might have to require the other Lender to
marshal assets or to resort to Collateral in any particular order or manner,
whether provided for by common law or statute. Neither Lender shall be required
to enforce any guaranty or any security interest or lien given by any obligor as
a condition precedent or concurrent to the taking of any Enforcement Action with
respect to the Collateral.
4.4 Insolvency Events. In the event of any distribution, division, or
-----------------
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the property of Borrower or the proceeds
thereof to the creditors of Borrower, or the readjustment of the Partnership
Claim and the Comdisco Claim, whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding involving the readjustment of all or any part of the
Partnership Claim or the Comdisco Claim, or the application of the property of
Borrower to the payment or liquidation thereof, or upon the dissolution or other
winding up of Borrowers business, or upon the sale of all or any substantial
part of Borrower's property (any of the foregoing being hereinafter referred to
as an "Insolvency Event"), then, and in any such event (a) all payments and
distributions of any kind or character, whether in cash or property or
securities in respect the Lenders' claims shall be distributed ratably between
the Lenders; (b) each Lender shall promptly file a claim or claims, on the form
required in such proceeding, for the full outstanding amount of such Lender's
Claim, and shall use its best efforts to cause said claim or claims to be
approved, (c) each of the Lenders hereby irrevocably agrees that, to the extent
that it fails timely to do so, the other Lender may in the name of the first
Lender, or otherwise, prove up any and all claims of the first Lender relating
to the first Lender's Claim; and (d) in the event that, notwithstanding the
foregoing, any payment or distribution of any kind or character, whether in
cash, properties or securities, shall be received by a Lender in excess of its
ratable share, then the portion of such payment or distribution in excess of
such Lender's ratable share shall be received by such Lender in trust for and
shall be promptly paid over to the other Lender for application to the payments
of amounts due on the other Lender's Claim.
-4-
<PAGE>
4.5 Return of Payment. To the extent any payment for the account of
-----------------
Borrower is required to be returned as a voidable transfer or otherwise, the
Lenders shall contribute to one another as is necessary to ensure that such
return of payment is on a pro rata basis.
4.6 Foreclosure.
-----------
(a) Credit Bid By Lenders. Partnership shall have the exclusive
right to enter and determine the amount of a credit bid at any foreclosure
sale or other sale of any of the Collateral on behalf of both Lenders. If
Lenders are the successful bidders at the sale, then (i) the amount to be
credited against their respective Claims shall be allocated pro rata
between the Lenders according to the balances of such Claims, and (ii)
Lenders shall take title to the Collateral so purchased together, each
holding a pro rata undivided interest in such Collateral. Partnership shall
consult with Comdisco as to the most favorable disposition of any
Collateral purchased with any such credit bid.
(b) Cash Bid for Account of One Lender. Neither Lender shall make a
cash bid at any foreclosure sale or other sale of any of the Collateral
without the prior written consent of the other Lender. If a cash bid is
made and is successful, then (i) the proceeds of the sale shall be
allocated as set forth in Section 4.2, and (ii) the Lender that entered the
successful bid shall acquire the Collateral so purchased for its own
account, and the other Lender shall have no further interest in that
Collateral upon the payment to such other Lender of the share of the
proceeds in accordance with Section 4.2.
5. EXCULPATION; DELEGATION; AND INDEMNIFICATION OF PARTNERSHIP
5.1 Exculpation. In connection with any exercise of Enforcement Actions
-----------
hereunder, neither Partnership nor any of its partners, nor any of their
respective directors. officers, employees, attorneys, accountants, or agents
shall be liable as such for any action taken or omitted by it or them, except
for its or their own gross negligence or willful misconduct with respect to its
duties under this Agreement.
5.2 Delegation of Duties. Partnership may execute any of its powers and
--------------------
perform any duties hereunder either directly or by or through agents or
attorneys-in-fact. Partnership shall be entitled to advice of counsel concerning
all matters pertaining to such powers and duties. Partnership shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it without gross negligence or willful misconduct.
5.3 Indemnification. To the extent not reimbursed either by Borrower or
---------------
from the application of Collateral proceeds pursuant to Section 4.2, Comdisco
agrees to reimburse and indemnify Partnership for its pro rata share of the
following items:
(a) all reasonable out-of-pocket costs and expenses of Partnership
incurred by Partnership in connection with the discharge of its activities
under this Agreement or either Loan Agreement, including reasonable legal
expenses and attorneys' fees; provided, that the Partnership shall consult
with Comdisco regarding the incurrence of such costs and expenses at
reasonable intervals (but not more often than monthly) and any such
reasonable costs and expenses shall be "Claims" hereunder notwithstanding
any disagreement by Comdisco as to their incurrence; and
(b) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatever, which may be imposed on,
incurred by or asserted against Partnership in any way relating to or
arising out of this Agreement, or any action taken or omitted by
Partnership hereunder; provided that Comdisco shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs. expenses or disbursements, if the same
results from Partnership's gross negligence or willful misconduct.
-5-
<PAGE>
6. EXCULPATION, DELEGATION; AND INDEMNIFICATION OF COMDISCO
6.1 Exculpation. In connection with any exercise of Enforcement Actions
-----------
hereunder. neither Comdisco nor any of its directors, officers, employees,
attorneys, accountants, or agents shall be liable as such for any action taken
or omitted by it or them, except for its or their own gross negligence or
willful misconduct with respect to its duties under this Agreement.
6.2 Delegation of Duties. Comdisco may execute any of its powers and
--------------------
perform any duties hereunder either directly or by or through agents or
attorneys-in-fact. Comdisco shall be entitled to advice of counsel concerning
all matters pertaining to such powers and duties. Comdisco shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it without gross negligence or willful misconduct.
6.3 Indemnification. To the extent not reimbursed either by Borrower or
---------------
from the application of Collateral proceeds pursuant to Section 4.2, Partnership
agrees to reimburse and indemnify Comdisco for its pro rata share of the
following items:
(a) all reasonably out-of-pocket costs and expenses of Comdisco
incurred by Comdisco in connection with the discharge of its activities
under this Agreement or either Loan Agreement, including reasonable legal
expenses and attorneys' fees; provided, that the Comdisco shall consult
with the Partnership regarding the incurrence of such costs and expenses at
reasonable intervals (but not more often than monthly) and any such
reasonable costs and expenses shall be "Claims" hereunder notwithstanding
any disagreement by the Partnership as to their incurrence; and
(b) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatever, which may be imposed on,
incurred by or asserted against Comdisco in any way relating to or arising
out of this Agreement, or any action taken or omitted by Comdisco
hereunder; provided that Partnership shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements, if the same results
from Comdisco's gross negligence or willful misconduct.
7. RIGHTS IN THE WARRANTS. Notwithstanding anything to the contrary herein,
any Warrants issued to either Lender by Borrower, the stock issuable thereunder,
any amounts paid thereunder, any dividends, and any other rights in connection
therewith shall not be subject to the terms and conditions of this Agreement.
Nothing herein shall affect either Lender's rights under any such Warrants or
stock to administer, manage, transfer, assign, or exercise such Warrants or
stock for its own account.
8. NO RESPONSIBILITY FOR INVESTIGATION. Each Lender agrees that it will make
its own independent investigation of the financial condition and affairs of
Borrower in connection with the making of Loans pursuant to the Loan Agreements
and has made and shall continue to make its own appraisal of the
creditworthiness of Borrower. Neither Lender shall have any duty or
responsibility either initially or on a continuing basis to make any such
investigation or any such appraisal on behalf of both Lenders or to provide the
other Lender with any credit or other information with respect thereto whether
coming into its possession before the date hereof or any time or times to the
accuracy of or the completeness of the information provided to Lenders by
Borrower.
9. REPRESENTATIONS AND WARRANTIES.
9.1 Due Organization and Qualification. Comdisco represents and warrants
----------------------------------
that it is a Delaware corporation duly existing and in good standing under the
laws of Illinois and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires
-6-
<PAGE>
that it be so qualified, except for such states as to which any failure so to
qualify would not have a material adverse effect on Comdisco. Partnership
represents and warrants that it is a California general partnership and that it
and each of its general partners is duly existing and is in good standing under
the laws of its respective state of incorporation or formation and under the
laws of California and is qualified and licensed to do business in, and is in
good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified, except for such states
as to which any failure so to qualify would not have a material adverse effect
on Partnership,
9.2 Authority. Each Lender represents and warrants that it has all
---------
necessary power and authority to execute, deliver and perform this Agreement in
accordance with the terms hereof and that it has all requisite power and
authority to own and operate its properties and to carry on its business as now
conducted.
9.3 Authorization; Enforceability. Each Lender represents and warrants
-----------------------------
that (a) the execution and delivery of this Agreement and the consummation of
the actions contemplated herein have each been duly authorized by all necessary
action on the part of such Lender and (b) this Agreement has been duly executed
and delivered and constitutes a legal, valid and binding obligation of such
Lender, enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights or by general principles of equity.
10. NOTICES. Unless otherwise provided in this Agreement all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except informal documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by certified mail postage prepaid, return receipt requested,
or by facsimile to Partnership or to Comdisco, as the case may be, at their
respective addresses or fax numbers et forth below:
If to Partnership: MMC/GATX Partnership No. I
c/o GATX Capital Corporation
as General Partner and Agent
Four Embarcadero Center
Suite 220
San Francisco, California 94111
Attention: Contracts Administration
FAX: (415) 955-3288
with a copy to: Meier Mitchell & Company
4 Orinda Way
Suite 200-B
Orinda, California 94563
Attention: Contract Administration
FAX: (510) 253-9528
If to Comdisco: Comdisco, Inc.
6111 North River Road
Rosemont, Illinois 60018
Attn: Venture Lease
FAX: (847) 518-5465
with a copy to: Comdisco, Inc.
6111 North River Road
Rosemont, Illinois 60018
Attn: General Counsel
FAX: (847) 518-5088
-7-
<PAGE>
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
In addition. each Lender agrees (a) to notify the other Lender promptly
upon receipt of any notice from any Borrower and (b) at the other Lender's
request, to send a copy of any such notice to the other Lender.
11. NO BENEFIT TO THIRD PARTIES. The terms and provisions of this Agreement
shall be for the sole benefit of Lenders and their respective successors and
assigns, and no other Person (including Borrower) shall have any right, benefit,
priority, or interest under, or because of this Agreement.
12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Comdisco or Partnership without the other party's prior
written consent, which consent shall not be unreasonably withheld.
12.2 Time of Essence. Time is of the essence for the performance of all
---------------
obligations set forth in this Agreement.
12.3 Severability of Provisions. Each provision of this Agreement shall be
--------------------------
severable from every other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
12.4 Entire Agreement: Construction- Amendments and Waivers.
------------------------------------------------------
(a) This Agreement constitutes and contains the entire agreement
between the Lenders and supersedes any and all prior agreements,
negotiations, correspondence, understandings and communications between the
parties, whether written or oral, respecting the subject matter hereof.
(b) This Agreement is the result of negotiations between and has been
reviewed by each of the Lenders executing this Agreement as of the date
hereof and their respective counsel; accordingly, this Agreement shall be
deemed to be the product of the parties hereto, and no ambiguity shall be
construed in favor of or against either Lender. Lenders agree that they
intend the literal words of this Agreement and that no parol evidence shall
be necessary or appropriate to establish any Lender's actual intentions.
(c) Any and all amendments, modifications, discharges or waivers of,
or consents to any departures from any provision of this Agreement shall
not be effective without the written consent of each Lender. Any waiver or
consent with respect to any provision of this Agreement shall be effective
only in the specific and for the specific purpose for which it was given.
Any amendment modification, waiver or consent effected in accordance with
this Section 12.4 shall be binding upon each Lender.
12.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.6 Termination. With respect to any particular Loan Agreement and the
-----------
Loans thereunder, upon payment in full to either Lender of all amounts owing to
such Lender with respect to such Loan Agreement, this Agreement shall terminate
as to such Loan Agreement.
12.7 Reinstatement. Notwithstanding any provision of this Agreement to the
-------------
contrary, the rights and obligations of the parties hereunder with respect to
any Borrower shall be reinstated and revived if and to the
-8-
<PAGE>
extent that for any reason any payment by or on behalf of Borrower is rescinded.
or must be otherwise restored by Lenders, whether as a result of any proceedings
in bankruptcy or reorganization or otherwise, all as though such amount had not
been paid. To the extent any payment is rescinded or restored, the Obligations
shall be revived in full force and effect without reduction or discharge for
that payment.
12.8 Survival. All covenants, representations and warranties made in this
--------
Agreement shall continue in full force and effect so long as any obligations
remain outstanding hereunder. Notwithstanding the prior termination of this
Agreement with respect to any Loan Agreement, the respective obligations of
Lenders to indemnify each other shall survive until all applicable statute of
limitations periods with respect to actions that may be brought against Lenders
have run.
13. RELATIONSHIP OF PARTIES. The relationship between Partnership and
Comdisco is, and at all times shall remain solely that of co-lenders. Lenders
shall not under any circumstances be construed to be partners or joint venturers
of each other; nor shall the Lenders under any circumstances be deemed to be in
a relationship of confidence or trust or a fiduciary relationship with each
other, or to owe any fiduciary duty to each other. Lenders do not undertake or
assume any responsibility or duty to each other to select, review, inspect,
supervise, pass judgment upon or otherwise inform each other of any matter in
connection with Borrower's property, any Collateral held by any Lender or the
operations of Borrower. Each Lender shall rely entirely on its own judgment
with respect to such matters, and any review, inspection, supervision, exercise
of judgment or supply of information undertaken or assumed by any Lender in
connection with such matters is solely for the protection of such Lender.
14. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW, EACH OF THE LENDERS HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF CALIFORNIA.
LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company, its general partner
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
COMDISCO, INC.
By:_________________________________________________
Name:_______________________________________________
Title:______________________________________________
Corsair Communications, a California corporation, the Borrower referred to
in the foregoing Intercreditor Agreement, hereby acknowledges that it has
received a copy of the Intercreditor Agreement and consent thereto, and agrees
to recognize the rights granted thereby and will take no action that is not in
accordance with the agreements set forth in the Agreement.
CORSAIR COMMUNICATION
By:_________________________________________________
Name:_______________________________________________
Title:______________________________________________
-10-
<PAGE>
EXHIBIT 10.30
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION
STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER
EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
CORSAIR COMMUNICATIONS
----------------------
WARRANT TO PURCHASE 112,500 SHARES
OF SERIES B PREFERRED STOCK
THIS CERTIFIES THAT, for value received, MMC/GATX PARTNERSHIP NO. I and its
assignees are entitled to subscribe for and purchase 112,500 shares of the fully
paid and nonassessable Series B Preferred Stock (as adjusted pursuant to Section
4 hereof, the "Shares") of CORSAIR COMMUNICATIONS, INC., a Delaware corporation
(the "Company"), subject to the provisions and upon the terms and conditions
hereinafter set forth, provided, however, that in the event that at the time of
-----------------
exercise of this Warrant there are insufficient authorized shares of the
Company's Series B Preferred Stock to allow issuance of the Shares, then this
Warrant shall be exercisable for the same number of shares of the Company's
Common Stock. The price per Share at which this Warrant is exercisable shall be
the lower of (i) $4.43 or (ii) the price per share at which the next sale of
equity securities of Borrower is made (such price and such other price as shall
result, from time to time. from the adjustments specified in Section 4 hereof is
herein referred to as the "Warrant Price"). As used herein, (a) the term
"Series Preferred" shall mean the Company's presently authorized Series B
Preferred Stock, and any stock into or for which such Series B Preferred Stock
may hereafter be converted or exchanged, (b) the term "Date of Grant" shall mean
July 31, 1996, and (c) the term "Other Warrants" shall mean any other warrants
issued by the Company in connection with the transaction with respect to which
this Warrant was issued, and any warrant issued upon transfer or partial
exercise of this Warrant. The term "Warrant" as used herein shall be deemed to
include Other Warrants unless the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is
----
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through the later of (i) ten (10) days after the Date of Grant or
(ii) five (5) years after the closing of the Company's initial public offering
of its Common Stock effected pursuant to a Registration Statement on Form S-1
(or its successor) filed under the Securities Act of 1933, as amended (the
"Act").
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
----------------------------------------------------
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased, or (b) exercise of the right provided for in Section 10.3 hereof.
The person or persons in whose name(s) any certificate(s) representing shares of
Series Preferred shall be issuable upon exercise of this Warrant shall be deemed
to have become the holder(s) of record of, and shall be treated for all purposes
as the record holder(s) of, the shares represented thereby (and such shares
shall be deemed to have been issued) immediately prior to the close of business
on the date or dates upon which this Warrant is exercised. In the event of any
exercise of the rights represented by this Warrant, certificates for the shares
of stock so purchased shall be delivered to the holder hereof as soon as
possible and in any event within thirty (30) days after such exercise and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
<PAGE>
hereof as soon as possible and in any event within such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
---------------------------------------
issued upon the exercise of the rights represented by this Warrant, upon
issuance pursuant to the terms and conditions herein and upon payment of the
Warrant Price multiplied by the number of shares to be issued either in cash or
pursuant to the terms of Section 10.3 hereof, will be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The Company agrees that prior to December 31, 1996, it will take
such actions as are necessary, including obtaining stockholder consent, to
authorize the issuance of a sufficient number of shares of Series B Preferred
Stock to allow the full exercise of this Warrant. During the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized, and reserved for the purpose of the issue upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Series Preferred or Common Stock to provide for the exercise of
the rights represented by this Warrant and, if applicable, a sufficient number
of shares of its Common Stock to provide for the conversion of the Series
Preferred into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and
------------------------------------------------
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification or
--------------------------
change of securities of the class issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in case
of any merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance reasonably satisfactory to the holder of this Warrant), so that
the holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the shares of Series Preferred theretofore issuable
upon exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of Series Preferred then purchasable
under this Warrant. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4 and, in the case of a new Warrant issuable after conversion of
the authorized shares of the Series Preferred into shares of Common Stock or
after the amendment of the terms of the antidilution protection of the Series
Preferred, shall provide for antidilution protection that shall be as nearly
equivalent as may be practicable to the antidilution provisions applicable to
the Series Preferred on the Date of Grant. The provisions of this subparagraph
(a) shall similarly apply to successive reclassifications, changes, mergers and
transfers.
(b) Subdivision or Combination of Shares. If the Company at any
------------------------------------
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
---------------------------------------
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution if
specifically provided for in Sections 4(a) and 4(b)), of Series Preferred, then
the Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of shares of Series Preferred outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of Series Preferred outstanding immediately after such dividend
or distribution.
-2-
<PAGE>
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price pursuant to Sections 4.01(b) or 4.01(c), the number of Shares of
Series Preferred purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of Shares purchasable
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately prior to such
adjustment and the denominator of which shall be the Warrant Price immediately
thereafter.
(e) Antidilution Rights. The other antidilution rights applicable
-------------------
to the Shares of Series Preferred purchasable hereunder are set forth in the
Company's Certificate of Incorporation, as amended through the Date of Grant, a
true and complete copy of which is attached hereto as Exhibit B (the "Charter").
The Company shall promptly provide the holder hereof with any restatement,
amendment, modification or waiver of the Charter promptly after the same has
been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
---------------------
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant. In addition, whenever the conversion price or
conversion ratio of the Series Preferred shall be adjusted, the Company shall
make a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
conversion price or ratio of the Series Preferred after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (without
regard to Section 13 hereof, by first class mail, postage prepaid) to the holder
of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Act; Disposition of Warrant or Shares of Series
---------------------------------------------------------------
Preferred.
- ---------
(a) Compliance with Act. The holder of this Warrant, by acceptance
------------------
hereof, agrees that this Warrant, and the shares of Series Preferred to be
issued upon exercise hereof and any Common Stock issued upon conversion thereof
are being acquired for investment and not with a view to the sale or
distribution of any part thereof and the holder of this Warrant has no present
intention of selling or engaging in any public distribution of this Warrant, and
that such holder will not offer, sell or otherwise dispose of this Warrant, or
any shares of Series Preferred to be issued upon exercise hereof or any Common
Stock issued upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state securities laws. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act and any applicable state securities laws or an exemption from such
registration is available, the holder hereof shall confirm in writing that the
shares of Series Preferred so purchased (and any shares of Common Stock issued
upon conversion thereof) are being acquired for investment and not with a view
toward distribution or resale in violation of the Act and shall confirm such
other matters related thereto as may be reasonably requested by the Company.
This Warrant and all shares of Series Preferred issued upon exercise of this
Warrant and all shares of Common Stock issued upon conversion thereof (unless
registered under the Act and any applicable state securities laws) shall be
stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL
-3-
<PAGE>
AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE
WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder,
at such time as the restrictions on the transfer of the applicable security
shall have terminated. In addition, in connection with the issuance of this
Warrant, the holder specifically represents to the Company by acceptance of this
Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
in violation of the Act.
(2) The holder understands that this Warrant has not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the holder's
investment intent as expressed herein.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. The holder is aware of the provisions of
Rule 144, promulgated under the Act.
(4) The holder has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment. and has the ability to bear the economic risks of its investment.
(5) The holder is an "accredited investor" within the meaning of Rule
501 of Regulation D promulgated under the Act, as presently in effect.
(b) Disposition of Warrant or Shares. With respect to any offer,
--------------------------------
sale or other disposition of this Warrant or any shares of Series Preferred
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or shares, the holder hereof agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of such holder's counsel, or other evidence, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state securities law then in effect) of this
Warrant or such shares of Series Preferred or Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Series Preferred to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to ensure
compliance with such law. Promptly upon receiving such written notice and
reasonably satisfactory opinion or other evidence, if so requested, the Company,
as promptly as practicable but no later than fifteen (15) days after receipt of
the written notice, opinion or other evidence, shall notify such holder that
such holder may sell or otherwise dispose of this Warrant or such shares of
Series Preferred or Common Stock, all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
Section 7(b) that the opinion of counsel for the holder or other evidence is not
reasonably satisfactory to the Company, the Company shall so notify the holder
promptly with details thereof after such determination has been made.
Notwithstanding the foregoing, this Warrant or such shares of Series Preferred
or Common Stock may, as to such federal laws, be offered, sold or otherwise
disposed of in accordance with Rule 144 or 144A under the Act, provided that the
Company shall have been furnished with such information as the Company may
reasonably request to provide a reasonable assurance that the provisions of Rule
144 or 144A have been satisfied. Each certificate representing this Warrant or
the shares of Series Preferred thus transferred (except a transfer pursuant to
Rule 144 or 144A) shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with such laws, unless in the
aforesaid opinion of counsel for the holder, such legend is not required in
order to ensure compliance with such laws. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
-4-
<PAGE>
(c) Applicability of Restrictions. Neither any restrictions of any
legend described in this Warrant nor the requirements of Section 7(b) above
shall apply to any transfer of, or grant of a security interest in, this Warrant
(or the Series Preferred or Common Stock obtainable upon exercise thereof) or
any part hereof (1) to a partner of the holder if the holder is a partnership,
(ii) to a partnership of which the holder is a partner, or (iii) to any
affiliate of the holder if the holder is a corporation; provided, however, in
-------- -------
any such transfer, if applicable, the transferee shall on the Company's request
agree in writing to be bound by the terms of this Warrant as if an original
signatory hereto.
8. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to the
shareholders.
9. Registration Rights. The Company grants registration rights to the
-------------------
holder of this Warrant for any Common Stock of the Company obtained upon
conversion of the Series Preferred, comparable to the registration rights
granted to the investors in that certain Investor Rights Agreement, dated as of
December 10, 1996, as amended, as of December 14, 1994 and October 31, 1995 (the
"Registration Rights Agreement"), with the following exceptions and
clarifications:
(1) The holder will have no demand registration rights pursuant to
Section 1.2 of the Registration Rights Agreement.
(2) The holder will be subject to the same provisions regarding
indemnification as contained in the Registration Rights
Agreement.
(3) The registration rights are freely assignable by the holder of
this Warrant.
10. Additional Rights.
-----------------
10.1 Secondary Sales. The Company agrees that it will not interfere with
---------------
the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available so long as such
sales are in accordance with all applicable state and federal securities laws.
10.2 Mergers. The Company shall provide the holder of this Warrant with
-------
at least twenty (20) days' notice of the terms and conditions of any of the
following potential transactions: (i) the sale, lease, exchange, conveyance or
other disposition of all or substantially all of the Company's property or
business, or (ii) its merger into or consolidation with any other corporation
(other than a wholly-owned subsidiary of the Company), or any transaction
(including a merger or other reorganization) or series of related transactions,
in which more than 50% of the voting power of the Company is disposed of.
10.3 Right to Convert Warrant into Stock; Net Issuance.
-------------------------------------------------
(a) Right to Convert. In addition to and without limiting the
----------------
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.3
at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
-5-
<PAGE>
consideration) (X) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) equal to the quotient obtained by dividing the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (Y) the fair market value of one share of Series Preferred (or
Common Stock if the Series Preferred has been automatically converted into
Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion (assuming the Series Preferred has
been automatically converted into Common Stock) shall be computed as follows:
X = B - A
-------
Y
Where: X = the number of shares of Common Stock that may
be issued to holder
Y = the fair market value of one share of
Common Stock
A = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
B = the aggregate fair market value (i.e., fair
market value x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by
------------------
the holder by the surrender of this Warrant at the principal office of the
Company together with a written statement specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of shares
subject to this Warrant which are being surrendered (referred to in Section
10.3(a) hereof as the Converted Warrant Shares) in exercise of the Conversion
Right. Such conversion shall be effective upon receipt by the Company of this
Warrant together with the aforesaid written statement, or on such later date as
is specified therein (the "Conversion Date"), and, at the election of the holder
hereof, may be made contingent upon the closing of the sale of the Company's
Common Stock to the public in a public offering pursuant to a Registration
Statement under the Act (a "Public Offering"). Certificates for the shares
issuable upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the holder within
thirty (30) days following the Conversion Date. Any conversion from Series
Preferred to Common Stock shall be in the ratio of one (1) share of Common Stock
for each share of Series Preferred (as adjusted herein and in the Charter). On
the Date of Grant, each share of the Series Preferred represented by this
Warrant is convertible into one share of Common Stock.
(c) Determination of Fair Market Value. For purposes of this
----------------------------------
Section 10.3, "fair market value" of a share of Series Preferred (or Common
Stock if the Series Preferred has been automatically converted into Common
Stock) as of a particular date (the "Determination Date") shall mean:
-6-
<PAGE>
(i) If the Conversion Right is exercised in connection with
and contingent upon a Public Offering, and if the Company's Registration
Statement relating to such Public Offering ("Registration Statement") has been
declared effective by the SEC, then the initial "Price to Public" specified in
the final prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in connection
with and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair market value of
the Common Stock shall be deemed to be the average of the closing prices of
the Common Stock on such exchange over the 30-day period ending five
business days prior to the Determination Date, and the fair market value of
the Series Preferred shall be deemed to be such fair market value of the
Common Stock multiplied by the number of shares of Common Stock into which
each share of Series Preferred is then convertible.
(B) If traded over-the-counter, the fair market value of the Common
Stock shall be deemed to be the average of the closing bid prices of the
Common Stock over the 30-day period ending five business days prior to the
Determination Date, and the fair market value of the Series Preferred shall
be deemed to be such fair market value of the Common Stock multiplied by the
number of shares of Common Stock into which each share of Series Preferred
is then convertible; and
(C) If there is no public market for the Common Stock, then fair
market value shall be determined in good faith by the Company's Board of
Directors.
10.4 Exercise Prior to Expiration. To the extent this Warrant is not
----------------------------
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Series Preferred is greater than the Warrant
Price then in effect, this Warrant shall be deemed automatically exercised
pursuant to Section 10.3 above (even if not surrendered) immediately before its
expiration. For purposes of such automatic exercise, the fair market value of
one share of the Series Preferred upon such expiration shall be determined
pursuant to Section 10.3(c). To the extent this Warrant or any portion thereof
is deemed automatically exercised pursuant to this Section 10.4, the Company
agrees to promptly notify the holder hereof of the number of Shares, if any, the
holder hereof is to receive by reason of such automatic exercise.
11. Representations and Warranties. The Company represents and warrants
------------------------------
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been or will be duly authorized and reserved
for issuance by the Company and, when issued in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable;
(c) The rights, preferences, privileges and restrictions granted to
or imposed upon the Series Preferred and the holders thereof are as set forth in
the Charter, as amended to the Date of the Grant, a true and complete copy of
which has been delivered to the original holder of this Warrant and is attached
hereto as Exhibit B;
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms of the Charter will be validly issued,
fully paid and nonassessable;
-7-
<PAGE>
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of any notices required pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
and
(f) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. Modification and Waiver. The Warrant and any provision hereof may
-----------------------
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document
-------
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by U.S. mail, postage prepaid, or
recognized overnight courier service to each such holder at its address as shown
on the books of the Company or to the Company at the address indicated therefor
on the signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon
----------------------------
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the Shares) to which the holder hereof shall continue to be
entitled after such exercise or conversion in accordance with this Warrant;
provided, that the failure of the holder hereof to make any such request shall
- --------
not affect the continuing obligation of the Company to the holder hereof in
respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language IN this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California, without regard to principles of conflicts of laws.
18. Survival of Representations, Warranties and Agreements. All
------------------------------------------------------
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
-8-
<PAGE>
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
--------
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant.
21. Severability. The invalidity or unenforceability of any provision
------------
of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other
----------------------------
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
23. Entire Agreement; Modification. This Warrant constitutes the entire
------------------------------
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
CORSAIR COMMUNICATIONS, INC.
By /s/ Martin J. Silver
----------------------------------------
Title: Chief Financial Officer
------------------------------------
Address: 3408 Hillview Avenue
Palo Alto, California 94304
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<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: CORSAIR COMMUNICATIONS, INC.
1. The undersigned hereby:
[_] elects to purchase ___ shares of Series __ Preferred Stock of
CORSAIR COMMUNICATIONS, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase
price of such shares in full, or
[_] elects to exercise its net issuance rights pursuant to Section
10.3 of the attached Warrant with respect to __ Shares of Series
__ Preferred Stock.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
____________________________
(Name)
____________________________
____________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
_____________________________________
(Signature)
_________________________
(Date)
-10-
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
To: CORSAIR COMMUNICATIONS, INC. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-_______, filed ___________________, 19__, the undersigned
hereby:
[_] elects to purchase __ shares of Series __ Preferred Stock of the
Company (or such lesser number of shares as may be sold on behalf
of the undersigned at the Closing) pursuant to the terms of the
attached Warrant, or
[_] elects to exercise its net issuance rights pursuant to Section
10.3 of the attached Warrant with respect to __ Shares of Series
__ Preferred Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such ____________ shares.
________________________________________
(Signature)
____________________________
(Date)
-11-
<PAGE>
EXHIBIT B
CHARTER
-12-
<PAGE>
CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
CORSAIR COMMUNICATIONS, INC.
Corsair Communications, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That a resolution was duly adopted by the Board of Directors of the
Corporation setting forth a proposed amendment to the Amended and Restated
Certificate of Incorporation of the Corporation, and declaring said amendment to
be advisable and recommended for approval by the stockholders of the
Corporation. Subsection B.4.b. of Article IV of the Amended and Restated
Certificate of Incorporation is amended as follows:
"Election of Directors. The authorized number of directors of
---------------------
this Corporation shall be seven (7). Notwithstanding 5(a)
above, the holders of Series A Preferred Stock, voting as a
separate class, shall be entitled to elect four (4) directors
of the corporation; and the holders of the Series A Preferred
Stock, Series B Preferred Stock and Common Stock, voting
together as a single class on an as converted basis, shall be
entitled to elect three (3) directors of the corporation. At
any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority
of the Series A Preferred Stock then outstanding shall
constitute a quorum of the Series A Preferred Stock for the
election of directors to be elected solely by the holders of
Series A Preferred Stock. At any meeting held for the purpose
of electing directors, the presence in person or by proxy of
the holders of a majority of the Series A Preferred Stock,
Series B Preferred Stock and Common Stock then outstanding,
on an as converted basis, shall constitute a quorum of the
Series A Preferred Stock, Series B Preferred Stock and Common
Stock for the election of directors to be elected solely by
the holders of the Series A Preferred Stock, Series B
Preferred Stock and Common Stock, voting together as a single
class on an as converted basis. A vacancy in any directorship
elected by the holders of Series A Preferred Stock shall be
filled only
<PAGE>
by vote of the holders of Series A Preferred Stock; and a
vacancy in any directorship elected by the holders of Series
A Preferred Stock, Series B Preferred Stock and Common Stock
voting together shall be filled only by the vote of the
holders of Series A Preferred Stock, Series B Preferred Stock
and Common Stock voting together as provided above."
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, said Corsair Communications, Inc. has caused this
certificate to be signed and attested by MaryAnn Byrnes, its President and Kevin
Compton, its Secretary this 10th day of November, 1995.
By: /s/ MaryAnn Byrnes
--------------------------------
MaryAnn Byrnes, President
ATTEST:
By: /s/ Kevin Compton
------------------------------
Kevin Compton, Secretary
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
Corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of a majority
of the outstanding shares in accordance with Section 228 thereof, and written
notice having been given in accordance with the requirements of such Section.
The Amended and Restated Certificate of Incorporation restates, integrates and
amends the provisions of the Certificate of Incorporation of this corporation.
3. The Certificate of Incorporation of the corporation is hereby
amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Corsair Communications, Inc..
ARTICLE II
The address of this corporation's registered office in the State of Delaware
is 15 East North Street, City of Dover, County of Kent 19901. The name of its
registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
<PAGE>
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the corporation is authorized to issue
is Twenty-Eight Million Two Hundred Forty-Seven Thousand Four Hundred and Ten
(28,247,410) shares. Eighteen Million (18,000,000) shares shall be Common
Stock, $.001 par value per share, and Ten Million Two Hundred Forty-Seven
Thousand Four Hundred and Ten (10,247,410) shares shall be Preferred Stock,
$.001 par value per share, of which Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock and Two Million One Hundred
Twenty-Seven Thousand Four Hundred and Ten (2,127,410) shares shall be Series B
Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
rights, preferences, restrictions and other matters relating to the Preferred
Stock are as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock and
Series B Preferred Stock shall be entitled to receive dividends, out of any
assets legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this corporation) on the
Common Stock of this corporation, at the rate of $0.10 per share of Series A
Preferred Stock per annum and $0.22 per share of Series B Preferred Stock per
annum (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) payable when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative. No cash dividend
shall be declared or paid with respect to the Series A Preferred Stock or Series
B Preferred Stock unless at the same time a like proportionate cash dividend for
the same dividend period, ratably in proportion to the respective annual
dividend rates set forth above, is declared and paid with respect to the Series
A Preferred Stock and the Series B Preferred Stock.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
the holders of the Series A Preferred Stock and Series B Preferred Stock were
the holders of the number of shares of Common Stock of this corporation into
which their respective shares of Series A Preferred Stock and Series B Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of this corporation entitled to receive such
distribution.
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<PAGE>
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock and Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to the sum of (i) $2.00 for each outstanding share of Series A
Preferred Stock, (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations and hereafter referred to as
the "Original Series A Issue Price"), (ii) $4.43 for each outstanding share of
Series B Preferred Stock (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations and hereafter referred
to as the "Original Series B Issue Price"), and (iii) an amount equal to
declared but unpaid dividends on such share of Series A Preferred Stock or
Series B Preferred Stock, as applicable. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series A
Preferred Stock and the Series B Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then,
the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and the Series B Preferred Stock in proportion to the aggregate
liquidation preferences of the respective series, and ratably among the holders
of that series in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Series A Preferred Stock and Series B Preferred Stock).
c. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement and the issuance of Series B Preferred Stock
pursuant to the Series B Preferred Stock Purchase Agreement), shall be deemed to
be a liquidation, dissolution or winding up within the meaning of this Section
2.
3. Conversion. The holders of the Series A Preferred Stock and
----------
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
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<PAGE>
a. Right to Convert.
----------------
(i) Subject to subsection (c), each share of Series A
Preferred Stock and Series B Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of this corporation or any transfer agent for the particular series
of Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (A) the Original Series A Issue Price
for each share of Series A Preferred Stock and (B) the Original Series B Issue
Price for each share of Series B Preferred Stock, plus all declared but unpaid
dividends thereon for each share of Series A Preferred Stock or Series B
Preferred Stock, by the Conversion Price at the time in effect for such share.
The initial Conversion Price per share for shares of Series A Preferred Stock
shall be the Original Series A Issue Price and the initial Conversion Price per
share for shares of Series B Preferred Stock shall be the Original Series B
Issue Price; provided, however, that the Conversion Price for the Series A
Preferred Stock and Series B Preferred Stock shall be subject to adjustment as
set forth in subsection 3(c).
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $7,500,000 in the aggregate or (B) the date upon which
the corporation obtains the consent of the holders of a majority of the then
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a single class on an as converted basis.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock or Series B Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the particular series of Preferred Stock, and shall give
written notice by mail, postage prepaid, to this corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock and/or Series B Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred Stock and/or Series B
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an
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<PAGE>
underwritten offer of securities registered pursuant to the Securities Act, the
conversion may, at the option of any holder tendering Series A Preferred Stock
and/or Series B Preferred Stock for conversion, be conditioned upon the closing
with the underwriter of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive the Common Stock issuable upon
such conversion of the Series A Preferred Stock and/or Series B Preferred Stock
shall not be deemed to have converted such Series A Preferred Stock and/or
Series B Preferred Stock until immediately prior to the closing of such sale of
securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Prices of the Series A Preferred Stock and Series B Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) A. If the corporation shall issue any Additional
Stock (as defined below) without consideration or for a consideration per share
less than the Conversion Price for the Series A Preferred Stock or the
Conversion Price for the Series B Preferred Stock in effect immediately prior to
the issuance of such Additional Stock, the Conversion Price for the Series A
Preferred Stock or Series B Preferred Stock, as the case may be, in effect
immediately prior to each such issuance shall forthwith (except as otherwise
provided in this clause (i)) be adjusted to a price equal to the quotient
obtained by dividing the total computed under clause (x) below by the total
computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock or Series B Preferred Stock
sold pursuant to the applicable agreements pursuant to which such
shares of Series A Preferred Stock or Series B Preferred Stock, as
the case may be, are first issued (the "Stock Purchase Agreements"),
plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the dates of the applicable Stock Purchase Agreements (the
"Purchase Date") other than shares of Common Stock issued or
issuable with respect to the Series A Preferred Stock or Series B
Preferred Stock;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock or Series B Preferred Stock sold
pursuant to the applicable Stock Purchase Agreements divided by the
applicable Conversion Price for such shares in effect at the
applicable Purchase Date (or such higher or lower Conversion Price
for such series as results from the application of subsections
3(c)(iii) and (iv) and assuming that this Certificate was in effect
as of the applicable Purchase Date) plus
-5-
<PAGE>
(2) the number of shares of Additional
Stock issued since the applicable Purchase Date (increased or
decreased to the extent that the number of such shares of Additional
Stock shall have been increased or decreased as the result of the
application of subsections 3(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the
Series A Preferred Stock or Series B Preferred Stock shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to 3
years from the date of the event giving rise to the adjustment being carried
forward, or shall be made at the end of 3 years from the date of the event
giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections (E)(3) and (E)(4), no adjustment of such
Conversion Price pursuant to this subsection 3(c)(i) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase
or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subsections 3(c)(i)(C) and (c)(i)(D)), if any, received
by the corporation upon the issuance of such options or rights plus
the minimum exercise price provided in such options or rights
(without taking into account potential antidilution adjustments) for
the Common Stock covered thereby.
-6-
<PAGE>
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for
a consideration equal to the consideration, if any, received by the
corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or
accrued dividends), plus the minimum additional consideration, if
any, to be received by the corporation (without taking into account
potential antidilution adjustments) upon the conversion or exchange
of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner
provided in subsections 3(c)(i)(C) and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable
to this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from
the antidilution provisions thereof, the applicable Conversion Price
of the Series A Preferred Stock and Series B Preferred Stock, as
applicable, and to the extent in any way affected by or computed
using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such consideration
upon the exercise of any such options or rights or the conversion or
exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible
or exchangeable securities, the applicable Conversion Price of the
Series A Preferred Stock and Series B Preferred Stock, as
applicable, to the extent in any way affected by or computed using
such options, rights or securities or options or rights related to
such securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon
the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or
rights related to such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 3(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect
-7-
<PAGE>
any change, termination or expiration of the type described in
either subsection 3(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by this corporation before, on or after the applicable Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 3(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
shares of Series A Preferred Stock or Series B Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly or
pursuant to a stock option plan or agreement or restricted stock
plan or agreement approved by the Board of Directors of this
corporation,
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock and Series B Preferred Stock will
be converted to Common Stock or (II) upon exercise of warrants or
rights granted to underwriters in connection with such a public
offering, or
E. shares of Series B Preferred Stock issued or
issuable to Comdisco, Inc. pursuant to a Warrant dated August 31,
1995.
(iii) In the event the corporation should at any time or
from time to time after the applicable Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of the Series A Preferred Stock and Series B
Preferred Stock then in effect shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of the aggregate of
shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
-8-
<PAGE>
(iv) If the number of shares of Common Stock outstanding at
any time after the applicable Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock
and Series B Preferred Stock then in effect shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be decreased in proportion to such decrease in outstanding
shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock and Series B Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the corporation into which their shares
of Series A Preferred Stock and Series B Preferred Stock are convertible as of
the record date fixed for the determination of the holders of Common Stock of
the corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3) provision shall be made so that the holders of the Series A
Preferred Stock and Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock and Series B Preferred
Stock, respectively, the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
Series A Preferred Stock and Series B Preferred Stock after the recapitalization
to the end that the provisions of this Section 3 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock and Series B
Preferred Stock against impairment.
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<PAGE>
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon conversion
of the Series A Preferred Stock and Series B Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded up to the nearest whole
share. Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of shares of Series A Preferred
Stock and Series B Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock and Series B
Preferred Stock pursuant to this Section 3, this corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series A Preferred Stock
and Series B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock or Series B Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price at the time in
effect, and (C) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of a
share of Series A Preferred Stock or Series B Preferred Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock and Series B
Preferred Stock at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock and Series B Preferred
Stock such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series A
Preferred Stock and Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred Stock
and Series B Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock or Series B Preferred
Stock, this corporation will take such corporate action as may, in the
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<PAGE>
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock or
Series B Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of this corporation.
4. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series
---------------------
A Preferred Stock and Series B Preferred Stock shall have the right to one vote
for each share of Common Stock into which such Series A Preferred Stock and
Series B Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote, together as a single class with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be five (5). Notwithstanding 5(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis, shall be entitled to elect one (1)
director of the corporation. At any meeting held for the purpose of electing
directors, the presence in person or by proxy of the holders of a majority of
the Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the election of directors to be elected solely by
the holders of Series A Preferred Stock. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock and Common
Stock then outstanding, on an as converted basis, shall constitute a quorum of
the Series A Preferred Stock, Series B Preferred Stock and Common Stock for the
election of directors to be elected solely by the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock; and a vacancy in any directorship elected
by the holders of Series A Preferred Stock, Series B Preferred Stock and Common
Stock voting together shall be filled only by the vote of the holders of Series
A Preferred Stock, Series B Preferred Stock and Common Stock voting together as
provided above.
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<PAGE>
5. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock and/or Series B Preferred Stock are outstanding, this corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of a majority of the then outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, voting together as a
single class on an as converted basis:
a. sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of
the shares of Series A Preferred Stock or Series B Preferred Stock so as to
affect adversely the shares;
c. increase the authorized number of shares of Series A
Preferred Stock, Series B Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock or
Series B Preferred Stock with respect to voting, dividends, conversion rights or
upon liquidation, or (ii) having rights similar to any of the rights of the
Series A Preferred Stock and Series B Preferred Stock under this Section 5; or
e. change authorized number of directors from five (5).
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
------------------
winding up of the corporation, the assets of the corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
-12-
<PAGE>
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The corporation shall have a perpetual existence.
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the Bylaws of the corporation.
-13-
<PAGE>
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of the
Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-14-
<PAGE>
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been signed under the seal of this corporation as of this 24th day of
October, 1995.
CORSAIR COMMUNICATIONS, INC.
By: /s/ Mary Ann Byrnes
----------------------------------
Mary Ann Byrnes, President
ATTEST:
/s/ Kevin Compton
- -------------------------------
Kevin Compton, Secretary
<PAGE>
EXHIBIT 10.31
SECURED PROMISSORY NOTE
$3,000,000 Dated: July 31, 1996
FOR VALUE RECEIVED, the undersigned, CORSAIR COMMUNICATIONS, INC.
("Borrower"), a Delaware corporation, HEREBY PROMISES TO PAY to the order of
--------
MMC/GATX PARTNERSHIP NO. 1, a California general partnership ("Lender") the
------
principal amount of Three Million Dollars ($3,000,000) or such lesser amount as
shall equal the aggregate outstanding principal balance of the Loan made by
Lender to Borrower pursuant to the Loan and Security Agreement referred to below
(the "Loan Agreement"), and to pay all other amounts due with respect to the
--------------
Loan on the dates and in the amounts set forth in the Loan Agreement.
The principal amount of this Note shall be payable in 36 consecutive
monthly installments of 2.778% of the original principal amount of this Note per
month on the last day of each calendar month commencing on February 28, 1997.
All unpaid principal and interest shall, in any event, be payable no later than
January 31, 2000.
Interest on the unpaid principal amount of this Note from the date of
this Note until such principal amount is paid in full shall accrue at the Loan
Rate, or, if applicable, the Default Rate. The Loan Rate for this Note is
14.55% per annum (based on a year of 360 days and actual days elapsed). All
accrued interest shall be payable on the last day of each calendar month,
commencing July 31, 1996.
Whenever any payment due hereunder shall fall on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall be included in the computation of interest or
fees, as the case may be.
Principal, interest and all other amounts due with respect to the
Loan, are payable in lawful money of the United States of America to Lender as
follows: GATX Capital Corporation, P.O. Box 71316, Chicago, Illinois 60694, in
immediately available funds. The Loan made by Lender to Borrower and the
interest rate applicable thereto, and all payments made with respect thereto,
shall be recorded by Lender and, prior to any transfer hereof, endorsed on the
grid attached hereto which is part of this Note.
This Note is the Note referred to in, and is entitled to the benefits
of, the Loan and Security Agreement, dated as of July 31, 1996, between Borrower
and Lender (the "Loan Agreement"). The Loan Agreement, among other things, (a)
provides for the making of a secured Loan by Lender to Borrower from time to
time in an aggregate principal amount not to exceed at any time outstanding the
amount first above mentioned, the indebtedness of Borrower resulting from the
Loan being evidenced by a Note, and (b) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
Prior to the first anniversary of the date hereof, there shall be no
prepayment of the Loan evidenced by this Note in whole or in part. Borrower may,
at its option, at any time on or after the first anniversary of the date hereof,
prepay the Loan evidenced by this Note, either in whole or from time to time in
any part of the principal amount thereof equal to $500,000 or more, at a
prepayment price equal to the principal amount of the Loan so to be prepaid,
plus interest accrued thereon through and including the date of such prepayment,
plus the Make-Whole Premium (as defined in the Loan Agreement). If the maturity
of this Note and the Loan evidenced thereby is accelerated under the Loan
Agreement, Borrower shall pay to Lender, in addition to principal, interest and
all other amounts due with respect to this Note, as liquidated damages for loss
of Lender's benefit of the bargain and not as a penalty, an amount equal to the
Make-Whole Premium (as defined in the Loan Agreement).
<PAGE>
This Note and the obligation of Borrower to repay the unpaid principal
amount of the Loan, interest on the Loan and all other amounts due Lender under
the Loan Agreement is secured under the Loan Agreement.
Presentment for payment, demand, notice of protest and all other
demands and notices of any kind in connection with the execution, delivery,
performance and enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including,
without limitation, reasonable attorneys' fees and costs, incurred by Lender in
the enforcement or attempt to enforce any of Borrower's obligations hereunder
not performed when due. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
by one of its officers thereunto duly authorized on the date hereof.
CORSAIR COMMUNICATIONS, INC.
By: /s/ Martin J. Silver
---------------------------------------
Name: Martin J. Silver
------------------------------------
Title: Chief Financial Officer
-----------------------------------
-2-
<PAGE>
LOAN, INTEREST RATE AND PAYMENTS OF PRINCIPAL
PRINCIPAL SCHEDULED
DATE AMOUNT INTEREST RATE PAYMENT AMOUNT NOTATION BY
- ---- ------------- ----------------- ------------------ -----------
<PAGE>
Corsair Communications
Amortization Schedule
<TABLE>
Loan Amount: $3,000,000
Loan Interest Rate: 14.55%
- ---------------------------------------------------------------------------
Principal Interest Total Debt Principal
Date Repayment Payment Service Balance
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aug-96 0.00 $ 0.00 $ 0.00 $3,000,000.00
Sep-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Oct-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Nov-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Dec-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Jan-97 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Feb-97 $83,334.00 $36,375.00 $119,709.00 $2,916,666.00
Mar-97 $83,334.00 $35,364.58 $118,698.58 $2,833,332.00
Apr-97 $83,334.00 $34,354.15 $117,688.15 $2,749,998.00
May-97 $83,334.00 $33,343.73 $116,677.73 $2,666,664.00
Jun-97 $83,334.00 $32,333.30 $115,667.30 $2,583,330.00
July-97 $83,334.00 $31,322.88 $114,656.88 $2,499,996.00
Aug-97 $83,334.00 $30,312.45 $113,646.45 $2,416,662.00
Sep-97 $83,334.00 $29,302.03 $112,636.03 $2,333,328.00
Oct-97 $83,334.00 $28,291.60 $111,625.60 $2,249,994.00
Nov-97 $83,334.00 $27,281.18 $110,615.18 $2,166,660.00
Dec-97 $83,334.00 $26,270.75 $109,604.75 $2,083,326.00
Jan-98 $83,334.00 $25,260.33 $108,594.33 $1,999,992.00
Feb-98 $83,334.00 $24,249.90 $107,583.90 $1,916,658.00
Mar-98 $83,334.00 $23,239.48 $106,573.48 $1,833,324.00
Apr-98 $83,334.00 $22,229.05 $105,563.05 $1,749,990.00
May-98 $83,334.00 $21,218.63 $104,552.63 $1,666,656.00
Jun-98 $83,334.00 $20,208.20 $103,542.20 $1,583,322.00
July-98 $83,334.00 $19,197.78 $102,531.78 $1,499,988.00
Aug-98 $83,334.00 $18,187.35 $101,521.35 $1,416,654.00
Sep-98 $83,334.00 $17,176.93 $100,510.93 $1,333,320.00
Oct-98 $83,334.00 $16,166.51 $ 99,500.51 $1,249,986.00
Nov-98 $83,334.00 $15,156.08 $ 98,490.08 $1,166,652.00
Dec-98 $83,334.00 $14,145.66 $ 97,479.66 $1,083,318.00
Jan-99 $83,334.00 $13,135.23 $ 96,469.23 $ 999,984.00
Feb-99 $83,334.00 $12,124.81 $ 95,458.81 $ 916,650.00
Mar-99 $83,334.00 $11,114.38 $ 94,448.38 $ 833,316.00
Apr-99 $83,334.00 $10,103.96 $ 93,437.96 $ 749,982.00
May-99 $83,334.00 $ 9,093.53 $ 92,427.53 $ 666,648.00
Jun-99 $83,334.00 $ 8,083.11 $ 91,417.11 $ 583,314.00
July-99 $83,334.00 $ 7,072.68 $ 90,406.68 $ 499,980.00
Aug-99 $83,334.00 $ 6,062.26 $ 89,396.26 $ 416,646.00
Sep-99 $83,334.00 $ 5,051.83 $ 88,385.83 $ 333,312.00
Oct-99 $83,334.00 $ 4,041.41 $ 87,375.41 $ 249,978.00
Nov-99 $83,334.00 $ 3,030.98 $ 86,364.98 $ 166,644.00
Dec-99 $83,334.00 $ 2,020.56 $ 85,354.56 $ 83,310.00
Jan-00 $83,310.00 $ 1,010.13 484,320.13 $ 0.00
- ---------------------------------------------------------------------------
</TABLE>
This amortization schedule ("Amort") has been prepared at the Borrower's request
and is subject to the terms and conditions of the Loan and Security Agreement
dated as of July 31, 1996 ("Loan Agreement"). The Amort is provided for the
convenience of Corsair Communications and in no way modifies or amends the Loan
Agreement. The allocation of principal and interest and the principal balance
may or may not be in accordance with GAAP. Accordingly, you should not utilize
this Amort without consulting your accountant.
A3
<PAGE>
Corsair CommunicationsRevised August 9, 1996
Amortization Schedule
<TABLE>
<CAPTION>
Loan Amount: $3,000,000
Loan Interest Rate: 14.55%
- ---------------------------------------------------------------------------
Principal Interest Total Debt Principal
Date Repayment Payment Service Balance
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aug-96 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Sep-96 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Oct-96 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Nov-96 0.00 $36,375.00 $ 36,375.00 $3,000,000.00
Dec-96 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Jan-97 0.00 $37,587.50 $ 37,587.50 $3,000,000.00
Feb-97 $83,334.00 $33,950.00 $117,284.00 $2,916,666.00
Mar-97 $83,334.00 $36,543.39 $119,877.39 $2,833,332.00
Apr-97 $83,334.00 $34,354.15 $117,688.15 $2,749,998.00
May-97 $83,334.00 $34,455.18 $117,789.18 $2,666,664.00
Jun-97 $83,334.00 $32,333.30 $115,667.30 $2,583,330.00
July-97 $83,334.00 $32,366.97 $115,700.97 $2,499,996.00
Aug-97 $83,334.00 $31,322.87 $114,656.87 $2,416,662.00
Sep-97 $83,334.00 $29,302.03 $112,363.03 $2,333,328.00
Oct-97 $83,334.00 $29,234.66 $112,568.66 $2,249,994.00
Nov-97 $83,334.00 $27,281.18 $110,615.18 $2,166,660.00
Dec-97 $83,334.00 $27,146.44 $110,480.44 $2,083,326.00
Jan-98 $83,334.00 $26,102.34 $109,436.34 $1,999,992.00
Feb-98 $83,334.00 $22,633.24 $105,967.24 $1,916,658.00
Mar-98 $83,334.00 $24,014.13 $107,348.13 $1,833,324.00
Apr-98 $83,334.00 $22,229.05 $105,563.05 $1,749,990.00
May-98 $83,334.00 $21,925.92 $105,259.92 $1,666,656.00
Jun-98 $83,334.00 $20,208.20 $103,542.20 $1,583,322.00
July-98 $83,334.00 $19,837.71 $103,171.71 $1,499,988.00
Aug-98 $83,334.00 $18,793.60 $102,127.60 $1,416,654.00
Sep-98 $83,334.00 $17,176.93 $100,510.93 $1,333,320.00
Oct-98 $83,334.00 $16,705.39 $100,039.39 $1,249,986.00
Nov-98 $83,334.00 $15,156.08 $ 98,490.08 $1,166,652.00
Dec-98 $83,334.00 $14,617.18 $ 97,951.18 $1,083,318.00
Jan-99 $83,334.00 $13,573.07 $ 96,907.07 $ 999,984.00
Feb-99 $83,334.00 $11,316.49 $ 94,650.49 $ 916,650.00
Mar-99 $83,334.00 $11,484.86 $ 94,818.86 $ 833,316.00
Apr-99 $83,334.00 $10,103.96 $ 93,437.96 $ 749,982.00
May-99 $83,334.00 $ 9,396.65 $ 92,730.65 $ 666,648.00
Jun-99 $83,334.00 $ 8,083.11 $ 91,417.11 $ 583,314.00
July-99 $83,334.00 $ 7,308.44 $ 90,642.44 $ 499,980.00
Aug-99 $83,334.00 $ 6,264.33 $ 89,598.33 $ 416,646.00
Sep-99 $83,334.00 $ 5,051.83 $ 88,385.83 $ 333,312.00
Oct-99 $83,334.00 $ 4,176.12 $ 87,510.12 $ 249,978.00
Nov-99 $83,334.00 $ 3,030.98 $ 86,364.98 $ 166,644.00
Dec-99 $83,334.00 $ 2,087.91 $ 85,421.91 $ 83,310.00
Jan-00 $83,310.00 $ 1,043.80 $ 84,353.80 $ 0.00
- ---------------------------------------------------------------------------
</TABLE>
This amortization schedule ("Amort") has been prepared at the Borrower's request
and is subject to the terms and conditions of the Loan and Security Agreement
dated as of July 31, 1996 ("Loan Agreement"). The Amort is provided for the
convenience of Corsair Communications and in no way modifies or amends the Loan
Agreement. The allocation of principal and interest and the principal balance
may or may not be in accordance with GAAP. Accordingly, you should not utilize
this Amort without consulting your accountant.
A3
<PAGE>
EXHIBIT 10.32
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series B Preferred Stock of
Corsair Communications, Inc.
Dated as of August 5, 1996 (the "Effective Date")
WHEREAS, Corsair Communications, Inc., a Delaware corporation (the
"Company") has entered into a Master Lease Agreement dated as of August 31,
1995, Equipment Schedule No. VL-2 dated as of August 5, 1996, and related
Summary Equipment Schedules (collectively, the "Leases") with Comdisco Inc., a
Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series B Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases, and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
For value received, the Company hereby grants to the Warrantholder, and the
Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from the Company 8,750
fully paid and nonassessable shares of the Company's Series B Preferred Stock
("Preferred Stock") at the price per share of $4.43 the ("Exercise Price")
provided, however, that from and after the effective date of the registration
statement for the Company's initial public offering of its equity securities the
shares purchasable by the Warrantholder upon exercise of this Warrant Agreement
shall be shares of the Company's common stock which shares shall be purchasable
by the Warrantholder in the same number that the Warrantholder would otherwise
have been entitled to purchase had this Warrant Agreement remained exercisable
for shares of the Company's Preferred Stock. The number and purchase price of
such shares are subject to adjustment as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
shall commence on the Effective Date and shall be exercisable for a period of
(i) ten (10) years or (ii) five (5) years from the effective date of the
Company's initial public offering, whichever is longer.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
-1-
<PAGE>
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be exercised
under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering of
the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall
be deemed to be the product of (x) the average of the closing prices
over a twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being determined
and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market value shall
be deemed to be the product of (x) the average of the closing bid and
asked prices quoted on the NASDAQ system (or similar system) over the
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
-2-
<PAGE>
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be determined in good
faith by the Company's Board of Directors and (y) the number of shares of
Common Stock into which each share of Preferred Stock is convertible at the
time of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Common Stock shall
be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term which this
---------------------------------------
Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for the
exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
------------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon conversion, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered, listed or approved for listing on such domestic securities exchange,
as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
-3-
<PAGE>
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, that the Warrantholder would have been
entitled to had the Warrantholder exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent reasonably possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution.
The Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
-4-
<PAGE>
(e) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit A (the "Charter") and the
Company shall provide Warrantholder with the same notices provided to holders of
Preferred Stock as set forth therein.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) there shall be any Merger Event; (iii) there shall be an
initial public offering; or (iv) there shall be any voluntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder: (A) at least twenty (20)
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution, (specifying
the date on which the holders of Preferred Stock shall be entitled thereto) or
for determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, at least twenty (20) days' prior written
notice of the date when the same shall take place (and specifying the date on
which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such Merger
Event, dissolution, liquidation or winding up); and (C) in the case of a public
offering, the Company shall give the Warrantholder at least twenty (20) days
written notice prior to the effective date hereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall
begin on the date Warrantholder actually receives a written notice containing
all the information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights shall, prior to March 1, 1996, be duly
and validly reserved and when issued in accordance with the provisions of this
Warrant Agreement, will be validly issued, fully paid and non-assessable, and
will be free of any taxes, liens, charges or encumbrances of any nature
whatsoever; provided, however, that the Preferred Stock issuable pursuant to
this Warrant Agreement may be subject to restrictions on transfer under state
and/or Federal securities laws. The issuance of certificates for shares of
Preferred Stock upon exercise of the Warrant Agreement shall be made without
charge to the Warrantholder for any issuance tax in respect thereof, or other
cost incurred by the Company in connection with such exercise and the related
issuance of shares of Preferred Stock. The Company shall not be required to pay
any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
-5-
<PAGE>
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and this Warrant Agreement is not
inconsistent with the Company's Charter or Bylaws, does not contravene any law
or governmental rule, regulation or order applicable to it, does not and will
not contravene any provision of, or constitute a default under, any material
indenture, mortgage, contract or other instrument to which it is a party or by
which it is bound, and this Warrant Agreement constitutes a legal, valid and
binding agreement of the Company, enforceable in accordance with its terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
-----------------
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital of the Company consists of (A) 18,000,000
shares of Common Stock, 76,125 of which are issued and outstanding, and (B)
10,247,410 shares of Series A Preferred Stock, of which (I) 8,120,000 shares are
issued and outstanding and (ii) 2,127,410 shares have been designated Series B
Preferred Stock, 1,992,104 of which are issued and outstanding.
(ii) The Company has reserved 2,750,000 shares of Common Stock for
issuance pursuant to a stock option plan or agreements or restricted stock plan
or agreement as shall be approved by the Board of Directors of the Company.
(iii) Except as set forth above and except for (A) the conversion
privileges of the Series A Preferred Stock currently outstanding, (B) warrants
to purchase 40,609 shares of the Company's Series B Preferred Stock, (C)
warrants to purchase 187,500 shares of the Company's Series B Preferred Stock or
Common Stock, (D) the rights of the Warrantholder hereunder and(E) the rights
provided in the Investor's Rights Agreement dated December 10, 1994 (the
"Investor Rights Agreements"), no shareholder of the Company has preemptive
rights to purchase new issuances of the company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in
----------------------------------------
this Warrant Agreement and the Investor Rights Agreement, the Company is not,
pursuant to the terms of any other agreement currently in existence, under any
-6-
<PAGE>
obligation to register under the 1933 Act any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with
-7-
<PAGE>
Rule 144 under the 1933 Act, or (3) a letter shall have been issued to the
Warrantholder at its request by the staff of the securities and Exchange
Commission or a ruling shall have been issued to the Warrantholder at its
request by such Commission stating that no action shall be recommended by such
staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
------------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
---------
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
-8-
<PAGE>
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
California.
(d) Counterparts. This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or three (3) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: Venture Group, cc:
Legal Department, attn: General Counsel, (and/or, if by facsimile, (708) 518-
5466 and (708) 518-5088; and (ii) to the Company at 3408 Hillview Avenue, Palo
Alto, California, 94304, attention: (and/or if by facsimile, (415) 493-3588) or
at such other address as any such party may subsequently designate by written
notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(h) Severability. In the event any one or more of the provisions of this
-------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(i) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(j) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: CORSAIR COMMUNICATIONS, INC.
By: /s/ Martin J. Silver
-------------------------------------
Title: Chief Financial Officer
----------------------------------
Warrantholder: COMDISCO, INC.
By:_____________________________________
Title:__________________________________
-10-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To:______________
(1) The undersigned Warrantholder hereby elects to purchase ______ shares of
the Series ____ Preferred Stock of ____________________________, pursuant
to the terms of the Warrant Agreement dated the ____ day of ____________,
19__ (the "Warrant Agreement") between _________________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series ___ Preferred Stock of
_____________________________________, the undersigned hereby confirms and
acknowledges the investment representations and warranties made in Section
10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ___ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
________________________________
(Name)
________________________________
(Address)
Warrantholder: COMDISCO, INC.
By:_____________________________
Title:__________________________
Date:___________________________
I-1
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
________________________________________________________________________________
(Please Print)
whose address is __________________________________________
___________________________________________________________
Dated _________________________________________
Holder's Signature ____________________________
Holder's Address ______________________________
_______________________________________________
Signature Guaranteed: ________________________________________
NOTE: The signature to this Transfer Notice must
correspond with the name as it appears on the
face of the Warrant Agreement, without
alteration or enlargement or any change
whatever. Officers of corporations and those
acting in a fiduciary or other representative
capacity should file proper evidence of
authority to assign the foregoing Warrant
Agreement.
II-1
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
Corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995. The original name was Phoneprint, Inc.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of a majority
of the outstanding shares in accordance with Section 228 thereof, and written
notice having been given in accordance with the requirements of such Section.
The Amended and Restated Certificate of Incorporation restates, integrates and
amends the provisions of the Certificate of Incorporation of this corporation.
3. The Certificate of Incorporation of the corporation is hereby
amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Corsair Communications, Inc..
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
Delaware General Corporation Law.
<PAGE>
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the corporation is authorized to issue
is Twenty-Eight Million Two Hundred Forty-Seven Thousand Four Hundred and Ten
(28,247,410) shares. Eighteen Million (18,000,000) shares shall be Common
Stock, $.001 par value per share, and Ten Million Two Hundred Forty-Seven
Thousand Four Hundred and Ten (10,247,410) shares shall be Preferred Stock,
$.001 par value per share, of which Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock and Two Million One Hundred
Twenty-Seven Thousand Four Hundred and Ten (2,127,410) shares shall be Series B
Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
rights, preferences, restrictions and other matters relating to the Preferred
Stock are as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock and
Series B Preferred Stock shall be entitled to receive dividends, out of any
assets legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this corporation) on the
Common Stock of this corporation, at the rate of $0.10 per share of Series A
Preferred Stock per annum and $0.22 per share of Series B Preferred Stock per
annum (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) payable when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative. No cash dividend
shall be declared or paid with respect to the Series A Preferred Stock or Series
B Preferred Stock unless at the same time a like proportionate cash dividend for
the same dividend period, ratably in proportion to the respective annual
dividend rates set forth above, is declared and paid with respect to the Series
A Preferred Stock and the Series B Preferred Stock.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
the holders of the Series A Preferred Stock and Series B Preferred Stock were
the holders of the number of shares of Common Stock of this corporation into
which their respective shares of Series A Preferred Stock and Series B Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of this corporation entitled to receive such
distribution.
2. Liquidation Preference.
----------------------
-2-
<PAGE>
a. In the event of any liquidation, dissolution or winding up of
this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock and Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to the sum of (i) $2.00 for each outstanding share of Series A
Preferred Stock, (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations and hereafter referred to as
the "Original Series A Issue Price"), (ii) $4.43 for each outstanding share of
Series B Preferred Stock (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations and hereafter referred
to as the "Original Series B Issue Price"), and (iii) an amount equal to
declared but unpaid dividends on such share of Series A Preferred Stock or
Series B Preferred Stock, as applicable. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series A
Preferred Stock and the Series B Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then,
the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and the Series B Preferred Stock in proportion to the aggregate
liquidation preferences of the respective series, and ratably among the holders
of that series in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above have
been paid, the remaining assets of the corporation available for distribution to
stockholders shall be distributed among the holders of Series A Preferred Stock,
Series B Preferred Stock and Common Stock pro rata based on the number of shares
of Common Stock held by each (assuming conversion of all such Series A Preferred
Stock and Series B Preferred Stock).
c. A consolidation or merger of this corporation with or into any
other corporation or corporations, or a sale, conveyance or disposition of all
or substantially all of the assets of this corporation or the effectuation by
the corporation of a transaction or series of related transactions in which more
than 50% of the voting power of the corporation is disposed of (excluding the
issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement and the issuance of Series B Preferred Stock
pursuant to the Series B Preferred Stock Purchase Agreement), shall be deemed to
be a liquidation, dissolution or winding up within the meaning of this Section
2.
3. Conversion. The holders of the Series A Preferred Stock and
----------
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
a. Right to Convert.
----------------
(i) Subject to subsection (c), each share of Series A
Preferred Stock and Series B Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of this corporation or any transfer agent for the particular series
of Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (A) the Original Series A Issue Price
for each share of Series A Preferred Stock and (B) the Original Series B Issue
-3-
<PAGE>
Price for each share of Series B Preferred Stock, plus all declared but unpaid
dividends thereon for each share of Series A Preferred Stock or Series B
Preferred Stock, by the Conversion Price at the time in effect for such share.
The initial Conversion Price per share for shares of Series A Preferred Stock
shall be the Original Series A Issue Price and the initial Conversion Price per
share for shares of Series B Preferred Stock shall be the Original Series B
Issue Price; provided, however, that the Conversion Price for the Series A
Preferred Stock and Series B Preferred Stock shall be subject to adjustment as
set forth in subsection 3(c).
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $7,500,000 in the aggregate or (B) the date upon which
the corporation obtains the consent of the holders of a majority of the then
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a single class on an as converted basis.
b. Mechanics of Conversion. Before any holder of Series A Preferred
-----------------------
Stock or Series B Preferred Stock shall be entitled to convert the same into
shares of Common Stock, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this corporation or of any transfer
agent for the particular series of Preferred Stock, and shall give written
notice by mail, postage prepaid, to this corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Preferred Stock and/or Series
B Preferred Stock, or to the nominee or nominees of such holder, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Series A Preferred Stock and/or Series B Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offer of securities registered
pursuant to the Securities Act, the conversion may, at the option of any holder
tendering Series A Preferred Stock and/or Series B Preferred Stock for
conversion, be conditioned upon the closing with the underwriter of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock issuable upon such conversion of the Series A Preferred
Stock and/or Series B Preferred Stock shall not be deemed to have converted such
Series A Preferred Stock and/or Series B Preferred Stock until immediately prior
to the closing of such sale of securities.
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<PAGE>
c. Conversion Price Adjustments of Preferred Stock. The Conversion
-----------------------------------------------
Prices of the Series A Preferred Stock and Series B Preferred Stock shall be
subject to adjustment from time to time as follows:
(i) A. If the corporation shall issue any Additional Stock (as
defined below) without consideration or for a consideration per share less than
the Conversion Price for the Series A Preferred Stock or the Conversion Price
for the Series B Preferred Stock in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for the Series A Preferred Stock or
Series B Preferred Stock, as the case may be, in effect immediately prior to
each such issuance shall forthwith (except as otherwise provided in this clause
(i)) be adjusted to a price equal to the quotient obtained by dividing the total
computed under clause (x) below by the total computed under clause (y) below as
follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock or Series B Preferred Stock
sold pursuant to the applicable agreements pursuant to which such
shares of Series A Preferred Stock or Series B Preferred Stock, as the
case may be, are first issued (the "Stock Purchase Agreements"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the dates of the applicable Stock Purchase Agreements (the
"Purchase Date") other than shares of Common Stock issued or issuable
with respect to the Series A Preferred Stock or Series B Preferred
Stock;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock or Series B Preferred Stock sold
pursuant to the applicable Stock Purchase Agreements divided by the
applicable Conversion Price for such shares in effect at the
applicable Purchase Date (or such higher or lower Conversion Price for
such series as results from the application of subsections 3(c)(iii)
and (iv) and assuming that this Certificate was in effect as of the
applicable Purchase Date) plus
(2) the number of shares of Additional
Stock issued since the applicable Purchase Date (increased or
decreased to the extent that the number of such shares of Additional
Stock shall have been increased or decreased as the result of the
application of subsections 3(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the Series A
Preferred Stock or Series B Preferred Stock shall be made in an amount less than
-5-
<PAGE>
one cent per share, provided that any adjustments which are not required to be
made by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to 3 years from the
date of the event giving rise to the adjustment being carried forward, or shall
be made at the end of 3 years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant
to this subsection 3(c)(i) shall have the effect of increasing the Conversion
Price above the Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or after
the applicable Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued at
the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in
subsections 3(c)(i)(C) and (c)(i)(D)), if any, received by the
corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
2. The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options
to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
-6-
<PAGE>
the minimum additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 3(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the
antidilution provisions thereof, the applicable Conversion Price of
the Series A Preferred Stock and Series B Preferred Stock, as
applicable, and to the extent in any way affected by or computed using
such options, rights or securities, shall be recomputed to reflect
such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or exchange
of such securities.
4. Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the Series
A Preferred Stock and Series B Preferred Stock, as applicable, to the
extent in any way affected by or computed using such options, rights
or securities or options or rights related to such securities, shall
be recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the
exercise of the options or rights related to such securities.
5. The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections
3(c)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either
subsection 3(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E)) by this
corporation before, on or after the applicable Purchase Date other than
A. shares of Common Stock issued pursuant to a transaction
described in subsection 3(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of shares
of Series A Preferred Stock or Series B Preferred Stock,
-7-
<PAGE>
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly or
pursuant to a stock option plan or agreement or restricted stock plan
or agreement approved by the Board of Directors of this corporation,
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock and Series B Preferred Stock will
be converted to Common Stock or (II) upon exercise of warrants or
rights granted to underwriters in connection with such a public
offering, or
E. shares of Series B Preferred Stock issued or
issuable to Comdisco, Inc. pursuant to a Warrant dated August 31,
1995.
(iii) In the event the corporation should at any time or from
time to time after the applicable Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of the Series A Preferred Stock and Series B
Preferred Stock then in effect shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of the aggregate of
shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at any
time after the applicable Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock
and Series B Preferred Stock then in effect shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be decreased in proportion to such decrease in outstanding
shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock and Series B Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the corporation into which their shares
of
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<PAGE>
Series A Preferred Stock and Series B Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3) provision shall be made so that the holders of the Series A
Preferred Stock and Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock and Series B Preferred
Stock, respectively, the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
Series A Preferred Stock and Series B Preferred Stock after the recapitalization
to the end that the provisions of this Section 3 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 3 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock and Series B Preferred Stock against
impairment.
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon conversion of the
Series A Preferred Stock and Series B Preferred Stock, and the number of shares
of Common Stock to be issued shall be rounded up to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Series A Preferred
Stock and Series B Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of Series A Preferred Stock and Series B Preferred Stock
pursuant to this Section 3, this corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series A Preferred Stock and Series B
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
This corporation shall, upon the written request at any time of any
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<PAGE>
holder of Series A Preferred Stock or Series B Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of a share of
Series A Preferred Stock or Series B Preferred Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock and Series B
Preferred Stock at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series A Preferred Stock and Series B Preferred Stock such number
of its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Series A Preferred Stock and
Series B Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series A Preferred Stock and Series B
Preferred Stock, in addition to such other remedies as shall be available to the
holder of such Series A Preferred Stock or Series B Preferred Stock, this
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this Section 3
-------
to be given to the holders of shares of Series A Preferred Stock or Series B
Preferred Stock shall be deemed given if deposited in the United States mail,
postage prepaid, and addressed to each holder of record at his address appearing
on the books of this corporation.
4. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock and Series B Preferred Stock shall have the right to one vote
for each share of Common Stock into which such Series A Preferred Stock and
Series B Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled, notwithstanding any provision hereof, to notice of
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<PAGE>
any stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote, together as a single class with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors of
---------------------
this Corporation shall be five (5). Notwithstanding 5(a) above, the holders of
Series A Preferred Stock, voting as a separate class, shall be entitled to elect
four (4) directors of the corporation; and the holders of the Series A Preferred
Stock, Series B Preferred Stock and Common Stock, voting together as a single
class on an as converted basis, shall be entitled to elect one (1) director of
the corporation. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of the Series A
Preferred Stock then outstanding shall constitute a quorum of the Series A
Preferred Stock for the election of directors to be elected solely by the
holders of Series A Preferred Stock. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock and Common
Stock then outstanding, on an as converted basis, shall constitute a quorum of
the Series A Preferred Stock, Series B Preferred Stock and Common Stock for the
election of directors to be elected solely by the holders of the Series A
Preferred Stock, Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock; and a vacancy in any directorship elected
by the holders of Series A Preferred Stock, Series B Preferred Stock and Common
Stock voting together shall be filled only by the vote of the holders of Series
A Preferred Stock, Series B Preferred Stock and Common Stock voting together as
provided above.
5. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock and/or Series B Preferred Stock are outstanding, this corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of a majority of the then outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, voting together as a
single class on an as converted basis:
a. sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock or Series B Preferred Stock so as to affect
adversely the shares;
c. increase the authorized number of shares of Series A
Preferred Stock, Series B Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities
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<PAGE>
convertible into equity securities of the corporation (i) having a preference
over, or being on a parity with, the Series A Preferred Stock or Series B
Preferred Stock with respect to voting, dividends, conversion rights or upon
liquidation, or (ii) having rights similar to any of the rights of the Series A
Preferred Stock and Series B Preferred Stock under this Section 5; or
e. change authorized number of directors from five (5).
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons,
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<PAGE>
vote of stockholders or disinterested directors or otherwise, in excess of the
indemnification and advancement otherwise permitted by Section 145 of the
Delaware General Corporation Law, subject only to limits created by applicable
Delaware law (statutory or non-statutory), with respect to actions for breach of
duty to the Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The corporation shall have a perpetual existence.
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the Bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation has
been signed under the seal of this corporation as of this 24th day of October,
1995.
CORSAIR COMMUNICATIONS, INC.
By: /s/ Mary Ann Byrnes
-----------------------------
Mary Ann Byrnes, President
ATTEST:
/s/ Kevin Compton
- ----------------------------
Kevin Compton, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
CORSAIR COMMUNICATIONS, INC.
Corsair Communications, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That a resolution was duly adopted by the Board of Directors of the
Corporation setting forth a proposed amendment to the Amended and Restated
Certificate of Incorporation of the Corporation, and declaring said amendment to
be advisable and recommended for approval by the stockholders of the
Corporation. Subsection B.4.b. of Article IV of the Amended and Restated
Certificate of Incorporation is amended as follows:
"Election of Directors. The authorized number of directors of
---------------------
this Corporation shall be seven (7). Notwithstanding 5(a) above,
the holders of Series A Preferred Stock, voting as a separate
class, shall be entitled to elect four (4) directors of the
corporation; and the holders of the Series A Preferred Stock,
Series B Preferred Stock and Common Stock, voting together as a
single class on an as converted basis, shall be entitled to
elect three (3) directors of the corporation. At any meeting
held for the purpose of electing directors, the presence in
person or by proxy of the holders of a majority of the Series A
Preferred Stock then outstanding shall constitute a quorum of
the Series A Preferred Stock for the election of directors to be
elected solely by the holders of Series A Preferred Stock. At
any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of
the Series A Preferred Stock, Series B Preferred Stock and
Common Stock then outstanding, on an as converted basis, shall
constitute a quorum of the Series A Preferred Stock, Series B
Preferred Stock and Common Stock for the election of directors
to be elected solely by the holders of the Series A Preferred
Stock, Series B Preferred Stock and Common Stock, voting
together as a single class on an as converted basis. A vacancy
in any directorship elected by the holders of Series A Preferred
Stock shall be filled only by vote of the holders of Series A
Preferred Stock; and a vacancy in any directorship elected by
the holders of Series A Preferred Stock, Series B Preferred
<PAGE>
Stock and Common Stock voting together shall be filled only by
the vote of the holders of Series A Preferred Stock, Series B
Preferred Stock and Common Stock voting together as provided
above."
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, said Corsair Communications, Inc. has caused this
certificate to be signed and attested by MaryAnn Byrnes, its President and Kevin
Compton, its Secretary this 10th day of November, 1995.
By: /s/ Mary Ann Byrnes
--------------------------------
MaryAnn Byrnes, President
ATTEST:
By: /s/ Kevin Compton
------------------------------
Kevin Compton, Secretary
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
<PAGE>
EXHIBIT 10.33
________________________________________________________________________________
CORSAIR COMMUNICATIONS, INC.
LOAN AND SECURITY AGREEMENT
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS AND CONSTRUCTION.......................................... 1
1.1 Definitions...................................................... 1
1.2 Accounting Terms................................................. 7
2. LOAN AND TERMS OF PAYMENT............................................. 7
2.1 Advances......................................................... 7
2.2 Overadvances..................................................... 8
2.3 Interest Rates, Payments, and Calculations....................... 8
2.4 Crediting Payments............................................... 9
2.5 Fees............................................................. 9
2.6 Additional Costs................................................. 9
2.7 Term............................................................. 10
3. CONDITIONS OF LOANS................................................... 10
3.1 Conditions Precedent to Initial Advance.......................... 10
3.2 Conditions Precedent to all Advances............................. 10
4. CREATION OF SECURITY INTEREST......................................... 11
4.1 Grant of Security Interest....................................... 11
4.2 Delivery of Additional Documentation Required.................... 11
4.3 Right to Inspect................................................. 11
5. REPRESENTATIONS AND WARRANTIES........................................ 11
5.1 Due Organization and Qualification............................... 11
5.2 Due Authorization; No Conflict................................... 11
5.3 No Prior Encumbrances............................................ 11
5.4 Bona Fide Eligible Accounts...................................... 11
5.5 Merchantable Inventory........................................... 12
5.6 Name; Location of Chief Executive Office......................... 12
5.7 Litigation....................................................... 12
5.8 No Material Adverse Change in
Financial Statements.......................................... 12
5.9 Solvency......................................................... 12
5.10 Regulatory Compliance............................................ 12
5.11 Environmental Condition.......................................... 12
5.12 Taxes............................................................ 13
5.13 Subsidiaries..................................................... 13
5.14 Government Consents.............................................. 13
5.15 Full Disclosure.................................................. 13
6. AFFIRMATIVE COVENANTS................................................. 13
6.1 Good Standing.................................................... 13
6.2 Government Compliance............................................ 13
6.3 Financial Statements, Reports, Certificates...................... 13
6.4 Inventory; Returns............................................... 14
6.5 Taxes............................................................ 14
6.6 Insurance........................................................ 14
6.7 Principal Depository............................................. 15
6.8 Quick Ratio...................................................... 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
6.9 Tangible Net Worth.............................................. 15
6.10 Profitability................................................... 15
6.11 Further Assurances.............................................. 15
7. NEGATIVE COVENANTS
7.1 Dispositions..................................................... 15
7.2 Change in Business............................................... 15
7.3 Mergers or Acquisitions.......................................... 15
7.4 Indebtedness..................................................... 15
7.5 Encumbrances..................................................... 15
7.6 Distributions.................................................... 16
7.7 Investments...................................................... 16
7.8 Transactions with Affiliates..................................... 16
7.9 Subordinated Debt................................................ 16
7.10 Inventory....................................................... 16
7.11 Compliance...................................................... 16
8. EVENTS OF DEFAULT..................................................... 16
8.1 Payment Default.................................................. 16
8.2 Covenant Default................................................. 16
8.3 Material Adverse Change.......................................... 17
8.4 Attachment....................................................... 17
8.5 Insolvency....................................................... 17
8.6 Other Agreements................................................. 17
8.7 Subordinated Debt................................................ 17
8.8 Judgments........................................................ 17
8.9 Misrepresentations............................................... 17
9. BANK'S RIGHTS AND REMEDIES............................................ 18
9.1 Rights and Remedies.............................................. 18
9.2 Power of Attorney................................................ 18
9.3 Accounts Collection.............................................. 19
9.4 Bank Expenses.................................................... 19
9.5 Bank's Liability for Collateral.................................. 19
9.6 Remedies Cumulative.............................................. 19
9.7 Demand; Protest.................................................. 19
10. NOTICES............................................................... 20
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER............................ 20
12. GENERAL PROVISIONS.................................................... 20
12.1 Successors and Assigns........................................... 20
12.2 Indemnification.................................................. 20
12.3 Time of Essence.................................................. 21
12.4 Severability of Provisions....................................... 21
12.5 Amendments in Writing, Integration............................... 21
12.6 Counterparts..................................................... 21
12.7 Survival......................................................... 21
12.8 Confidentiality.................................................. 21
</TABLE>
ii
<PAGE>
This LOAN AND SECURITY AGREEMENT is entered into as of August 30, 1996, by
and between SILICON VALLEY BANK ("Bank") and CORSAIR COMMUNICATIONS, INC.
("Borrower").
RECITALS
--------
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
---------
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means an Advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that owns
or controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents (including fees and expenses of
appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1 hereof.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
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<PAGE>
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Line" means Three Million Dollars ($3,000,000).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Current Assets" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, an amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Advances made
under this Agreement, including all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless such Indebtedness
is renewable or extendable at the option of Borrower or any Subsidiary to a date
more than one year from the date of determination, but excluding Subordinated
Debt.
"Daily Balance" means the amount of the Obligations owed at the end of
a given day.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4; provided, that standards of
--------
eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts
shall not include the following:
(a) Accounts that the account debtor has failed to pay within ninety
(90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent (50%)
of whose Accounts the account debtor has failed to pay within ninety (90) days
of invoice date;
(c) Accounts with respect to which the account debtor is an officer,
employee, or agent of Borrower;
2
<PAGE>
(d) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other terms
by reason of which the payment by the account debtor may be conditional;
(e) Accounts with respect to which the account debtor is an Affiliate
of Borrower;
(f) Accounts with respect to which the account debtor is the United
States or any department, agency, or instrumentality of the United States;
(g) Accounts with respect to which Borrower is liable to the account
debtor for goods sold or services rendered by the account debtor to Borrower,
but only to the extent of any amounts owing to the account debtor against
amounts owed to Borrower;
(h) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed fifty
percent (50%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(i) Accounts with respect to which the account debtor does not have
its principal place of business in the United States, unless supported by
letters of credit or FCIA or other insurance on terms, and by financial
institutions, acceptable to Bank, or otherwise permitted by Bank;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably determines to be
doubtful.
"Eligible Inventory" means raw materials, work in process and finished
goods inventory approved from time to time by Bank, net of any reserves for
excess or obsolete inventory, and excluding field inventory.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or
3
<PAGE>
informal moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies,
packaging and shipping materials, work in process and finished products intended
for sale or lease or to be furnished under a contract of service, of every kind
and description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Inventory Backlog" means Borrower's backlog, as reported in the
financial statements delivered pursuant to Section 6.3.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means the date immediately preceding the first
anniversary of the date hereof.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, and Borrower's Books relating
to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
4
<PAGE>
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness secured by Liens described in clause (c) of the
defined term "Permitted Liens" provided the principal amount of the indebtedness
does not exceed the lesser of the cost or the fair market value of such
Equipment;
(e) Indebtedness owing to GATX/MMC and Comdisco, Inc. pursuant to
those certain Loan and Security Agreements, each dated as of July 31, 1996;
(f) Indebtedness to trade creditors incurred in the ordinary course
of business;
(g) extensions, renewals and refinancings of the Indebtedness of the
Borrower or any of its Subsidiaries of the type referred to in clauses (b) and
(e) above, provided that the principal amount of such Indebtedness being
--------
extended, renewed or refinanced does not increase;
(h) Indebtedness consisting of guarantees resulting from endorsement
of negotiable instruments for collection by the Borrower or any such Subsidiary
in the ordinary course of business;
(i) Indebtedness of the Borrower to any of its Subsidiaries or of any
of its Subsidiaries to another Subsidiary in each case in the ordinary course of
business; and
(j) guarantees by the Borrower of any Indebtedness of its
Subsidiaries, and of any Subsidiary of Indebtedness of the Borrower or another
Subsidiary, to the extent such Indebtedness is permitted hereunder.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., and (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank.
(c) loans to employees, officers and directors for the purpose of
purchasing equity securities of Borrower not exceeding $10,000 in any year;
(d) travel advances and other employee loans and advances in the
ordinary course of business not to exceed $20,000 at any time outstanding;
(e) extensions of credit to customers, in each case in the ordinary
course of business;
(f) Investments accepted in connection with Transfers permitted by
Section 7.1.
5
<PAGE>
"Permitted Liens" means the following:
(a) the Liens existing on the Closing Date in favor of GATX/MMC and
Comdisco, Inc. or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Bank's security
--------
interests;
(c) Liens (i) upon or in any equipment acquired or held by Borrower
or any of its Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
--------
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens securing the Indebtedness described in clause (e) of the
defined term "Permitted Indebtedness";
(e) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (d) above, provided that any extension, renewal or
---------
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase;
(f) Liens of materialmen, mechanics, warehousemen, carriers, or other
similar liens arising in the ordinary course of business and securing
obligations which are not delinquent;
(g) Liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods;
(h) Liens which constitute rights of set-off of a customary nature or
banker's liens on amounts on deposit, whether arising by contract or by
operation of law, in connection with arrangements entered into with depository
institutions in the ordinary course of business, provided such Liens do not have
priority over the Liens granted hereunder; and
(i) any judgment, attachment or similar Lien in connection with any
event or circumstance described in Section 8.4 that is not an Event of Default
hereunder.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof shall
be determined, the consolidated cash, cash-equivalents, accounts receivable and
investments, with maturities not to exceed 90 days, of Borrower determined in
accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
Chief Financial Officer, the Controller and Assistant Controller of Borrower.
6
<PAGE>
"Revolving Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i) any
general partnership interest or (ii) more than 50% of the stock of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount thereof
shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
-----
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
---
"Total Liabilities" means at any date as of which the amount thereof
shall be determined, all obligations that should, in accordance with GAAP be
classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
1.2 Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
-------------------------
2.1 Advances. Subject to and upon the terms and conditions of this
--------
Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed the lesser of the Committed Line or the Borrowing Base. For purposes
of this Agreement, "Borrowing Base" shall mean an amount equal to (i) eighty
percent (80%) of Eligible Accounts plus (ii) the lesser of (a) twenty five
percent (25%) of Eligible Inventory or (b) Five Hundred Thousand Dollars
($500,000); provided that "Borrowing Base" shall mean an amount equal to (i)
eighty percent (80%) of Eligible Accounts plus the lesser of (a) twenty five
percent (25%) of Eligible Inventory or (b) One Million Dollars ($1,000,000) at
any time when the Inventory Backlog consists of more than one hundred (100)
radio frequency units. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1 may be repaid and reborrowed at
any time prior to the Maturity Date.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time, on
the Business Day that the Advance is to be made. Each such notification shall
be promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
- ---------
based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer, and Borrower shall indemnify and hold Bank
7
<PAGE>
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this Section 2.1 to
Borrower's deposit account.
The Revolving Facility shall terminate on the Maturity Date, at which
time all Advances under this Section 2.1 shall be immediately due and payable.
2.1.1 Letters of Credit.
-----------------
(a) Subject to the terms and conditions of this Agreement,
Bank agrees to issue or cause to be issued letters of credit for the account of
Borrower in an aggregate face amount not to exceed (i) the lesser of the
Committed Line or the Borrowing Base minus (ii) the then outstanding principal
balance of the Advances. Each such letter of credit shall have an expiry date no
later than the Revolving Maturity Date, provided that Borrower's letter of
credit reimbursement obligation shall be secured by cash on terms acceptable to
Bank at any time after the Maturity Date if the term of this Agreement is not
extended by Bank. All such letters of credit shall be, in form and substance,
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form of application and letter of credit agreement. All
amounts actually paid by Bank in respect of a Letter of Credit shall, when paid,
constitute an Advance under this Agreement.
(b) The obligation of Borrower to immediately reimburse Bank
for drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend and hold Bank harmless from any loss, cost,
expense or liability, including, without limitation, reasonable attorneys' fees,
arising out of or in connection with any letters of credit.
2.1.2 Letter of Credit Reimbursement; Reserve.
---------------------------------------
(a) Borrower may request that Bank issue a letter of-credit
payable in a currency other than United States Dollars. If a demand for payment
is made under any such letter of credit, Bank shall treat such demand as an
advance to Borrower of the equivalent of the amount thereof (plus cable charges)
in United States currency at the then prevailing rate of exchange in San
Francisco, California, for sales of that other currency for cable transfer to
the country of which it is the currency.
(b) Upon the issuance of any letter of credit payable in a
currency other than United States Dollars, Bank shall create a reserve under the
Committed Line for letters of credit against fluctuations in currency exchange
rates, in an amount equal to twenty percent (20%) of the face amount of such
letter of credit. The amount of such reserve may be amended by Bank from time to
time to account for fluctuations in the exchange rate. The availability of funds
under the Committed Line shall be reduced by the amount of such reserve for so
long as such letter of credit remains outstanding.
2.2 Overadvances. If, at any time or for any reason, the amount of
------------
Obligations owed by Borrower to Bank pursuant to Section 2.1 of this Agreement
is greater than the lesser of (i) the Committed Line or (ii) the Borrowing Base,
Borrower shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rate. Except as set forth in Section 2.3(b), any
-------------
Advances shall bear interest, on the Daily Balance, at a rate equal to one half
(0.5) percentage point above the Prime Rate.
8
<PAGE>
(b) Default Rate. All Obligations shall bear interest, from and after
------------
the occurrence of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the last
--------
calendar day of each month during the term hereof. Bank shall, at its option,
charge such interest, all Bank Expenses, and all Periodic Payments against any
of Borrower's deposit accounts or against the Committed Line, in which case
those amounts shall thereafter accrue interest at the rate then applicable
hereunder. Any interest not paid when due shall be compounded by becoming a part
of the Obligations, and such interest shall thereafter accrue interest at the
rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
-----------
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under
the Loan Documents shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence and continuance of an
------------------
Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as Borrower specifies.
After the occurrence and during the continuance of an Event of Default, the
receipt by Bank of any wire transfer of funds, check, or other item of payment
shall be immediately applied to conditionally reduce Obligations, but shall not
be considered a payment on account unless such payment is of immediately
available federal funds or unless and until such check or other item of payment
is honored when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after 12:00 noon
California time shall be deemed to have been received by Bank as of the opening
of business on the immediately following Business Day. Whenever any payment to
Bank under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
----
(a) Facility Fee. A Facility Fee equal to Seven Thousand Dollars
------------
($7,000), which fee shall be due on the Closing Date and shall be fully earned
and nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's customary fees
----------------------------------------
and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for
each appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents provided that, except during
the continuance of an Event of Default, the cost of such audit or audits shall
not exceed One Thousand Two Hundred Dollars ($1,200) per year;
(c) Bank Expenses. Upon the date hereof, all Bank Expenses incurred
-------------
through the Closing Date, including reasonable attorneys' fees and expenses not
to exceed One Thousand Five Hundred Dollars ($1,500), and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as
and when they become due.
2.6 Additional Costs. In case any change in any law, regulation, treaty
----------------
or official directive or the interpretation or application thereof by any court
or any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
9
<PAGE>
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing Date and,
----
subject to Section 12.7, shall continue in full force and effect for a term
ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have the
right to terminate its obligation to make Advances under this Agreement
immediately upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination, Bank's Lien on the Collateral shall remain
in effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of Bank to
---------------------------------------
make the initial Advance is subject to the condition precedent that Bank shall
have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) financing statement (Form UCC-1);
(d) an intercreditor agreement;
(e) insurance certificate;
(f) an audit of Borrower's Accounts;
(g) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(h) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to make
------------------------------------
each Advance, including the initial Advance, is further subject to the following
conditions:
10
<PAGE>
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1; and
(b) the representations and warranties contained in Section 5 shall
be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
--------------------------
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall from
---------------------------------------------
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
----------------
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is a
----------------------------------
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified, except to the extent that failure to
so qualify would not have a Material Adverse Effect on the Borrower.
5.2 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to
---------------------
the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
---------------------------
existing obligations. The property giving rise to such Eligible Accounts has
been delivered to the account
11
<PAGE>
debtor or to the account debtor's agent for immediate shipment to and
unconditional acceptance by the account debtor. Borrower has not received notice
of actual or imminent Insolvency Proceeding of any account debtor that is
included in any Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects of
----------------------
good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as disclosed in the
----------------------------------------
Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no
----------
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral. Borrower does not have knowledge of
any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements. All consolidated
--------------------------------------------------
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not been
a material adverse change in the consolidated financial condition of Borrower
since the date of the most recent of such financial statements submitted to
Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts (including
--------
trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
---------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act, and Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, noncompliance with which or violation of
which could have a Material Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
-----------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency
12
<PAGE>
concerning any action or omission by Borrower or any Subsidiary resulting in the
releasing, or otherwise disposing of hazardous waste or hazardous substances
into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be filed
-----
all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein, except for taxes the
amount or validity of which Borrower is contesting in good faith by appropriate
proceedings and with respect to which Borrower has taken adequate reserves in
accordance with GAAP.
5.13 Subsidiaries. As of the date hereof Borrower does not own any
------------
stock, partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained all
-------------------
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted,
except to the extent that failure to do so would not have a Material Adverse
Effect on the Borrower.
5.15 Full Disclosure. No representation, warranty or other statement
---------------
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall deliver
-------------------------------------------
to Bank: (a) as soon as available, but in any event within thirty (30) days
after the end of each month, a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during such period,
certified by a Responsible Officer; (b) as soon as available, but in any event
within ninety (90) days after the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) within five (5) days upon becoming available, copies of
all statements, reports and notices sent or made available generally by Borrower
to its security holders or to any holders of Subordinated Debt and all reports
on Form 10-K and 10-Q filed with the Securities and Exchange Commission; (d)
promptly upon receipt of
13
<PAGE>
notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; and (e) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month in which an
Advance is outstanding, Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit
-------
C hereto, together with aged listings of accounts receivable and accounts
- -
payable and an RFU backlog report in form reasonably acceptable to Bank.
Borrower shall also deliver such Borrowing Base Certificate, aged listings and
backlog report as a condition to requesting an Advance in a month for which Bank
has not already received such documents.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
---------
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every six (6) months unless an Event of Default has
occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
------------------
marketable condition, free from all material defects. Returns and allowances,
if any, as between Borrower and its account debtors shall be on the same basis
and in accordance with the usual customary practices of Borrower, as they exist
at the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
-----
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
Nothing herein shall be construed as requiring the Borrower to
maintain credit insurance with respect to its accounts receivable.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as
14
<PAGE>
an additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must give
at least twenty (20) days notice to Bank before canceling its policy for any
reason. Upon Bank's request, Borrower shall deliver to Bank certified copies of
such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
-----------
calendar month, a ratio of Quick Assets to Current Liabilities, excluding
deferred revenue, of at least 1.0 to 1.0.
6.9 Tangible Net Worth. Borrower shall maintain, as of the last day
------------------
of each calendar month, a Tangible Net Worth plus Subordinated Debt of not less
than (i) Three Million Dollars ($3,000,000) plus (ii) Fifty Percent (50%) of the
net proceeds received by Borrower from the sale of its equity securities after
the Closing Date.
6.10 Profitability. Borrower shall not incur a loss after taxes in any
-------------
calendar month in excess of One Million Five Hundred Thousand Dollars
($1,500,000).
6.11 Further Assurances. At any time and from time to time Borrower
------------------
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Advances, Borrower will
not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
------------
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of its
------------------
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership.
Borrower will not, without thirty (30) days prior written notification to Bank,
relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
-----------------------
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, except for
mergers of Subsidiaries with each other or with Borrower, provided that Borrower
is the surviving Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
15
<PAGE>
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
------------
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution
-------------
or payment on account of or in redemption, retirement or purchase of any capital
stock, except (i) repurchases from current or former employees, directors or
consultants of the Borrower under the terms of any stock option or stock
purchase plans or agreements up to a maximum of $100,000 in any one fiscal year,
and (ii) dividends payable solely in common stock.
7.7 Investments. Directly or indirectly acquire or own, or make any
-----------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into
----------------------------
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
-----------------
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
---------
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
----------
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose.
Fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur, fail to comply
with the Federal Fair Labor Standards Act or violate any law or regulation,
which violation could have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral, or
permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or
---------------
any interest on, any Advances when due and payable; or fails to pay any portion
of any other Obligations not constituting such principal or interest, including
without limitation Bank Expenses, within thirty (30) days of receipt by Borrower
of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future
16
<PAGE>
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within twenty (20) days after Borrower receives notice thereof
or any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the twenty (20) day period or
cannot after diligent attempts by Borrower be cured within such twenty (20) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional reasonable period (which shall not in any case
exceed thirty (30) days) to attempt to cure such default, and within such
reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse
-----------------------
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a hen or encumbrance upon any material portion of Borrower's
assets, or if a notice of lien, levy, or assessment is filed of record with
respect to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
-----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money
---------
the uninsured amount of which, individually or in the aggregate, is at least
Fifty Thousand Dollars ($50,000), shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of thirty (30) days (provided that
no Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
------------------
misstatement on or as of the date made exists now or hereafter in any warranty
or representation set forth herein or in any certificate delivered to Bank by
any Responsible Officer pursuant to this Agreement or to induce Bank to enter
into this Agreement or any other Loan Document.
17
<PAGE>
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the
-------------------
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5 all Obligations shall become immediately due and payable without any action
by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Without notice to or demand upon Borrower, make such payments
and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the Collateral
if Bank so requires, and to make the Collateral available to Bank as Bank may
designate. Borrower authorizes Bank to enter the premises where the Collateral
is located, to take and maintain possession of the Collateral, or any part of
it, and to pay, purchase, contest, or compromise any encumbrance, charge, or
lien which in Bank's determination appears to be prior or superior to its
security interest and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
-----------------
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated
18
<PAGE>
officers, or employees) as Borrower's true and lawful attorney to: (a) send
requests for verification of Accounts or notify account debtors of Bank's
security interest in the Accounts; (b) endorse Borrower's name on any checks or
other forms of payment or security that may come into Bank's possession; (c)
sign Borrower's name on any invoice or bill of lading relating to any Account,
drafts against account debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to account debtors; (d) make, settle, and
adjust all claims under and decisions with respect to Borrower's policies of
insurance; and (e) settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable; provided Bank may exercise such power of attorney to sign the
name of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The appointment of Bank as Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
9.3 Accounts Collection. At any time from the date of this Agreement,
-------------------
Bank may notify any Person owing funds to Borrower of Bank's security interest
in such funds and verify the amount of such Account. Borrower shall collect all
amounts owing to Borrower for Bank, receive in trust all payments as Bank's
trustee, and immediately deliver such payments to Bank in their original form as
received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
-------------
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk
of loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
19
<PAGE>
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: Corsair Communications, Inc.
3408 Hillview Avenue
Palo Alto, CA 94304
Attn: Chief Financial Officer
FAX: (415) 493-3588
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: Peter Kidder
FAX: (408) 748-9478
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
-------- -------
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower
20
<PAGE>
whether under this Agreement, or otherwise (including without limitation
reasonable attorneys fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of
---------------
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
----------------------------------
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
--------
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information Bank
---------------
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank and (v) as Bank may
determine in connection with the enforcement of any remedies hereunder.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have actual knowledge that such third party is prohibited from
disclosing such information.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
CORSAIR COMMUNICATIONS, INC.
By: /s/ Martin J. Silver
--------------------
Title: CFO
-----------------
SILICON VALLEY BANK
By: /s/ Peter A. Kidder
--------------------
Title: Vice President
-----------------
22
<PAGE>
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing, and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
23
<PAGE>
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:_______________
FAX#: (408) 496-2426 TIME:_______________
- --------------------------------------------------------------------------------
FROM:___________________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY:___________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:___________________________________________________________
PHONE NUMBER:___________________________________________________________________
FROM ACCOUNT #______________________ TO ACCOUNT #____________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- --------------------------- ---------------------------
PRINCIPAL INCREASE (ADVANCE) $______________________________
PRINCIPAL PAYMENT (ONLY) $______________________________
INTEREST PAYMENT (ONLY) $______________________________
PRINCIPAL AND INTEREST (PAYMENT) $______________________________
OTHER INSTRUCTIONS:_____________________________________________________________
________________________________________________________________________________
All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties expressly
referreing to another date shall be true, correct and complete in all material
respects as of such date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
- ------------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is know to me.
________________________________ _________________________________
Authorized Requester Phone #
________________________________ _________________________________
Received By (Bank) Phone #
____________________________________________
Authorized Signature (Bank)
- --------------------------------------------------------------------------------
24
<PAGE>
EXHIBIT C
---------
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Borrower: Corsair Communications, Inc. Lender: Silicon Valley Bank
Commitment Amount: $3,000,000
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as ______ $______________
2. Additions (please explain on reverse) $______________
3. TOTAL ACCOUNTS RECEIVALBE $______________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $__________________
5. Balance of 50% over 90 day accounts $__________________
6. Concentration Limits $__________________
7. Foreign Accounts $__________________
8. Governmental Accounts $__________________
9. Contra Accounts $__________________
10. Promotion or Demo Accounts $__________________
11. Intercompany/Employee Accounts $__________________
12. Other (please explain on reverse) $__________________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________________
14. Eligible Accounts (#3 minus #13) $__________________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $__________________
INVENTORY
16. Eligible Inventory as of _______________ $__________________
17. LOAN VALUE OF INVENTORY (25% of of #16, up
to $500,000)* $__________________
BALANCES
18. Maximum Loan Amount $3,000,000
19. Total Funds Available [Lesser of #18 or (#15 plus #17)] $__________________
20. Present balance owing on Line of Credit $__________________
21. RESERVE POSITION (#20 minus #21) $__________________
* Up to $1,000,000 if RFU Inventory Backlog > 100 units.
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the repreesntations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: -----------------------------------------------------
BANK USE ONLY
---- --- ----
Corsair Communications, Inc. Rec'd By:________________________________________
Auth. Signer
Date:____________________________________________
By:__________________________________ Verified:________________________________________
Authorized Signer Auth. Signer
Date:____________________________________________
_________________________________________________
-----------------------------------------------------
</TABLE>
25
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: CORSAIR COMMUNICATIONS, INC.
The undersigned authorized officer of Corsair Communications, Inc. hereby
certifies on behalf of the foregoing company that in accordance with the terms
and conditions of the Loan and Security Agreement between Borrower and the Bank
(the "Agreement"), (i) Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
- ------------------ -------- --------
<S> <C> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings, Backlog Monthly within 20 days Yes No
report/1/
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
- ------------------ -------- ------ --------
Maintain on a Monthly Basis: Yes No
Minimum Quick Ratio/2/ 1.0:1.0 _______:1.0 Yes No
Minimum Tangible Net $3,000,000/2/ $__________
Worth & Sub Debt
Profitability: Monthly Loss less than $1,500,000 $__________ Yes No
/1/ When Advances outstanding
/2/ Excludes deferred revenue
/3/ Plus 50% of equity
---------------------------------------------
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Sincerely, Received by:_______________________
AUTHORIZED SIGNER
- ------------------------------- Date:______________________________
SIGNATURE
Verified:__________________________
- ------------------------------- AUTHORIZED SIGNER
TITLE
Date:______________________________
- -------------------------------
DATE
Compliance Status: Yes No
---------------------------------------------
</TABLE>
26
<PAGE>
CORSAIR COMMUNICATIONS, INC.
SCHEDULE TO LOAN AND SECURITY AGREEMENT
1. "Permitted Indebtedness", clause (b): $1,000,000 Loan and Security
Agreement dated August 31, 1995 with Comdisco; and $1,000,000 and $500,000 lease
lines with Comdisco for purchasing capital equipment.
2. "Permitted Investments", clause (a): Two Promissory Notes, each dated
April 10, 1996, and each in the amount of $50,000, made by Martin Silver in
favor of Borrower.
3. Litigation Disclosure: Ronald H. Busch, Robert E. Hartmann, Michael B.
Powell, James M. Simmons, John Taylor, Sharen Blasquez-Guerra and Peter McCoy
(collectively, the "Plaintiffs") have filed a lawsuit in the superior court of
the state of California, county of San Francisco naming TRW, Inc., ESL
Incorporated and the Company as defendants. The claims contained in the
Plaintiffs' complaint related to their dismissal on or about the time at which
Corsair purchased the PhonePrint assets from ESL Incorporated. Only two of the
seven Plaintiffs were ever employed by Corsair, and Corsair is seeking
indemnification from TRW, Inc. with regard to this matter.
4. Disclosure re stored Inventory: Inventory is stored from time to time
with North American, 1710 Little Orchard Street, San Jose, California 95125 (a
division of North American Van Lines, Inc.).
<PAGE>
EXHIBIT 10.34
CORSAIR COMMUNICATIONS, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
_____________________
October 30, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purchase and Sale of Stock ............................................. 1
1.1 Sale and Issuance of Series C Preferred Stock .................... 1
1.2 Closing .......................................................... 1
2. Representations and Warranties of the Company .......................... 1
2.1 Organization, Good Standing and Qualification .................... 1
2.2 Capitalization and Voting Rights ................................. 2
2.3 Subsidiaries ..................................................... 2
2.4 Authorization .................................................... 2
2.5 Valid Issuance of Preferred and Common Stock ..................... 3
2.6 Governmental Consents ............................................ 3
2.7 Litigation ....................................................... 3
2.8 Compliance with Other Instruments ................................ 4
2.9 Agreements; Action ............................................... 4
2.10 Related-Party Transactions ....................................... 5
2.11 Permits .......................................................... 5
2.12 Disclosure ....................................................... 5
2.13 Minute Books ..................................................... 5
2.14 Labor Agreements and Actions ..................................... 5
2.15 Registration Rights .............................................. 6
2.16 Returns and Complaints ........................................... 6
2.17 Offering ......................................................... 6
2.18 Title to Property and Asset; Leases .............................. 6
2.19 Financial Statements ............................................. 6
2.20 Changes .......................................................... 7
2.21 Patents and Trademarks ........................................... 8
2.22 Manufacturing and Marketing Rights ............................... 9
2.23 Proprietary Information and Inventions Agreements ................ 9
2.24 Tax Returns, Payments, and Elections ............................. 9
2.25 Insurance ........................................................ 10
2.26 Environmental and Safety Laws .................................... 10
2.27 Section 83(b) Elections .......................................... 10
3. Representations and Warranties of the Investor ......................... 10
3.1 Authorization .................................................... 10
3.2 Purchase Entirely for Own Account ................................ 10
3.3 Disclosure of Information ........................................ 10
3.4 Investment Experience ............................................ 11
3.5 Accredited Investor .............................................. 11
3.6 Restricted Securities ............................................ 11
3.7 Further Limitations on Disposition ............................... 11
3.8 Legends .......................................................... 12
</TABLE>
(i)
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
4. California Commissioner of Corporations ................................ 12
4.1 Corporate Securities Law ......................................... 12
5. Conditions of Investor's Obligations at Closing ........................ 12
5.1 Representations and Warranties ................................... 12
5.2 Performance ...................................................... 13
5.3 Compliance Certificate ........................................... 13
5.4 Qualifications ................................................... 13
5.5 Proceedings and Documents......................................... 13
5.6 Opinion of Company Counsel........................................ 13
5.7 Investors' Rights Agreement....................................... 13
5.8 Directed Share Agreement.......................................... 13
5.9 Management Information Rights Letters............................. 13
6. Conditions of the Company's Obligations at Closing ..................... 13
6.1 Representations and Warranties ................................... 13
6.2 Payment of Purchase Price ........................................ 14
6.3 Qualifications ................................................... 14
7. Miscellaneous .......................................................... 14
7.1 Survival of Warranties ........................................... 14
7.2 Successors and Assigns ........................................... 14
7.3 Governing Law .................................................... 14
7.4 Counterparts ..................................................... 14
7.5 Titles and Subtitles ............................................. 14
7.6 Notices .......................................................... 14
7.7 Finder's Fee ..................................................... 15
7.8 Expenses ......................................................... 15
7.9 Amendments and Waivers ........................................... 15
7.10 Severability ..................................................... 15
7.11 Aggregation of Stock ............................................. 15
7.12 Entire Agreement ................................................. 16
SCHEDULE A - Schedule of Investors
EXHIBIT A - Certificate of Incorporation
EXHIBIT B - Amended and Restated Investors' Rights Agreement
EXHIBIT C - Directed Share Agreement
EXHIBIT D - Management Information Rights Letters
SCHEDULE OF EXCEPTIONS
</TABLE>
(ii)
<PAGE>
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made
as of the 30th day of October, 1996, by and between Corsair Communications,
Inc., a Delaware corporation (the "Company"), and the investors listed on
Schedule A hereto, each of which is herein referred to as an "Investor."
- ----------
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Issuance of Series C Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) the Amended and Restated
Certificate of Incorporation in the form attached hereto as Exhibit A.
---------
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally, to purchase at the Closing and the Company agrees to
sell and issue to each Investor at the Closing, that number of shares of the
Company's Series C Preferred Stock set forth opposite each Investor's name on
Schedule A hereto for the purchase price set forth thereon. Such purchase price
- ----------
shall be payable by Investor by delivery to Company by Investor of a check in
the amount of the purchase price set forth opposite such Investor's name on
Schedule A payable to the Company's order or by wire transfer of funds in such
- ----------
amount to the Company's designated bank account.
1.2 Closing. The purchase and sale of the Series C Preferred Stock
-------
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1200, San Diego, California at 11:00 A.M., on October 30, 1996, or
at such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series C Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to each
Investor a certificate representing the Series C Preferred Stock which such
Investor is purchasing against delivery to the Company by such Investor of the
purchase price in the form as set forth above in Section 1.1(b).
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions attached hereto, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its
<PAGE>
business as now conducted. The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
--------------------------------
Company consists, or will consist prior to the Closing, of:
(i) Preferred Stock. 14,148,963 shares of Preferred
---------------
Stock (the "Preferred Stock"), of which 8,120,000 shares have been designated
Series A Preferred Stock all of which are issued and outstanding, 2,228,963
shares of which have been designated Series B Preferred Stock of which 1,992,104
shares are issued and outstanding, and 3,800,000 shares of which have been
designated Series C Preferred Stock of which 3,637,273 shares will be sold
pursuant to this Agreement. The rights, privileges and preferences of the Series
C Preferred Stock will be as stated in the Company's Amended and Restated
Certificate of Incorporation attached hereto as Exhibit A.
---------
(ii) Common Stock. 20,000,000 shares of common stock
------------
("Common Stock"), 173,729 of which are currently issued and outstanding.
(iii) Except for (A) the conversion privileges of the
Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock to be issued under this Agreement, (B) the rights provided in
Section 2.4 of the Amended and Restated Investors' Rights Agreement of even date
herewith by and among the Company and certain investors (the "Investors' Rights
Agreement"), and (C) the rights provided in the Directed Share Agreement of even
date herewith by and among the Company and certain investors (the "Directed
Share Agreement"), there are not outstanding any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock; provided that
the Company has reserved 2,750,000 shares for issuance to employees, consultants
or directors of the Company pursuant to equity incentive agreements approved by
the Board of Directors. The Company is not a party or subject to any agreement
or understanding, and, to the Company's knowledge, there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company.
2.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement, the
Directed Share Agreement and any other agreement to which the Company is a
party, the execution and
-2-
<PAGE>
delivery of which is contemplated hereby (the "Ancillary Agreements"), the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance) and delivery of the Series
C Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion of the Series C Preferred Stock has been taken or will be taken prior
to the Closing, and this Agreement, the Investors' Rights Agreement, the
Directed Share Agreement and any Ancillary Agreements constitute valid and
legally binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series C
--------------------------------------------
Preferred Stock which is being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and, based in part upon the representations of the Investors in
this Agreement, will be issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion of the Series
C Preferred Stock purchased under this Agreement has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Amended and Restated Certificate of Incorporation, shall be duly and validly
issued, fully paid and nonassessable, and issued in compliance with all
applicable securities laws, as presently in effect, of the United States and
each of the states whose securities laws govern the issuance of any of the
Series C Preferred Stock hereunder.
2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, which filing will be effected within 15 days of the
sale of the Series C Preferred Stock hereunder.
2.7 Litigation. There is no action, suit, proceeding or
----------
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, the Investors' Rights Agreement, the
Directed Share Agreement or any Ancillary Agreements, or the right of the
Company to enter into any of them, or to consummate the transactions
contemplated hereby or thereby, or which might result, either individually or in
the aggregate, in any material adverse changes in the assets, condition, affairs
or prospects of the Company, financially or otherwise, or any change in the
current equity ownership of the Company, nor is the Company aware that there is
any basis for the foregoing. The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or
-3-
<PAGE>
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
2.8 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default of any provisions of its Amended and Restated Certificate
of Incorporation or Bylaws or of any instrument, judgment, order, writ, decree
or contract to which it is a party or by which it is bound or, to its knowledge,
of any provision of federal or state statute, rule or regulation applicable to
the Company. The execution, delivery and performance of this Agreement, the
Investors' Rights Agreement, the Directed Share Agreement or any Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization, or approval applicable to the Company, its business or operations
or any of its assets or properties.
2.9 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement, the Directed Share Agreement and any Ancillary
Agreements, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates, or any
affiliate thereof.
(b) The Company is not a party to any contract, agreement, lease,
commitment or proposed transaction, written or oral, absolute or contingent,
other than (i) contracts for the purchase of supplies and services that were
entered into in the ordinary course of business and that do not involve more
than $100,000, and do not extend for more than one (1) year beyond the date
hereof, (ii) sales contracts entered into in the ordinary course of business,
and (iii) contracts terminable at will by the Company on no more than thirty
(30) days notice without cost or liability to the Company and that do not
involve any employment or consulting arrangement and are not material to the
conduct of the Company's business. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and license
agreements and any other agreements relating to the acquisition or disposition
of the Company's technology, shall not be considered to be contracts entered
into in the ordinary course of business.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $100,000 or, in the case of
indebtedness and/or liabilities individually less than $100,000, in excess of
$300,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv)
-4-
<PAGE>
sold, exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
2.10 Related-Party Transactions. No employee, officer, or director of
--------------------------
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any material contract
with the Company.
2.11 Permits. The Company has all franchises, permits, licenses, and
-------
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.12 Disclosure. The Company has fully provided each Investor with
----------
all the information which such Investor has requested for deciding whether to
purchase the Series C Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement, the Directed Share
Agreement and any Ancillary Agreements, nor any other statements, certificates
or documents made or delivered in connection herewith or therewith, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
2.13 Minute Books. The minute books of the Company provided to the
------------
Investors contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
2.14 Labor Agreements and Actions. The Company is not bound by or
----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or
-5-
<PAGE>
oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the knowledge of the Company, has
sought to represent any of the employees, representatives or agents of the
Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, prospects or business of the Company (as such business is
presently conducted and as it is proposed to be conducted), nor is the Company
aware of any labor organization activity involving its employees. The Company
is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.15 Registration Rights. Except as provided in the Investors' Rights
-------------------
Agreement, the Company is not obligated to register under the Securities Act of
1933 ("Securities Act") any of its presently outstanding securities or any of
its securities that may subsequently be issued.
2.16 Returns and Complaints. The Company has received no customer
----------------------
complaints concerning alleged defects in the design of its products that, if
true, would materially adversely affect the operations, financial condition or
prospects of the Company.
2.17 Offering. Subject in part to the truth and accuracy of each
--------
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series C Preferred Stock as contemplated by this Agreement is
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.18 Title to Property and Assets; Leases. Except (a) as reflected in
------------------------------------
the Financial Statements (defined in Section 2.19), (b) for liens for current
taxes not yet delinquent, (c) for liens imposed by law and incurred in the
ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (d) for liens in respect of
pledges or deposits under workers' compensation laws or similar legislation, or
(e) for minor defects in title, none of which, individually or in the aggregate
materially interferes with the use of such property, the Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances. With respect to the property and assets it leases, the Company is
in compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances, subject to clauses
(a)-(e) above.
2.19 Financial Statements. The Company has delivered to each Investor
--------------------
its unaudited financial statements (balance sheet and profit and loss statement
including
-6-
<PAGE>
notes thereto) as at and for the nine-month period ended September 30, 1996 (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other, except that the
Financial Statements may not contain all footnotes required by generally
accepted accounting principles. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein, subject to normal year-end audit
adjustments. Except as set forth in the Financial Statements, the Company has
no material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to September 30, 1996 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate, are not material to the financial condition, operating results
or prospects of the Company. Except as disclosed in the Financial Statements,
the Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.20 Changes. To the best of the Company's knowledge, since September
-------
30, 1996, there has not been:
(a) Any change in the assets, liabilities, financial condition,
operating results or prospects of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) Any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) Any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(e) Any material change to a material contract or arrangement by
which the Company or any of its assets is bound or subject;
(f) Any material change in any compensation arrangement or
agreement with any employee, officer, director, or stockholder;
-7-
<PAGE>
(g) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(h) Any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(i) Receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
(j) Any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(k) Any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) Any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(m) Any other event or condition of any character that might
materially and adversely affect the business, properties, prospects or financial
condition of the Company (as such business is presently conducted and as it is
proposed to be conducted); or
(n) Any agreement or commitment by the Company to do any of the
things described in this Section 2.20.
2.21 Patents and Trademarks. To the best of its knowledge (but
----------------------
without having conducted any special investigation or patent search) the Company
owns or possesses sufficient legal rights to all patents, trademarks,
servicemarks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes necessary for its business as now conducted and
as proposed to be conducted without any conflict with or infringement of the
rights of others. The Schedule of Exceptions contains a complete list of
patents and pending patent applications of the Company. Except for agreements
with its own employees or consultants, substantially in the form referenced in
Section 2.23 below, there are no outstanding options, licenses, or agreements of
any kind relating to the foregoing, nor is the Company bound by or a party to
any options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names,
-8-
<PAGE>
copyrights, trade secrets or other proprietary rights of any other person or
entity nor is the Company aware of any basis therefor. The Company is not aware
that any of it employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's best efforts to promote the interests
of the Company or that would conflict with the Company's business as proposed to
be conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the best of the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
2.22 Manufacturing and Marketing Rights. The Company has not granted
----------------------------------
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person, and is not bound by any agreement that affects the
Company's exclusive right to develop, manufacture, assemble, distribute, market,
or sell its products.
2.23 Proprietary Information and Inventions Agreements. Each employee
-------------------------------------------------
and officer of the Company has executed a Proprietary Information and Inventions
Agreement substantially in the form or forms that have been delivered to special
counsel for the Investors.
2.24 Tax Returns, Payments, and Elections. The Company has filed all
------------------------------------
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The provision for
taxes of the Company as shown in the Financial Statements is adequate for taxes
due or accrued as of the date thereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended ("Code"), to be treated as an S
corporation or a collapsible corporation pursuant to Section 341(f) of Section
1362(a) of the Code, nor has it made any other elections pursuant to the Code
(other than elections which relate solely to methods of accounting, depreciation
or amortization) which would have a material effect on the business, properties,
prospects or financial condition of the Company. The Company has never had any
tax deficiency proposed or assessed against it and has not executed any waiver
of any statute of limitations on the assessment or collection of any tax or
governmental charge. None of the Company's federal income tax returns and none
of its state income or franchise tax or sales or use tax returns has ever been
audited by governmental authorities. Since the date of the Financial
Statements, the Company has made adequate provisions on its books of account for
all taxes, assessments and governmental charges with respect to its business,
properties and operations for such period. The Company has withheld or
collected from each payment made to each of its employees, the amount of all
taxes (including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes)
-9-
<PAGE>
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositaries.
2.25 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability insurance in amounts customary for companies similarly
situated.
2.26 Environmental and Safety Laws. To the best of its knowledge, the
-----------------------------
Company is not in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law, or regulation.
2.27 Section 83(b) Elections. To the best of the Company's knowledge,
-----------------------
all individuals who have purchased shares of the Company's Common Stock have
timely filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
3. Representations and Warranties of the Investor. Each Investor hereby
----------------------------------------------
represents and warrants that:
3.1 Authorization. This Agreement constitutes its valid and legally
-------------
binding obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series C Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has
full power and authority to enter into this Agreement.
3.3 Disclosure of Information. It believes it has received all the
-------------------------
information it considers necessary or appropriate for deciding whether to
purchase the Series C Preferred Stock. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series C Preferred
Stock. The foregoing, however,
-10-
<PAGE>
does not limit or modify the representations and warranties of the Company in
Section 2 of this Agreement or the right of the Investors to rely thereon.
3.4 Investment Experience. It is an investor in securities of
---------------------
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series C Preferred Stock.
3.5 Accredited Investor. It is an "accredited investor" within the
-------------------
meaning of SEC Rule 501 of Regulation D, as presently in effect. If other than
an individual, Investor also represents either (a) it has not been organized for
the purpose of acquiring the Series C Preferred Stock or (b) if it has been
organized for the purpose of acquiring the Series C Preferred Stock, that all
the equity owners of such entity are accredited investors.
3.6 Restricted Securities. It understands that the shares of Series
---------------------
C Preferred Stock it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act, only in certain limited circumstances. In this
connection, each Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series C Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3.7, provided and to the extent such section is then applicable,
the Investors' Rights Agreement, and any applicable Ancillary Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a
-11-
<PAGE>
retired partner of such partnership who retires after the date hereof, or to the
estate of any such partner or retired partner or the transfer by gift, will or
intestate succession of any partner to his spouse or to the siblings, lineal
descendants or ancestors of such partner or his spouse, or to an affiliate (as
such term is defined in SEC Rule 405) of such partnership, if the transferee
agrees in writing to be subject to the terms hereof to the same extent as if he
were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
-------
Series C Preferred Stock (and the Common Stock issuable upon conversion thereof)
may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by the laws of the State of Delaware or
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the Corporations Code of California.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. Conditions of Investor's Obligations at Closing. The obligations of
-----------------------------------------------
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
-12-
<PAGE>
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The President of the Company shall
----------------------
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since
September 30, 1996.
5.4 Qualifications. The Commissioner of Corporations of the State of
--------------
California shall have issued a permit qualifying the offer and sale of the
Series C Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification.
5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 Opinion of Company Counsel. Each Investor shall have received
--------------------------
from Brobeck, Phleger & Harrison, counsel for the Company, an opinion, dated as
of the Closing, in form and substance satisfactory to special counsel to the
Investors.
5.7 Investors' Rights Agreement. The Company and each Investor shall
---------------------------
have entered into the Investors' Rights Agreement, in the form attached hereto
as Exhibit B.
---------
5.8 Directed Share Agreement. The Company and each Investor shall
------------------------
have entered into the Directed Share Agreement, in the form attached hereto as
Exhibit C.
- ---------
5.9 Management Information Rights Letters. The Company shall have
-------------------------------------
delivered letters in the forms attached hereto as Exhibit D to Technology
---------
Crossover Ventures, L.P. and Technology Crossover Ventures, C.V., T. Rowe Price
Threshold Fund III, L.P., and UST Private Equity Investors Fund, Inc. granting
certain rights to obtain information about the Company.
6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing
-13-
<PAGE>
with the same effect as though such representations and warranties had been made
on and as of the Closing.
6.2 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
purchase price specified in Section 1.2.
6.3 Qualifications. The Commissioner of Corporations of the State of
--------------
California shall have issued a permit qualifying the offer and sale to the
Investor of the Series C Preferred Stock and the Common Stock issuable upon the
conversion thereof or such offer and sale shall be exempt from such
qualification.
7. Miscellaneous.
-------------
7.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Series C Preferred Stock sold hereunder or any
Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon (a) personal delivery to the party to be notified, (b)
upon telefacsimile transmission to the party to be notified at the telefacsimile
number indicated for such party on the signature page hereof, if any, or (c)
upon deposit with an overnight courier service or the United States Post Office,
by registered or certified mail, postage prepaid
-14-
<PAGE>
and addressed to the party to be notified at the address(es) indicated for such
party on the signature page hereof, or at such other address as such party may
designate by ten (10) days' advance written notice to the other parties.
7.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finder's fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected, the
--------
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of special counsel for the Investors (not to exceed $15,000) and shall,
upon receipt of a bill therefor, reimburse the out of pocket expenses of such
counsel. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement or the Amended and Restated Certificate of
Incorporation, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the Series
C Preferred Stock issued pursuant hereto. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company; provided, however, that no condition set
forth in Section 5 hereof may be waived with respect to any Investor who does
not consent thereto.
7.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Aggregation of Stock. All shares of the Series C Preferred Stock
--------------------
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
-15-
<PAGE>
7.12 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORSAIR COMMUNICATIONS, INC., a Delaware
corporation
By: /s/ Mary Ann Byrnes
------------------------------------
Mary Ann Byrnes, President
Address: 3408 Hillview Avenue
Palo Alto, CA 94304
INVESTORS:
UST PRIVATE EQUITY INVESTORS FUND, INC.
By: /s/ illegible
------------------------------------
Title: President & CEO
---------------------------------
Address: 114 West 47th Street
New York, NY 10036-1532
TECHNOLOGY CROSSOVER VENTURES, L.P.
By: /s/ Robert C. Bensky
------------------------------------
Title: Chief Financial Officer
---------------------------------
Technology Crossover Management, L.L.C.
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
TECHNOLOGY CROSSOVER VENTURES, C.V.
By: /s/ Robert C. Bensky
-------------------------------------
Title: Chief Financial Officer
----------------------------------
Technology Crossover Management, L.L.C.
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
ORCHID & CO., Nominee for
T. Rowe Price Threshold Fund III, L.P.
By: T. ROWE PRICE THRESHOLD
FUND ASSOCIATES, INC.,
General Partner
By: /s/ illegible
-------------------------------
Title: Vice President of Gen. Par.
----------------------------
Address: 100 East Pratt Street
Baltimore, MD 21202
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
Its: General Partner
By: /s/ illegible
--------------------------------
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
INTEGRAL CAPITAL PARTNERS
INTERNATIONAL II, C.V.
By: Integral Capital Management II,L.P.
Its: Investment General Partner
By: /s/ illegible
---------------------------------
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
COLUMBIA CAPITAL INVESTMENTS, LLC
By: /s/ Phil Herget
--------------------------------------
Title: Manager
-----------------------------------
Address: 201 N. Union Street, Suite 300
Alexandria, VA 22314
SPINNAKER TECHNOLOGY FUND, L.P.
By: Soundview Asset Management
General Partner
By: /s/ Lawrence A. Bowman
--------------------------------------
Title: President
-------------------------------
Address: 22 Gatehouse Road
P. O. Box 110236
Stamford, CT 06911-0236
KLEINER PERKINS CAUFIELD & BYERS VII, L.P.
By: /s/ Kevin Compton
--------------------------------------
Title: Partner
-----------------------------------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II, L.P.
By: /s/ Kevin Compton
--------------------------------
Title: Partner
-----------------------------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
ACCEL IV L.P.
By: Accel IV Associates, L.P.
Its: General Partner
By: /s/ G. Carter Sednaoui
----------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL INVESTORS '95 L.P.
By: /s/ G. Carter Sednaoui
--------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
ACCEL KEIRETSU L.P.
By: Accel Partners & Co. Inc.
Its: General Partner
By: /s/ G. Carter Sednaoui
---------------------------
Title: CFO
------------------------
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ELLMORE C. PATTERSON PARTNERS
By: /s/ illegible
---------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
NORWEST EQUITY PARTNERS V, a Minnesota Limited
Liability Partnership
By: Itasca Partners V, L.L.P.
Its: General Partner
By: /s/ Promod Haque
---------------------------
Title: Partner
------------------------
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301-1426
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By: /s/ John Jaggers
---------------------------
General Partner
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
ANDBACH VENTURES VI, L.P.
By: Andbach Capital Partners
Its: General Partner
By: /s/ illegible
--------------------------------
Title: Its Managing Partner
---------------------------
Address: 803 N. Church Street
Rockford, IL 61103
SOUNDVIEW FINANCIAL GROUP, GATEHOUSE PARTNERS, LLC
INC.
By: /s/ Kenny Tyler
Title: VP Finance By: /s/ Kenny Tyler
-------------------------------
22 Gatehouse Road Title: Financial Manager
-----------------------------
Stanford, CT 06902
Address: 22 Gatehouse Road
Stanford, CT 06902
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
Its: __________________________________________
By: /s/ John Michaelson
--------------------------------------
Title:____________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
NEEDHAM CAPITAL PARTNERS, L.P.
By: /s/ John Michaelson
----------------------------------
Title:________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By: /s/ John Michaelson
-----------------------------------
Title:_________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
HAMBRECHT & QUIST CALIFORNIA, a California
corporation
By: /s/ illegible
-----------------------------------
Title: CFO
--------------------------------
Address: One Bush Street
San Francisco, CA 94144
/s/ Eugene Eidenberg
---------------------------------------
EUGENE EIDENBERG
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
/s/ Christopher Sheeline
-----------------------------------------
CHRISTOPHER SHEELINE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
/s/ Rakesh Sood
-----------------------------------------
RAKESH SOOD
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
_________________________________________
JAMES ZANZE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
COMDISCO, INC.
By: /s/ Jill C. Hanses
--------------------------------------
Title: Assistant Vice President
-----------------------------------
Address: 6111 North River Road
Rosemont, IL 60018
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
DAVID H. RING CHARITABLE
REMAINDER UNITRUST UTA Dated 5/20/96
By: /s/ David H. Ring, Trustee
-------------------------------------
David H. Ring, Trustee
Address: 4140 23rd Street
San Francisco, CA 94114
TRAILHEAD VENTURES, L.P.
By: /s/ illegible
-------------------------------------
Title: General Partner
----------------------------------
Address: 5949 Sherry Lane, Suite 1450
Dallas, TX 75225
UMB BANK, N.A., as Trustee for Brobeck,
Phleger & Harrison Retirement Savings Trust
F/B/O John A.Denniston
By: /s/ illegible
-------------------------------------
Title: Assistant Trust Officer
----------------------------------
Address: UMB Bank, N.A.
P. O. Box 419692
Kansas City, MO 64141-6692
/s/ Michael S. Kagnoff
-----------------------------------------
MICHAEL S. KAGNOFF
Address: 8121 Camino Del Sol
La Jolla, CA 92307
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
/s/ Kevin J. McQuillan
------------------------------------
KEVIN J. McQUILLAN
Address: 345 Cervantes Road
Portola Valley, CA 94028
/s/ Jennifer Gill Roberts
------------------------------------
JENNIFER GILL ROBERTS
Address: 550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
/s/ Steven P. Bird
------------------------------------
STEVEN P. BIRD
Address: c/o Comdisco, Inc.
3000 Sand Hill Road
Bld. 1, Suite 290
Menlo Park, CA 94025
[SIGNATURE PAGE TO
SERIES C PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
---------------------
<TABLE>
<CAPTION>
Cash Purchase No. of
Name Price Shares
- -------------------------------------------------------------------- -------------- ---------
<S> <C> <C>
Kleiner Perkins Caufield & Byers VII, L.P. $ 975,001.50 177,273
KPCB Information Sciences Zaibatsu Fund II, L.P. $ 24,997.50 4,545
Sevin-Rosen Fund IV L.P. $ 499,999.50 90,909
UST Private Equity Investors Fund, Inc. $ 3,000,002.50 545,455
Orchid and Co., nominee for T. Rowe Price Threshold Fund III, L.P. $ 3,000,002.50 545,455
Spinnaker Technology Fund, L.P. $ 1,999,998.00 363,636
Andbach Ventures VI, L.P. $ 499,999.50 90,909
Trailhead Ventures, L.P. $ 999,999.00 181,818
Hambrecht & Quist California $ 205,001.50 37,273
Eugene Eidenberg $ 14,998.50 2,727
Christopher Sheeline $ 14,998.50 2,727
Rakesh Sood $ 9,999.00 1,818
James Zanze $ 4,999.50 909
Soundview Financial Group, Inc. $ 100,001.00 18,182
Gatehouse Partners, LLC $ 150,001.50 27,273
Columbia Capital Investments, LLC $ 999,999.00 181,818
Norwest Equity Partners V $ 1,709,999.50 310,909
Accel IV L.P. $ 915,997.50 166,545
Accel Investors '95 L.P. $ 42,999.00 7,818
Accel Keiretsu L.P. $ 19,002.50 3,455
Ellmore C. Patterson Partners $ 22,000.00 4,000
Needham Capital SBIC, L.P. $ 74,998.00 13,636
Needham Capital Partners, L.P. $ 175,004.50 31,819
Needham Emerging Growth Partners $ 250,002.50 45,455
Technology Crossover Ventures, L.P. $ 1,853,236.00 336,952
Technology Crossover Ventures, C.V. $ 146,762.00 26,684
Integral Capital Partners II, L.P. $ 1,472,625.00 267,750
Integral Capital Partners International II, C.V. $ 527,373.00 95,886
David H. Ring Charitable Remainder Unitrust UTA Dated 5/20/96 $ 50,000.50 9,091
Comdisco Inc. $ 200,002.00 36,364
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cash Purchase No. of
Name Price Shares
- -------------------------------------------------------------------- -------------- -------------
<S> <C> <C>
UMB Bank, N.A., as Trustee for Brobeck, Phleger & Harrison $ 9,999.00 1,818
Retirement Savings Trust F/B/O John A. Denniston
Michael S. Kagnoff $ 9,999.00 1,818
Kevin J. McQuillan $ 9,999.00 1,818
Jennifer Gill Roberts $ 9,999.00 1,818
Steve Bird $ 4,999.50 909
CLOSING TOTALS: $20,004,996.00 3,637,272
</TABLE>
Schedule A-2
<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------------
A-1
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995. An amended and restated Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on October 26, 1995 and was
amended pursuant to a Certificate of Amendment of Certificate of Incorporation
of the corporation filed with the Secretary of State of the State of Delaware on
December 18, 1995.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of at least a
majority of the outstanding shares in accordance with Section 228 thereof, and
written notice having been given in accordance with the requirements of such
Section. The Amended and Restated Certificate of Incorporation restates,
integrates and amends the provisions of the Certificate of Incorporation of this
corporation.
3. The Certificate of Incorporation of the corporation is hereby amended
and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Corsair Communications, Inc.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
<PAGE>
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
Thirty-Four Million One Hundred Forty-Eight Thousand Nine Hundred Sixty Three
(34,148,963) shares. Twenty Million (20,000,000) shares shall be Common Stock,
$.001 par value per share, and Fourteen Million One Hundred Forty-Eight Thousand
Nine Hundred Sixty Three (14,148,963) shares shall be Preferred Stock, $.001 par
value per share, of which Eight Million One Hundred Twenty Thousand (8,120,000)
shares shall be Series A Preferred Stock, Two Million Two Hundred Twenty-Eight
Thousand Nine Hundred Sixty Three (2,228,963) shares shall be Series B Preferred
Stock and Three Million Eight Hundred Thousand (3,800,000) shares shall be
Series C Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall be entitled to receive
dividends, out of any assets legally available therefor, prior and in preference
to any declaration or payment of any dividend (payable other than in Common
Stock or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock of
this corporation) on the Common Stock of this corporation, at the rate of $0.10
per share of Series A Preferred Stock per annum, $0.22 per share of Series B
Preferred Stock per annum, and $0.275 per share of Series C Preferred Stock per
annum (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) payable when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative. No cash dividend
shall be declared or paid with respect to the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock unless at the same time a like
proportionate cash dividend for the same dividend period, ratably in proportion
to the respective annual dividend rates set forth above, is declared and paid
with respect to Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to
-2-
<PAGE>
purchase any such securities or evidences of indebtedness, then, in each case
the holders of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock were the holders of the number of
shares of Common Stock of this corporation into which their respective shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of this corporation entitled to receive such distribution.
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series C
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Series A
Preferred Stock, Series B Preferred Stock or Common Stock by reason of their
ownership thereof, an amount per share equal to the sum of (i) $5.50 for each
outstanding share of Series C Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series C Issue
Price"), and (ii) an amount equal to declared but unpaid dividends on such
shares of Series C Preferred Stock. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of Series C Preferred Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then, the entire assets and funds of the
corporation legally available for distribution shall be distributed ratably
among the holders of Series C Preferred Stock in proportion to the amount of
such stock owned by each such holder.
b. After the distribution described in subsection (a) above has
been paid, the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets of this corporation to the holders of Common Stock by reason of
their ownership thereof, an amount per share equal to the sum of (i) $2.00 for
each outstanding share of Series A Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series A Issue
Price"), (ii) $4.43 for each outstanding share of Series B Preferred Stock
(subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations and hereafter referred to as the
"Original Series B Issue Price"), and (iii) an amount equal to declared but
unpaid dividends on such shares of Series A Preferred Stock or Series B
Preferred Stock as applicable. If upon the occurrence of such event, and after
the distribution described in subsection (a) above has been paid, the assets and
funds thus distributed among the holders of Series A Preferred Stock and the
Series B Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then, the entire assets and
funds of the corporation legally available for distribution shall be distributed
ratably among the holders of Series A Preferred Stock and Series B Preferred
Stock in proportion to the
-3-
<PAGE>
aggregate liquidation preferences of the respective series, and ratably among
the holders of each series in proportion to the amount of such stock owned by
each such holder.
c. After the distributions described in subsections (a) and (b)
above have been paid, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common
Stock pro rata based on the number of shares of Common Stock held by each
(assuming conversion of all such Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock).
d. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement, the issuance of Series B Preferred Stock
pursuant to the Series B Preferred Stock Purchase Agreement and the issuance of
Series C Preferred Stock pursuant to the Series C Preferred Stock Purchase
Agreement), shall be deemed to be a liquidation, dissolution or winding up
within the meaning of this Section 2.
3. Conversion. The holders of the Series A Preferred Stock, Series
----------
B Preferred Stock and Series C Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
a. Right to Convert.
----------------
(i) Subject to subsection (c), each share of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of this corporation or any transfer agent
for the particular series of Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (A) the
Original Series A Issue Price for each share of Series A Preferred Stock, (B)
the Original Series B Issue Price for each share of Series B Preferred Stock and
(C) the Original Series C Issue Price for each share of Series C Preferred
Stock, plus all declared but unpaid dividends thereon for each share of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, by the
Conversion Price at the time in effect for such share. The initial Conversion
Price per share for shares of Series A Preferred Stock shall be the Original
Series A Issue Price, the initial Conversion Price per share for shares of
Series B Preferred Stock shall be the Original Series B Issue Price and the
initial Conversion Price per share for shares of Series C Preferred Stock shall
be the Original Series C Issue Price; provided, however, that the Conversion
Price for the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock shall be subject to adjustment as set forth in subsection 3(c).
-4-
<PAGE>
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $15,000,000 in the aggregate or (B) the date upon which
the corporation obtains the written consent of the holders of a majority of the
then outstanding shares of Series A Preferred Stock and Series B Preferred Stock
voting together as a single class on an as converted basis.
(iii) Each share of Series C Preferred Stock shall automatically
be converted into shares of Common Stock at the Conversion Price at the time in
effect for such shares immediately upon the earlier of (A) the consummation of
the corporation's sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), the public offering price of which was
not less than $10.00 per share (subject to appropriate adjustments for stock
splits, stock dividends, combinations or other recapitalizations) and
$15,000,000 in the aggregate or (B) the date upon which the corporation obtains
the written consent of the holders of a majority of the then outstanding shares
of Series C Preferred Stock.
b. Mechanics of Conversion. Before any holder of Series A Preferred
-----------------------
Stock, Series B Preferred Stock or Series C Preferred Stock shall be entitled to
convert the same into shares of Common Stock, he shall surrender the certificate
or certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the particular series of Preferred Stock, and shall give
written notice by mail, postage prepaid, to this corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock, or to
the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of Series A
Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offer of securities registered
pursuant to the Securities Act, the conversion may, at the option of any holder
tendering Series A Preferred Stock, Series B Preferred Stock and/or Series C
Preferred Stock for conversion, be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive the Common Stock issuable upon such conversion
of the
-5-
<PAGE>
Series A Preferred Stock, Series B Preferred Stock and/or Series C Preferred
Stock shall not be deemed to have converted such Series A Preferred Stock,
Series B Preferred Stock and/or Series C Preferred Stock until immediately prior
to the closing of such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Prices of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) A. If the corporation shall issue any Additional
Stock (as defined below) without consideration or for a consideration per share
less than the Conversion Price for the Series A Preferred Stock, the Conversion
Price for the Series B Preferred Stock or the Conversion Price for the Series C
Preferred Stock in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price for the Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, as the case may be, in effect immediately
prior to each such issuance shall forthwith (except as otherwise provided in
this clause (i)) be adjusted to a price equal to the quotient obtained by
dividing the total computed under clause (x) below by the total computed under
clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock sold pursuant to the applicable agreements
pursuant to which such shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, as the case may be, are
first issued (the "Stock Purchase Agreements"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the dates of the applicable Stock Purchase Agreements (the
"Purchase Date") other than shares of Common Stock issued or issuable
with respect to the Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock sold pursuant to the applicable Stock
Purchase Agreements divided by the applicable Conversion Price for
such shares in effect at the applicable Purchase Date (or such higher
or lower Conversion Price for such series as results from the
application of subsections 3(c)(iii) and (iv) and assuming that this
Certificate was in effect as of the applicable Purchase Date) plus
-6-
<PAGE>
(2) the number of shares of Additional Stock
issued since the applicable Purchase Date (increased or decreased to
the extent that the number of such shares of Additional Stock shall
have been increased or decreased as the result of the application of
subsections 3(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
shall be made in an amount less than one cent per share, provided that any
adjustments which are not required to be made by reason of this sentence shall
be carried forward and shall be either taken into account in any subsequent
adjustment made prior to 3 years from the date of the event giving rise to the
adjustment being carried forward, or shall be made at the end of 3 years from
the date of the event giving rise to the adjustment being carried forward.
Except to the limited extent provided for in subsections (E)(3) and (E)(4), no
adjustment of such Conversion Price pursuant to this subsection 3(c)(i) shall
have the effect of increasing the Conversion Price above the Conversion Price in
effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subsections 3(c)(i)(C) and (c)(i)(D)), if any, received by
the corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
-7-
<PAGE>
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 3(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the applicable Conversion Price of
the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, as applicable, and to the extent in any way affected
by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be
made for the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, as applicable, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related
to such securities, shall be recomputed to reflect the issuance of
only the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon
the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or
rights related to such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 3(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect
-8-
<PAGE>
any change, termination or expiration of the type described in either
subsection 3(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by this corporation before, on or after the applicable Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 3(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
shares of Series A Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly or
pursuant to a stock option plan or agreement or restricted stock plan
or agreement approved by the Board of Directors of this corporation,
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock will be converted to Common Stock or (II)
upon exercise of warrants or rights granted to underwriters in
connection with such a public offering,
E. shares of Series B Preferred Stock issued or
issuable to Comdisco, Inc. pursuant to Warrants dated August 31, 1995,
July 31, 1996, and August 5, 1996, or
F. shares of Series B Preferred Stock issued or
issuable to MMC/GATX PARTNERSHIP NO. 1 pursuant to a Warrant dated
July 31, 1996.
(iii) In the event the corporation should at any time
or from time to time after the applicable Purchase Date fix a record date for
the effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of the Series A Preferred Stock, Series B
-9-
<PAGE>
Preferred Stock and Series C Preferred Stock then in effect shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at
any time after the applicable Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock then in effect shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of the corporation
into which their shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the corporation entitled to
receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision
or a combination provided for elsewhere in this Section 3) provision shall be
made so that the holders of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock, respectively, the number of shares of stock or other
securities or property of the Company or otherwise, to which a holder of Common
Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3 with respect to the rights of
the holders of the Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect and
the number of shares issuable upon conversion of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock) shall be applicable after
that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of
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<PAGE>
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by this corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
against impairment.
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon conversion of
the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, and the number of shares of Common Stock to be issued shall be rounded up
to the nearest whole share. The number of shares of Common Stock issuable upon
such conversion shall be determined on the basis of the total number of shares
of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock the holder is at the time converting into Common Stock.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock pursuant to this Section 3, this corporation, at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. This
corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (A)
such adjustment and readjustment, (B) the Conversion Price at the time in
effect, and (C) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of a
share of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock at least 20 days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but
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<PAGE>
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, in addition to such other remedies
as shall be available to the holder of such Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, this corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this corporation.
4. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of
---------------------
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
could then be converted (with any fractional share determined on an aggregate
conversion basis being rounded to the nearest whole share), and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the Bylaws of this corporation, and shall be entitled to vote,
together as a single class with holders of Common Stock, with respect to any
question upon which holders of Common Stock have the right to vote; except for
the election of directors.
b. Election of Directors. The authorized number of
---------------------
directors of this Corporation shall be seven (7). Notwithstanding 4(a) above,
the holders of Series A Preferred Stock, voting as a separate class, shall be
entitled to elect four (4) directors of the corporation; and the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Common Stock, voting together as a single class on an as converted basis, shall
be entitled to elect three (3) directors of the corporation. At any meeting
held for the purpose of electing directors, the presence in person or by proxy
of the holders of a majority of the Series A Preferred Stock then outstanding
shall constitute a quorum of the Series A Preferred Stock for the election of
directors to be elected solely by the holders of Series A Preferred Stock. At
any meeting held for the purpose of electing directors, the presence in person
or by proxy of the holders of a
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<PAGE>
majority of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Common Stock then outstanding, on an as converted basis,
shall constitute a quorum of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Common Stock for the election of directors
to be elected solely by the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Common Stock, voting together as a
single class on an as converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock; and a vacancy in any directorship elected
by the holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Common Stock voting together shall be filled only by the
vote of the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Common Stock voting together as provided above.
5. Protective Provisions.
---------------------
a. Preferred Stock. So long as shares of Series A Preferred
---------------
Stock, Series B Preferred Stock and/or Series C Preferred Stock are outstanding,
this corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of a majority of the then
outstanding shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, voting together as a single class on an as converted
basis:
i) sell, convey, or otherwise dispose of or encumber all
or substantially all of its property or business or merge into or consolidate
with any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
ii) alter or change the rights, preferences or privileges
of the shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock;
iii) increase the authorized number of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Common
Stock;
iv) create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock, Series
B Preferred Stock or Series C Preferred Stock with respect to voting, dividends,
conversion rights or upon liquidation, or (ii) having rights similar to any of
the rights of the Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock under this Section 5;
v) pay any dividend to the holders of Common Stock; or
vi) change the authorized number of directors from seven
(7).
-13-
<PAGE>
b. Series C Preferred Stock. So long as shares of Series C
------------------------
Preferred Stock are outstanding, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of a majority of the then outstanding shares of Series C Preferred Stock
alter or change the rights, preferences or privileges of the shares of Series C
Preferred Stock so as to adversely affect the shares or the holders thereof.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such
-14-
<PAGE>
agents or other persons, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 145 of the Delaware General Corporation Law, subject only to limits
created by applicable Delaware law (statutory or non-statutory), with respect to
actions for breach of duty to the Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The corporation shall have a perpetual existence.
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the Bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been signed under the seal of this corporation as of this 28th day of
October, 1996.
CORSAIR COMMUNICATIONS, INC.
By: _____________________________________________
Mary Ann Byrnes, President
ATTEST:
_____________________________
Martin Silver, Secretary
<PAGE>
EXHIBIT B
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------------
B-1
<PAGE>
CORSAIR COMMUNICATIONS, INC.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
_____________
October 30, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Registration Rights..................................... 1
1.1 Definitions 1
1.2 Request for Registration.......................... 2
1.3 Company Registration.............................. 3
1.4 Obligations of the Company........................ 4
1.5 Furnish Information............................... 5
1.6 Expenses of Demand Registration................... 5
1.7 Expenses of Company Registration.................. 6
1.8 Underwriting Requirements......................... 6
1.9 Delay of Registration............................. 6
1.10 Indemnification................................... 7
1.11 Reports Under Securities Exchange Act of 1934..... 9
1.12 Form S-3 Registration............................. 9
1.13 Assignment of Registration Rights................. 10
1.14 Limitations on Subsequent Registration Rights..... 11
1.15 "Market Stand-Off" Agreement...................... 11
1.16 Termination of Registration Rights................ 12
2. Covenants of the Company................................ 12
2.1 Delivery of Financial Statements.................. 12
2.2 Inspection........................................ 13
2.3 Termination of Information and Inspection
Covenants........................................ 13
2.4 Right of First Offer.............................. 13
2.5 Management Stock.................................. 15
3. Miscellaneous........................................... 15
3.1 Successors and Assigns............................ 15
3.2 Governing Law..................................... 16
3.3 Counterparts...................................... 16
3.4 Titles and Subtitles.............................. 16
3.5 Notices........................................... 16
3.6 Expenses.......................................... 16
3.7 Amendments and Waivers............................ 16
3.8 Severability...................................... 16
3.9 Aggregation of Stock.............................. 17
3.10 Entire Agreement.................................. 17
</TABLE>
(i)
<PAGE>
AMENDED AND RESTATED
--------------------
INVESTORS' RIGHTS AGREEMENT
---------------------------
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT ("Agreement"), dated
as of October 30, 1996, is among Corsair Communications, Inc., a Delaware
corporation (the "Company"), and the investors listed on the signature page,
each of which is herein referred to as an "Investor."
WHEREAS, the Company and certain of the Investors are parties to the Series
C Preferred Stock Purchase Agreement of even date herewith (the "Series C
Agreement");
WHEREAS, certain of the Investors are presently holders of the Company's
Series A Preferred Stock and/or Series B Preferred Stock and pursuant thereto
have entered into an Investors' Rights Agreement with the Company dated December
10, 1994, as previously amended (the "Rights Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series C
Agreement and to induce certain Investors to invest funds in the Company
pursuant to the Series C Agreement, all the Investors and the Company wish to
amend and restate the Rights Agreement so that this Agreement will govern the
rights of all the Investors to cause the Company to register shares of the
Company's common stock ("Common Stock") issuable to any Investors upon
conversion of their respective shares of the Company's Preferred Stock, and
certain other matters as set forth in this Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "register", "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(c) The term "Registrable Securities" means (1) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, Series B
Preferred Stock and/or Series C Preferred Stock and (2) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such Series A
Preferred Stock, Series B Preferred
<PAGE>
Stock or Series C Preferred Stock (or the Common Stock issued upon conversion
thereof), excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which his rights under this Section 1 are not
assigned;
(d) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(e) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof; and
(f) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier
of (i) December 10, 1998 or (ii) six (6) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction), a written request from the Holders
of at least thirty-three percent (33%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act where
the anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $2,500,000, then the Company shall, within ten (10)
days of the receipt thereof, give written notice of such request to all Holders
and shall, subject to the limitations of subsection 1.2(b), effect as soon as
practicable, and in any event within 60 days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered within twenty (20) days of the mailing of such notice
by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable
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<PAGE>
Securities in the underwriting (unless otherwise mutually agreed by a majority
in interest of the Initiating Holders and such Holder) to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company as provided in subsection 1.4(e))
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders. Notwithstanding any other provision of this Section 1.2, if
the underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 60 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve month period.
1.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration on Form S-4),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with Section
3.5, the Company shall, subject to the provisions of Section 1.8, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
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<PAGE>
1.4 Obligations of the Company. Whenever required under this Section
--------------------------
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Use its best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Section
1, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
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<PAGE>
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
reasonable and necessary to effect the registration of such Holder's Registrable
Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 1.2 or Section 1.12
whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses on
a pro rata basis), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 1.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2.
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<PAGE>
1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event shall (i) the amount of securities
of the selling Holders included in the offering be reduced below thirty percent
(30%) of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities in which
case the selling stockholders may be excluded if the underwriters make the
determination described above and no other stockholder's securities are included
or (ii) notwithstanding (i) above, any shares being sold by a stockholder
exercising a demand registration right similar to that granted in Section 1.2 be
excluded from such offering. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
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<PAGE>
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, each of its officers and directors and general
partners, any underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, or any rule or regulation
promulgated under the Act, or the 1934 Act; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld or delayed), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if
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<PAGE>
such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this subsection 1.10(b) exceed the proceeds (net of underwriting
discount but before deducting expenses) received by such Holder from the
offering.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
<PAGE>
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from a
---------------------
Holder, or Holders, a written request, or requests, that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, and the anticipated aggregate offering price to the public, net of
underwriting discounts and commissions, would exceed $1,000,000, the Company
will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
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<PAGE>
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Company
shall furnish to the Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 60 days after receipt of the request of
the Holder or Holders under this Section 1.12; provided, however, that the
Company shall not utilize this right more than once in any twelve month period;
(3) if any Holder or Holders have requested a registration pursuant to this
Section 1.12 two or more times during the current calendar year in which such
request is made, or (4) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration. Registrations effected pursuant to
this Section 1.12 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are (a) partners or retired
partners of
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<PAGE>
such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) or (b) affiliates of such partnership (as such
term is defined in SEC Rule 405) shall be aggregated together with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single attorney-
in-fact for the purpose of exercising any rights, receiving notices or taking
any action under this Section 1.
1.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 or 1.3
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which are included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
----------------------------
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any Registrable Securities of
the Company held by it at any time during such period except common stock
included in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements; and
(c) such market stand-off time period shall not exceed 180 days,
provided, however, that the market stand-off time period shall expire
immediately upon the underwriters of the Company's initial public offering
providing any discretionary waiver or termination of the restrictions contained
in the lock-up agreements between the underwriters and the officers, directors
and stockholders without waiving or
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<PAGE>
terminating such restrictions, on a pro rata basis, as to all persons subject to
such lock-up agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 1 after five (5) years
following the consummation of the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of stockholders'
equity as of the end of such year, and a schedule as to the sources and
applications of funds for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("gaap"), and audited and certified by independent public accountants
of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited profit or loss statement, schedule as to the
sources and application of funds for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter.
(c) within thirty (30) days of the end of each month, an
unaudited income statement and schedule as to the sources and application of
funds and balance sheet for and as of the end of such month, in reasonable
detail;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including balance sheets and sources
and applications of funds statements for such months and, as soon as prepared,
any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial
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<PAGE>
Officer or President of the Company and certifying that such financials were
prepared in accordance with gaap consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by gaap)
and fairly present the financial condition of the Company and its results of
operation for the period specified, subject to year-end audit adjustment;
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated under this subsection (f) or any other
subsection of Section 2.1 to provide information which it deems in good faith to
be a trade secret or similar confidential information.
2.2 Inspection. The Company shall permit each Investor, at such
----------
Investor's expense, as the case may be, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Investor; provided, however, that
the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
2.3 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in Sections 2.1 and 2.2 shall terminate as to Investors and
be of no further force or effect when the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.
2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined). For purposes of this
Section 2.4, a Major Investor shall mean (a) any Investor who holds at least (i)
10% of the original investment such Investor made in the Company pursuant to
that certain Series A Preferred Stock Purchase Agreement dated December 10, 1994
(the "Series A Agreement"), (ii) 10% of the original investment such Investor
made in the Company pursuant to that certain Series B Preferred Stock Purchase
Agreement dated October 31, 1995 (the "Series B Agreement"), or (iii) 10% of the
original investment such Investor makes in the Company pursuant to the Series C
Agreement and (b) any person who acquired or will acquire at least (i) 10% of
the Series A Preferred Stock (or the common stock issued upon conversion
thereof) issued pursuant to the Series A Agreement, (ii) 10% of the Series B
Preferred Stock (or Common Stock issued upon conversion thereof) issued pursuant
to the Series B Agreement or (iii) 10% of the Series C Preferred Stock (or the
common stock issued upon conversion thereof) issued pursuant to the Series C
Agreement. For purposes of this Section 2.4, an Investor includes any general
partners
-13-
<PAGE>
and affiliates of an Investor. An Investor shall be entitled to apportion the
right of first offer hereby granted it among itself and its partners and
affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice") to
the Major Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, each Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of common stock issued and held, or
issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock and/or Series C Preferred Stock then held, by such Major Investor bears to
the total number of shares of common stock of the Company then outstanding
(assuming full conversion and exercise of all convertible or exercisable
securities). The Company shall promptly, in writing, inform each Major Investor
which purchases all the shares available to it ("Fully-Exercising Investor") of
any other Major Investor's failure to do likewise. During the ten-day period
commencing after receipt of such information is given, each Fully-Exercising
Investor shall be entitled to obtain that portion of the Shares not subscribed
for by the Major Investors which is equal to the proportion that the number of
shares of common stock issued and held, or issuable upon conversion of Series A
Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock then
held by such Fully-Exercising Investor bears to the total number of shares of
common stock issued and held, or issuable upon conversion of the Series A
Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock then
held, by all Fully-Exercising Investors who wish to purchase some of the
unsubscribed shares.
(c) If all Shares that Investors are entitled to obtain pursuant to
subsection 2.4(b) are not elected to be obtained as provided in subsection
2.4(b) hereof, the Company may, during the 60-day period following the
expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such period, or if such agreement is not
consummated within 60 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
-14-
<PAGE>
(d) The right of first offer in this paragraph 2.4 shall not be
applicable: (i) to the issuance or sale of common stock (or options therefor) to
employees, consultants and directors, directly or pursuant to a stock option
plan or agreement or restricted stock plan or agreement approved by the Board of
Directors of this Company, provided each employee executes an agreement
containing the provisions set forth in Section 2.5(b) hereof, (ii) to or after
consummation of a bona fide, firmly underwritten public offering of shares of
common stock, registered under the Act pursuant to a registration statement on
Form S-1, at an offering price of at least $10.00 per share (appropriately
adjusted for any stock split, dividend, combination or other recapitalization)
and $15,000,000 in the aggregate, (iii) to the issuance of securities pursuant
to the conversion or exercise of convertible or exercisable securities, (iv) to
the issuance of securities in connection with a bona fide business acquisition
of or by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise or (v) to the issuance of stock, warrants or
other securities or rights to persons or entities with which the Company has
business relationships, provided such issuances are for other than primarily
equity financing purposes.
2.5 Management Stock.
----------------
(a) Employee Reserve. A pool of 2,750,000 shares of the
----------------
Company's Common Stock shall be reserved for purchase or incentive grants to
employees, consultants, directors or officers under those incentive and non-
qualified stock purchase or stock option plans or agreements ("Employee
Reserve").
(b) Vesting and Restrictions on Transfer. The shares or options
------------------------------------
issued from the Employee Reserve provided for in Section 2.5 shall vest
following the grant or issuance of such shares or options, as follows: 25% shall
vest after an initial 12-month cliff period and the remainder shall vest in
equal monthly installments over the next thirty-six (36) months following the
cliff period, as approved by the Company's Board of Directors. The Company
shall have a repurchase option at cost with respect to unvested shares.
Unvested shares may not be transferred. The Company shall have a right of first
refusal on vested shares until such time that the Company consummates an initial
public offering. The shares shall be subject to a market stand-off agreement
for a period of up to 180 days in connection with stock offerings by the
Company.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
-15-
<PAGE>
3.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon (a) personal delivery to the party to be notified, (b)
upon telefacsimile transmission to the party to be notified at the telefacsimile
number indicated for such party on the signature page hereof, if any, or (c)
upon deposit with an overnight courier service or the United States Post Office,
by registered or certified mail, postage prepaid and addressed to the party to
be notified at the address(es) indicated for such party on the signature page
hereof, or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties.
3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding, provided, however,
that any amendment or waiver of any term of this Agreement that would adversely
affect the rights, preferences or privileges of the holders of the Series C
Preferred Stock (or the Common Stock issued upon conversion thereof) in a manner
quantitatively disproportionately or qualitatively dissimilar to the effect on
the rights, preferences or privileges of the holders of other Registrable
Securities shall require the written consent of the holders of a majority of the
Series C Preferred Stock (on an as-converted basis) and any Common Stock issued
upon conversion thereof then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this
-16-
<PAGE>
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.10 Entire Agreement. This Agreement (including the Exhibits hereto,
----------------
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORSAIR COMMUNICATIONS, INC., a Delaware
corporation
By:______________________________________
Mary Ann Byrnes, President
Address: 3408 Hillview Avenue
Palo Alto, CA 94304
INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII, L.P.
By:______________________________________
Title:___________________________________
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By:________________________________
General Partner
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
By:______________________________________
Title:___________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
NORWEST EQUITY PARTNERS IV, a
Minnesota Limited Partnership
By: Itasca Partners
Its: General Partner
By:________________________________
Title: Partner
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
NORWEST EQUITY PARTNERS, V, a Minnesota Limited
Liability Partnership
By: Itasca Partners V, L.L.P.
Its: General Partner
By:________________________________
Title: Partner
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
Its: ____________________________________________
By:_________________________________________
Title:______________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM CAPITAL PARTNERS, L.P.
By:_______________________________________________
Title:____________________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By:_______________________________________________
Title:____________________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its: General Partner
By:_________________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL INVESTORS '95 L.P.
By:_______________________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL KEIRETSU L.P.
By: Accel Partners & Co. Inc.
Its: General Partner
By:_________________________________________
Title:______________________________________
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ELLMORE C. PATTERSON PARTNERS
By:______________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
TECHNOLOGY CROSSOVER VENTURES, L.P.
By:______________________________________
Title:___________________________________
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
TECHNOLOGY CROSSOVER VENTURES, C.V.
By:______________________________________
Title:___________________________________
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
Its: General Partner
By:________________________________
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
INTEGRAL CAPITAL PARTNERS INTERNATIONAL II, C.V.
By: Integral Capital Management II, L.P.
Its: Investment General Partner
By:________________________________
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
KPCB INFORMATION SCIENCES ZAIBATSU FUND II, L.P.
By:______________________________________
Title:___________________________________
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
DAVID H. RING CHARITABLE
REMAINDER UNITRUST UTA Dated 5/20/96
By:______________________________________
David H. Ring, Trustee
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
UST PRIVATE EQUITY INVESTORS FUND, INC.
By:______________________________________
Title:___________________________________
Address: 114 West 47th Street
New York, NY 10036-1532
ORCHID AND CO., Nominee for
T. Rowe Price Threshold Fund III, L.P.
By: T. ROWE PRICE THRESHOLD FUND ASSOCIATES,
INC.,
General Partner
By:________________________________
Title:_____________________________
Address: 100 East Pratt Street
Baltimore, MD 21202
COLUMBIA CAPITAL INVESTMENTS, LLC
By:______________________________________
Title:___________________________________
Address: 201 N. Union Street, Suite 300
Alexandria, VA 22314
SPINNAKER FUND
By:______________________________________
Title:___________________________________
Address: 22 Gatehouse Road
P. O. Box 110236
Stamford, CT 06911-0236
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ANDBACH VENTURES VI, L.P.
By:______________________________________
Title:___________________________________
Address: 803 N. Church Street
Rockford, IL 61103
TRAILHEAD VENTURES, L.P.
By:______________________________________
Title:___________________________________
Address: 5949 Sherry Lane, Suite 1450
Dallas, TX 75225
SOUNDVIEW PARTNERS
By:______________________________________
Title:___________________________________
Address: Two Embarcadero Center
Suite 1655
San Francisco, CA 94111
HAMBRECHT & QUIST CALIFORNIA, a California
corporation
By:______________________________________
Title:___________________________________
Address: One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
_________________________________________
EUGENE EIDENBERG
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
_________________________________________
CHRISTOPHER SHEELINE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
_________________________________________
RAKESH SOOD
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
_________________________________________
JAMES ZANZE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
_________________________________________
COMDISCO, INC.
By:______________________________________
Title:___________________________________
Address: 6111 North River Road
Rosemont, IL 60018
UMB BANK, N.A., as Trustee for Brobeck,
Phleger & Harrison Retirement Savings Trust
F/B/O John A. Denniston
By:______________________________________
Title:___________________________________
Address: UMB Bank, N.A.
P.O. Box 419692
Kansas City, MO 64141-6692
_________________________________________
MICHAEL S. KAGNOFF
Address: 8121 Camino Del Sol
La Jolla, CA 92307
_________________________________________
KEVIN J. McQUILLAN
Address: 345 Cervantes Road
Portola Valley, CA 94028
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
_________________________________________
JENNIFER GILL ROBERTS
Address: 550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
_________________________________________
STEVE BIRD
Address: c/o Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
KPCB VII FOUNDERS FUND
By:______________________________________
Title:___________________________________
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
TRW, INC.
By:______________________________________
Title:___________________________________
Address: 1 Federal System Park Dr., FP2-3287
Fairfax, VA 22033-4411
Attn: Roland Robertson
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
______________________________
DAVID H. RING
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT C
DIRECTED SHARE AGREEMENT
------------------------
C-1
<PAGE>
CORSAIR COMMUNICATIONS, INC.
DIRECTED SHARE AGREEMENT
THIS DIRECTED SHARE AGREEMENT ("Agreement") is made as of the 30th day of
October, 1996 by and among Corsair Communications, Inc., a Delaware corporation
(the "Company"), and each of the Investors listed on Exhibit A hereto (each
---------
individually, an "Investor" and collectively, the "Investors").
WHEREAS, the Company desires to sell and issue to the Investors and the
Investors desire to purchase from the Company, shares of the Company's Series C
Preferred Stock pursuant to a certain Series C Preferred Stock Purchase
Agreement dated of even date herewith (the "Series C Agreement").
WHEREAS, the Company wishes to provide a further inducement to the
Investors to purchase shares of the Company's Series C Preferred Stock pursuant
to the terms of the Series C Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
I. RIGHT TO ACQUIRE DIRECTED SHARES.
--------------------------------
(a) In a timely manner, upon selecting a managing underwriter or a group
of managing underwriters (collectively, the "Underwriters") to conduct an
initial public offering ("IPO") of the Company's Common Stock, the Company shall
request that the Underwriters designate a number of shares equal to $2,500,000
divided by the price to the public of the Company's Common Stock sold in the IPO
for sale to the Investors (the "Company Request"). Any shares designated by the
Underwriters for sale to the Investors in response to this request shall be
referred to herein as the "Directed Shares."
(b) The Company Request shall propose that, to the extent the Underwriters
designate any Directed Shares, the Underwriters deliver a notice ("Notice") to
each Investor, stating the proposed number of shares to be offered in the IPO
and the proposed range within which it is anticipated the shares of Common Stock
sold in the Company's IPO will be priced, and notifying each Investor of their
ability to purchase up to that portion of the Directed Shares which equals the
proportion that the number of shares of Common Stock issued or issuable upon
conversion of the Series C Preferred Stock held by such Investor bears to the
total number of shares of Common Stock issued or issuable upon conversion of the
Series C Preferred Stock of the Company.
(c) The Company Request shall further propose that the Underwriters
deliver a notice (the "Second Notice") to each Investor which elects to purchase
all of the Directed Shares made available to it pursuant to the Notice ("Fully-
Exercising Investor") of any other Investor's failure to do likewise, and
provide each Fully-Exercising Investor with the opportunity to obtain all or any
portion of the Directed Shares not subscribed
<PAGE>
for by the Investors pursuant to the Notice (the "Unsubscribed Shares"). If (i)
the total number of additional shares that the Fully-Exercising Investors elect
to purchase pursuant to the Second Notice is more than the total number of
Unsubscribed Shares and (ii) each Fully-Exercising Investor has elected to
purchase a portion of the Unsubscribed Shares that is equal to or greater than
the proportion that the number of shares of Common Stock issued or issuable upon
conversion of the Series C Preferred Stock then held by such Fully-Exercising
Investor bears to the total number of shares of Common Stock issued or issuable
upon conversion of the Series C Preferred Stock then held by all Fully-
Exercising Investors who wish to purchase some of the Unsubscribed Shares (the
"Pro Rata Portion"), then each Fully-Exercising Investor shall be limited to its
Pro Rata Portion. If (i) the total number of additional shares that the Fully-
Exercising Investors elect to purchase pursuant to the Second Notice is more
than the total number of Unsubscribed Shares and (ii) one or more Fully-
Exercising Investors has elected to purchase a portion of the Unsubscribed
Shares that is less than its Pro Rata Portion, then the difference shall be
allocated among the other Fully-Exercising Investors pursuant to mutual
agreement among them and the Underwriters.
II. LIMITATION OF RIGHT. Notwithstanding anything else set forth in this
-------------------
Agreement, to the extent that the Underwriters advise the Company that inclusion
of the full amount of Directed Shares would require the Underwriters to exclude
shares of Common Stock ("Excluded Shares") designated by the Underwriters for
sale in the IPO to persons and entities (other than the Investors) designated by
the Company as part of the IPO (which total number of shares, including any
Excluded Shares, shall in no event exceed five percent (5%) of the total number
of shares of Common Stock sold in the IPO), then the Investors agree that the
number of Directed Shares shall be reduced in a manner determined by the
Underwriters.
III. MISCELLANEOUS PROVISIONS.
------------------------
3.1 Notice. Unless otherwise provided, any notice required or permitted
------
under this Agreement shall be given in writing and shall be deemed effectively
given upon (a) personal delivery to the party to be notified, (b) upon
telefacsimile transmission to the party to be notified at the telefacsimile
number indicated for such party on the signature page hereof, if any, or (c)
upon deposit with an overnight courier service or the United States Post Office,
by registered or certified mail, postage prepaid and addressed to the party to
be notified at the address(es) indicated for such party on the signature page
hereof, or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties.
3.2 Severability. In the event one or more of the provisions of this
------------
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed and interpreted in such manner as to be effective and valid
under applicable law.
-2-
<PAGE>
3.3 Waiver or Modification. Any amendment or modification of this
----------------------
Agreement shall be effective only if evidenced by a written instrument executed
by (i) Investors holding not less than a majority of the Common Stock issued or
issuable upon conversion of the Series C Preferred Stock, then held by all
Investors and (ii) the Company.
3.4 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California as applied in contracts
among California residents entered into and performed entirely within
California.
3.5 Attorneys' Fees. In the event of any dispute involving the terms
---------------
hereof, the prevailing parties shall be entitled to collect legal fees and
expenses from the other party to the dispute.
3.6 Further Assurances. Each party agrees to act in accordance herewith
------------------
and not to take any action which is designed to avoid the intention hereof.
3.7 Successors and Assigns. This Agreement and the rights and obligations
----------------------
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year indicated above.
CORSAIR COMMUNICATIONS, INC., a
Delaware corporation
By: ________________________________
Mary Ann Byrnes, President
Address: 3408 Hillview Avenue
Palo Alto, CA 94304
INVESTORS:
UST PRIVATE EQUITY INVESTORS
FUND, INC.
By: ________________________________
Title: _____________________________
Address: 114 West 47th Street
New York, NY 10036-1532
TECHNOLOGY CROSSOVER VENTURES,
L.P.
By: ________________________________
Title: _____________________________
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
TECHNOLOGY CROSSOVER VENTURES,
C.V.
By: ________________________________
Title: _____________________________
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
ORCHID AND CO., Nominee for
T. Rowe Price Threshold Fund III, L.P.
By: T. ROWE PRICE THRESHOLD
FUND ASSOCIATES, INC.,
General Partner
By: __________________________
Title: _______________________
Address: 100 East Pratt Street
Baltimore, MD 21202
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
Its: General Partner
By: __________________________
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
INTEGRAL CAPITAL PARTNERS
INTERNATIONAL II, C.V.
By: Integral Capital Management II, L.P.
Its: Investment General Partner
By: __________________________
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
COLUMBIA CAPITAL INVESTMENTS, LLC
By: ________________________________
Title: _____________________________
Address: 201 N. Union Street, Suite 300
Alexandria, VA 22314
SPINNAKER FUND
By: ________________________________
Title: _____________________________
Address: 22 Gatehouse Road
P. O. Box 110236
Stamford, CT 06911-0236
KLEINER PERKINS CAUFIELD & BYERS
VII, L.P.
By: ________________________________
Title: _____________________________
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II, L.P.
By: ________________________________
Title: _____________________________
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
ACCEL IV L.P.
By: Accel IV Associates, L.P.
Its: General Partner
By: __________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL INVESTORS '95 L.P.
By: ________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
ACCEL KEIRETSU L.P.
By: Accel Partners & Co. Inc.
Its: General Partner
By: __________________________
Title: _______________________
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ELLMORE C. PATTERSON PARTNERS
By: ________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
NORWEST EQUITY PARTNERS V, a
Minnesota Limited Liability Partnership
By: Itasca Partners V, L.L.P.
Its: General Partner
By: __________________________
Title: _______________________
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301-1426
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By:___________________________
General Partner
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
ANDBACH VENTURES VI, L.P.
By:_________________________________
Title:______________________________
Address: 803 N. Church Street
Rockford, IL 61103
SOUNDVIEW PARTNERS
------------------
By:_________________________________
Title:______________________________
Address: Two Embarcadero Center, Suite 1655
San Francisco, CA 94111
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
Its:________________________________
By:___________________________
Title:________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
NEEDHAM CAPITAL PARTNERS, L.P.
By:_________________________________
Title:______________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By:_________________________________
Title:______________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
HAMBRECHT & QUIST CALIFORNIA, a California
corporation
By:_________________________________
Title:______________________________
Address: One Bush Street
San Francisco, CA 94144
____________________________________
EUGENE EIDENBERG
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
____________________________________
CHRISTOPHER SHEELINE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
____________________________________
RAKESH SOOD
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
____________________________________
JAMES ZANZE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
COMDISCO, INC.
By:________________________________
Title:_____________________________
Address: 6111 North River Road
Rosemont, IL 60018
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
DAVID H. RING CHARITABLE
REMAINDER UNITRUST UTA
Dated 5/20/96
By:________________________________
David H. Ring, Trustee
Address: 4140 23rd Street
San Francisco, CA 94114
TRAILHEAD VENTURES, L.P.
By:_________________________________
Title:______________________________
Address: 5949 Sherry Lane, Suite 1450
Dallas, TX 75225
UMB BANK, N.A., as Trustee for Brobeck, Phleger &
Harrison Retirement Savings Trust F/B/O John A.
Denniston
By:_________________________________
Title:______________________________
Address: UMB Bank, N.A.
P. O. Box 419692
Kansas City, MO 64141-6692
____________________________________
MICHAEL S. KAGNOFF
Address: 8121 Camino Del Sol
La Jolla, CA 92307
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
____________________________________
KEVIN J. McQUILLAN
Address: 345 Cervantes Road
Portola Valley, CA 94028
____________________________________
JENNIFER GILL ROBERTS
Address: 550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
____________________________________
STEVE BIRD
Address: c/o Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
EXHIBIT A
INVESTORS
---------
Kleiner Perkins Caufield & Byers VII, L.P.
KPCB Information Sciences Zaibatsu Fund II, L.P.
Sevin-Rosen Fund IV L.P.
UST Private Equity Investors Fund, Inc.
Orchid and Co., Nominee for T. Rowe Price Threshold Fund III, L.P.
Spinnaker Fund
Andbach Ventures VI, L.P.
Trailhead Ventures, L.P.
Hambrecht & Quist California
Eugene Eidenberg
Christopher Sheeline
Rakesh Sood
James Zanze
SoundView Partners
Columbia Capital Investments, LLC
Norwest Equity Partners V
Accel IV L.P.
Accel Investors '95 L.P.
Accel Keiretsu L.P.
Ellmore C. Patterson Partners
Needham Capital SBIC, L.P.
Needham Capital Partners, L.P.
Needham Emerging Growth Partners
Technology Crossover Ventures, L.P.
Technology Crossover Ventures, C.V.
Integral Capital Partners II, L.P.
Integral Capital Partners International II, C.V.
David H. Ring Charitable Remainder Unitrust UTA Dated 5/20/96
Comdisco, Inc.
UMB Bank, N.A., as Trustee
Michael S. Kagnoff
Kevin J. McQuillan
Jennifer Gill Roberts
Steve Bird
A-1
<PAGE>
EXHIBIT D
MANAGEMENT INFORMATION RIGHTS LETTERS
-------------------------------------
D-1
<PAGE>
CORSAIR COMMUNICATIONS, INC.
3408 HILLVIEW AVENUE
PALO ALTO, CA 94304
October 30, 1996
Mr. Richard Kimball
Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Mr. Robert Bensky
Technology Crossover Ventures
101 Eisenhower Parkway
Roseland, NJ 07068
Ladies and Gentlemen:
Reference is made to the Series C Preferred Stock Purchase Agreement
(the "Purchase Agreement"), of even date herewith, among Corsair Communications,
Inc. (the "Company") and the investors named therein. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed thereto
in the Purchase Agreement.
Pursuant to the Purchase Agreement, Technology Crossover Ventures,
L.P. and Technology Crossover Ventures, C.V. (collectively "Technology
Crossover") are purchasing 336,952 shares and 26,684 shares, respectively, of
the Company's Series C Preferred Stock (collectively the "Technology Crossover
Shares"). In order to induce Technology Crossover to purchase the Technology
Crossover Shares, the Company hereby represents, warrants and agrees that:
(a) Board Advisor. The Company shall invite a representative of
-------------
Technology Crossover (the "Representative") to attend all meetings of its Board
of Directors in a nonvoting advisor capacity and, in this respect, shall give
such representative copies of all notices, minutes, consents, and other
materials that it provides to its directors; provided, however, that such
representative shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so provided; and, provided
further, that the Company reserves the right to withhold any information and to
exclude such representative from any meeting or portion thereof if access to
such information or attendance at such meeting could adversely affect the
attorney-client privilege between the Company and its counsel.
(b) Inspection Rights. Technology Crossover on its own behalf and in
-----------------
its separate capacity as an Investor under the Purchase Agreement and as an
Investor
<PAGE>
Technology Crossover Ventures October 30, 1996
Page 2
under the Investors' Rights Agreement, will be entitled to the rights to certain
non-public financial information, inspection rights and other rights as provided
under the relevant provisions of such agreements. The Representative may
examine the books and records of the Company and inspect its facilities and may
request information at reasonable times and intervals concerning the general
status of the Company's financial condition and operations; provided, however,
-------- -------
that the Company may afford access to highly confidential proprietary
information and facilities subject to appropriate confidentiality conditions, as
determined in the reasonable judgment of the Company and consistent with
conditions or restrictions required of other stockholders in like circumstances.
The rights described herein shall terminate and be of no further force
or effect upon the earliest to occur of: (i) such time as Technology Crossover
shall own less than 500,000 shares of Preferred Stock of the Company (or shares
of Common Stock issued upon conversion of Preferred Stock) as adjusted from time
to time for stock splits, stock dividends and the like; (ii) the closing of a
public offering of shares of the Company's capital stock pursuant to a
registration statement filed by the Company under the Securities Act of 1933
which has become effective thereunder (other than a registration statement
relating solely to employee benefit plans or a transaction covered by Rule 145);
or (iii) such time as the Company becomes required to file reports with the
Securities and Exchange Commission under Sections 12(g) or 15(d) of the
Securities Exchange Act of 1934.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Technology Crossover Ventures October 30, 1996
Page 3
Please evidence your agreement to the foregoing by executing this letter in
the place provided below. This letter may be executed in more than one
counterpart, each of which shall be deemed an original and all of which shall
constitute a single instrument.
Very truly yours,
CORSAIR COMMUNICATIONS, INC.
By: ____________________________________
Mary Ann Byrnes, President
AGREED AND ACCEPTED:
TECHNOLOGY CROSSOVER VENTURES, L.P.
By:_________________________________
Title:______________________________
AGREED AND ACCEPTED:
TECHNOLOGY CROSSOVER VENTURES, C.V.
By:_________________________________
Title:______________________________
<PAGE>
SCHEDULE OF EXCEPTIONS
----------------------
The following matters are exceptions to the representations and warranties
of Corsair Communications, Inc., a Delaware corporation (the "Company") as set
forth in Section 2 of the Series C Preferred Stock Purchase Agreement (the
"Agreement"). The section numbers in this Schedule of Exceptions correspond to
the section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would
otherwise be appropriate. Where the terms of a contract or other disclosure
item have been summarized or described in this Schedule of Exceptions, such
summary or description does not purport to be a complete statement of the
material terms of such contract or other item. Any terms defined in the
Agreement shall have the same meaning when used in this Schedule of Exceptions
as when used in the Agreement unless the context otherwise requires.
<PAGE>
EXHIBIT 10.35
CORSAIR COMMUNICATIONS, INC.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
____________
October 30, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Registration Rights............................................. 1
1.1 Definitions................................................ 1
1.2 Request for Registration................................... 2
1.3 Company Registration....................................... 3
1.4 Obligations of the Company................................. 4
1.5 Furnish Information........................................ 5
1.6 Expenses of Demand Registration............................ 5
1.7 Expenses of Company Registration........................... 6
1.8 Underwriting Requirements.................................. 6
1.9 Delay of Registration...................................... 6
1.10 Indemnification............................................ 7
1.11 Reports Under Securities Exchange Act of 1934.............. 9
1.12 Form S-3 Registration...................................... 9
1.13 Assignment of Registration Rights.......................... 10
1.14 Limitations on Subsequent Registration Rights.............. 11
1.15 "Market Stand-Off" Agreement............................... 11
1.16 Termination of Registration Rights......................... 12
2. Covenants of the Company........................................ 12
2.1 Delivery of Financial Statements........................... 12
2.2 Inspection................................................. 13
2.3 Termination of Information and Inspection
Covenants................................................. 13
2.4 Right of First Offer....................................... 13
2.5 Management Stock........................................... 15
3. Miscellaneous................................................... 15
3.1 Successors and Assigns..................................... 15
3.2 Governing Law.............................................. 16
3.3 Counterparts............................................... 16
3.4 Titles and Subtitles....................................... 16
3.5 Notices.................................................... 16
3.6 Expenses................................................... 16
3.7 Amendments and Waivers..................................... 16
3.8 Severability............................................... 16
3.9 Aggregation of Stock....................................... 17
3.10 Entire Agreement........................................... 17
</TABLE>
(i)
<PAGE>
AMENDED AND RESTATED
--------------------
INVESTORS' RIGHTS AGREEMENT
---------------------------
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT ("Agreement"), dated
as of October 30, 1996, is among Corsair Communications, Inc., a Delaware
corporation (the "Company"), and the investors listed on the signature page,
each of which is herein referred to as an "Investor."
WHEREAS, the Company and certain of the Investors are parties to the Series
C Preferred Stock Purchase Agreement of even date herewith (the "Series C
Agreement");
WHEREAS, certain of the Investors are presently holders of the Company's
Series A Preferred Stock and/or Series B Preferred Stock and pursuant thereto
have entered into an Investors' Rights Agreement with the Company dated December
10, 1994, as previously amended (the "Rights Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series C
Agreement and to induce certain Investors to invest funds in the Company
pursuant to the Series C Agreement, all the Investors and the Company wish to
amend and restate the Rights Agreement so that this Agreement will govern the
rights of all the Investors to cause the Company to register shares of the
Company's common stock ("Common Stock") issuable to any Investors upon
conversion of their respective shares of the Company's Preferred Stock, and
certain other matters as set forth in this Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "register", "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(c) The term "Registrable Securities" means (1) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, Series B
Preferred Stock and/or Series C Preferred Stock and (2) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such Series A
Preferred Stock, Series B Preferred
<PAGE>
Stock or Series C Preferred Stock (or the Common Stock issued upon conversion
thereof), excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which his rights under this Section 1 are not
assigned;
(d) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(e) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof; and
(f) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier
of (i) December 10, 1998 or (ii) six (6) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction), a written request from the Holders
of at least thirty-three percent (33%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act where
the anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $2,500,000, then the Company shall, within ten (10)
days of the receipt thereof, give written notice of such request to all Holders
and shall, subject to the limitations of subsection 1.2(b), effect as soon as
practicable, and in any event within 60 days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered within twenty (20) days of the mailing of such notice
by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable
-2-
<PAGE>
Securities in the underwriting (unless otherwise mutually agreed by a majority
in interest of the Initiating Holders and such Holder) to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company as provided in subsection 1.4(e))
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders. Notwithstanding any other provision of this Section 1.2, if
the underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 60 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve month period.
1.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration on Form S-4),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with Section
3.5, the Company shall, subject to the provisions of Section 1.8, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
-3-
<PAGE>
1.4 Obligations of the Company. Whenever required under this Section
--------------------------
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Use its best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Section
1, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
-4-
<PAGE>
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
reasonable and necessary to effect the registration of such Holder's Registrable
Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 1.2 or Section 1.12
whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses on
a pro rata basis), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 1.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2.
-5-
<PAGE>
1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event shall (i) the amount of securities
of the selling Holders included in the offering be reduced below thirty percent
(30%) of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities in which
case the selling stockholders may be excluded if the underwriters make the
determination described above and no other stockholder's securities are included
or (ii) notwithstanding (i) above, any shares being sold by a stockholder
exercising a demand registration right similar to that granted in Section 1.2 be
excluded from such offering. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
-6-
<PAGE>
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, each of its officers and directors and general
partners, any underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, or any rule or regulation
promulgated under the Act, or the 1934 Act; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld or delayed), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if
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<PAGE>
such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this subsection 1.10(b) exceed the proceeds (net of underwriting
discount but before deducting expenses) received by such Holder from the
offering.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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<PAGE>
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from a
---------------------
Holder, or Holders, a written request, or requests, that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, and the anticipated aggregate offering price to the public, net of
underwriting discounts and commissions, would exceed $1,000,000, the Company
will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
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<PAGE>
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Company
shall furnish to the Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 60 days after receipt of the request of
the Holder or Holders under this Section 1.12; provided, however, that the
Company shall not utilize this right more than once in any twelve month period;
(3) if any Holder or Holders have requested a registration pursuant to this
Section 1.12 two or more times during the current calendar year in which such
request is made, or (4) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration. Registrations effected pursuant to
this Section 1.12 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are (a) partners or retired
partners of
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<PAGE>
such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) or (b) affiliates of such partnership (as such
term is defined in SEC Rule 405) shall be aggregated together with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single attorney-
in-fact for the purpose of exercising any rights, receiving notices or taking
any action under this Section 1.
1.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 or 1.3
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which are included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
----------------------------
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any Registrable Securities of
the Company held by it at any time during such period except common stock
included in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements; an d
(c) such market stand-off time period shall not exceed 180
days, provided, however, that the market stand-off time period shall expire
immediately upon the underwriters of the Company's initial public offering
providing any discretionary waiver or termination of the restrictions contained
in the lock-up agreements between the underwriters and the officers, directors
and stockholders without waiving or
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<PAGE>
terminating such restrictions, on a pro rata basis, as to all persons subject to
such lock-up agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 1 after five (5) years
following the consummation of the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor:
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
stockholders' equity as of the end of such year, and a schedule as to the
sources and applications of funds for such year, such year-end financial reports
to be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("gaap"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited profit or loss statement, schedule as to the
sources and application of funds for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter.
(c) within thirty (30) days of the end of each month, an
unaudited income statement and schedule as to the sources and application of
funds and balance sheet for and as of the end of such month, in reasonable
detail;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including balance sheets and sources
and applications of funds statements for such months and, as soon as prepared,
any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial
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<PAGE>
Officer or President of the Company and certifying that such financials were
prepared in accordance with gaap consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by gaap)
and fairly present the financial condition of the Company and its results of
operation for the period specified, subject to year-end audit adjustment;
(f) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request,
provided, however, that the Company shall not be obligated under this subsection
(f) or any other subsection of Section 2.1 to provide information which it deems
in good faith to be a trade secret or similar confidential information.
2.2 Inspection. The Company shall permit each Investor, at such
----------
Investor's expense, as the case may be, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Investor; provided, however, that
the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
2.3 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in Sections 2.1 and 2.2 shall terminate as to Investors and
be of no further force or effect when the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.
2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined). For purposes of this
Section 2.4, a Major Investor shall mean (a) any Investor who holds at least (i)
10% of the original investment such Investor made in the Company pursuant to
that certain Series A Preferred Stock Purchase Agreement dated December 10, 1994
(the "Series A Agreement"), (ii) 10% of the original investment such Investor
made in the Company pursuant to that certain Series B Preferred Stock Purchase
Agreement dated October 31, 1995 (the "Series B Agreement"), or (iii) 10% of the
original investment such Investor makes in the Company pursuant to the Series C
Agreement and (b) any person who acquired or will acquire at least (i) 10% of
the Series A Preferred Stock (or the common stock issued upon conversion
thereof) issued pursuant to the Series A Agreement, (ii) 10% of the Series B
Preferred Stock (or Common Stock issued upon conversion thereof) issued pursuant
to the Series B Agreement or (iii) 10% of the Series C Preferred Stock (or the
common stock issued upon conversion thereof) issued pursuant to the Series C
Agreement. For purposes of this Section 2.4, an Investor includes any general
partners
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<PAGE>
and affiliates of an Investor. An Investor shall be entitled to apportion the
right of first offer hereby granted it among itself and its partners and
affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice")
to the Major Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, each Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of common stock issued and held, or
issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock and/or Series C Preferred Stock then held, by such Major Investor bears to
the total number of shares of common stock of the Company then outstanding
(assuming full conversion and exercise of all convertible or exercisable
securities). The Company shall promptly, in writing, inform each Major Investor
which purchases all the shares available to it ("Fully-Exercising Investor") of
any other Major Investor's failure to do likewise. During the ten-day period
commencing after receipt of such information is given, each Fully-Exercising
Investor shall be entitled to obtain that portion of the Shares not subscribed
for by the Major Investors which is equal to the proportion that the number of
shares of common stock issued and held, or issuable upon conversion of Series A
Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock then
held by such Fully-Exercising Investor bears to the total number of shares of
common stock issued and held, or issuable upon conversion of the Series A
Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock then
held, by all Fully-Exercising Investors who wish to purchase some of the
unsubscribed shares.
(c) If all Shares that Investors are entitled to obtain pursuant to
subsection 2.4(b) are not elected to be obtained as provided in subsection
2.4(b) hereof, the Company may, during the 60-day period following the
expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such period, or if such agreement is not
consummated within 60 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
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<PAGE>
(d) The right of first offer in this paragraph 2.4 shall not be
applicable: (i) to the issuance or sale of common stock (or options therefor) to
employees, consultants and directors, directly or pursuant to a stock option
plan or agreement or restricted stock plan or agreement approved by the Board of
Directors of this Company, provided each employee executes an agreement
containing the provisions set forth in Section 2.5(b) hereof, (ii) to or after
consummation of a bona fide, firmly underwritten public offering of shares of
common stock, registered under the Act pursuant to a registration statement on
Form S-1, at an offering price of at least $10.00 per share (appropriately
adjusted for any stock split, dividend, combination or other recapitalization)
and $15,000,000 in the aggregate, (iii) to the issuance of securities pursuant
to the conversion or exercise of convertible or exercisable securities, (iv) to
the issuance of securities in connection with a bona fide business acquisition
of or by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise or (v) to the issuance of stock, warrants or
other securities or rights to persons or entities with which the Company has
business relationships, provided such issuances are for other than primarily
equity financing purposes.
2.5 Management Stock.
----------------
(a) Employee Reserve. A pool of 2,750,000 shares of the
----------------
Company's Common Stock shall be reserved for purchase or incentive grants to
employees, consultants, directors or officers under those incentive and non-
qualified stock purchase or stock option plans or agreements ("Employee
Reserve").
(b) Vesting and Restrictions on Transfer. The shares or options
------------------------------------
issued from the Employee Reserve provided for in Section 2.5 shall vest
following the grant or issuance of such shares or options, as follows: 25% shall
vest after an initial 12-month cliff period and the remainder shall vest in
equal monthly installments over the next thirty-six (36) months following the
cliff period, as approved by the Company's Board of Directors. The Company
shall have a repurchase option at cost with respect to unvested shares.
Unvested shares may not be transferred. The Company shall have a right of first
refusal on vested shares until such time that the Company consummates an initial
public offering. The shares shall be subject to a market stand-off agreement
for a period of up to 180 days in connection with stock offerings by the
Company.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
-15-
<PAGE>
3.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon (a) personal delivery to the party to be notified, (b)
upon telefacsimile transmission to the party to be notified at the telefacsimile
number indicated for such party on the signature page hereof, if any, or (c)
upon deposit with an overnight courier service or the United States Post Office,
by registered or certified mail, postage prepaid and addressed to the party to
be notified at the address(es) indicated for such party on the signature page
hereof, or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties.
3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding, provided, however,
that any amendment or waiver of any term of this Agreement that would adversely
affect the rights, preferences or privileges of the holders of the Series C
Preferred Stock (or the Common Stock issued upon conversion thereof) in a manner
quantitatively disproportionately or qualitatively dissimilar to the effect on
the rights, preferences or privileges of the holders of other Registrable
Securities shall require the written consent of the holders of a majority of the
Series C Preferred Stock (on an as-converted basis) and any Common Stock issued
upon conversion thereof then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this
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<PAGE>
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.10 Entire Agreement. This Agreement (including the Exhibits hereto,
----------------
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORSAIR COMMUNICATIONS, INC., a Delaware
corporation
By: /s/ Mary Ann Byrnes
----------------------------------------------
Mary Ann Byrnes, President
Address: 3408 Hillview Avenue
Palo Alto, CA 94304
INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII, L.P.
By: /s/ Kevin Compton
----------------------------------------------
Title: Partner
-------------------------------------------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By: /s/ John Jaggers
----------------------------------------
General Partner
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
By: /s/ John Jaggers
----------------------------------------------
Title: Vice President
-------------------------------------------
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
NORWEST EQUITY PARTNERS IV, a
Minnesota Limited Partnership
By: Itasca Partners
Its: General Partner
By: /s/ Promod Haque
----------------------------------------
Title: Partner
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
NORWEST EQUITY PARTNERS, V, a Minnesota Limited
Liability Partnership
By: Itasca Partners V, L.L.P.
Its: General Partner
By: /s/ Promod Haque
----------------------------------------
Title: Partner
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
Its: ____________________________________________
By: /s/ John Michaelson
----------------------------------------
Title: _____________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM CAPITAL PARTNERS, L.P.
By: /s/ John Michaelson
----------------------------------------------
Title: ___________________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By: /s/ John Michaelson
----------------------------------------------
Title: ___________________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its: General Partner
By: /s/ G. Carter Sednaoui
----------------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL INVESTORS '95 L.P.
By: /s/ G. Carter Sednaoui
----------------------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL KEIRETSU L.P.
By: Accel Partners & Co. Inc.
Its: General Partner
By: /s/ G. Carter Sednaoui
----------------------------------------
Title: C.F.O.
------
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ELLMORE C. PATTERSON PARTNERS
By: /s/ illegible
----------------------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
TECHNOLOGY CROSSOVER VENTURES, L.P.
By: /s/ Robert C. Bensky
----------------------------------------------
Title: Chief Financial Officer
-------------------------------------------
Technology Crossover Management, L.L.C.
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
TECHNOLOGY CROSSOVER VENTURES, C.V.
By: /s/ Robert C. Bensky
----------------------------------------------
Title: Chief Financial Officer
-------------------------------------------
Technology Crossover Management, L.L.C.
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
Its: General Partner
By: /s/ illegible
----------------------------------------
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
INTEGRAL CAPITAL PARTNERS INTERNATIONAL II, C.V.
By: Integral Capital Management II, L.P.
Its: Investment General Partner
By: /s/ illegible
----------------------------------------
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
KPCB INFORMATION SCIENCES ZAIBATSU FUND II, L.P.
By: /s/ Kevin Compton
----------------------------------------------
Title: Partner
-------------------------------------------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
DAVID H. RING CHARITABLE REMAINDER UNITRUST UTA
Dated 5/20/96
By: /s/ David H. Ring, Trustee
----------------------------------------------
David H. Ring, Trustee
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
UST PRIVATE EQUITY INVESTORS FUND, INC.
By: /s/ illegible
----------------------------------------------
Title: President & CEO
-------------------------------------------
Address: 114 West 47th Street
New York, NY 10036-1532
ORCHID & CO., Nominee for
T. Rowe Price Threshold Fund III, L.P.
By: T. ROWE PRICE THRESHOLD FUND ASSOCIATES,
INC.,
General Partner
By: /s/ illegible
----------------------------------------
Title: Vice President of Gen. Par.
-------------------------------------
Address: 100 East Pratt Street
Baltimore, MD 21202
COLUMBIA CAPITAL INVESTMENTS, LLC
By: /s/ illegible
----------------------------------------------
Title: Manager
-------------------------------------------
Address: 201 N. Union Street, Suite 300
Alexandria, VA 22314
SPINNAKER TECHNOLOGY FUND, L.P.
By: SoundView Asset Management
General Partner
By: /s/ Lawrence A. Bowman
----------------------------------------------
Title: President
-------------------------------------------
Address: 22 Gatehouse Road
P. O. Box 110236
Stamford, CT 06911-0236
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ANDBACH VENTURES VI, L.P.
By: Andbach Capital Partners
Its: General Partner
By: /s/ illegible
-------------
Title: Its Managing Partner
--------------------
Address: 803 N. Church Street
Rockford, IL 61103
TRAILHEAD VENTURES, L.P.
By: /s/ illegible
-------------
Title: General Partner
---------------
Address: 5949 Sherry Lane, Suite 1450
Dallas, TX 75225
SOUNDVIEW FINANCIAL GROUP, GROUNDHOUSE PARTNERS, LLC
INC.
By: /s/ Kenny Tyler
Title: VP Finance By: /s/ Kenny Tyler
---------------
Address: Title: Financial Manager
-----------------
22 Gatehouse Road. Address: 22 Gatehouse Road
Stanford, CT 06902 Stanford, CT 06902
HAMBRECHT & QUIST CALIFORNIA, a California
corporation
By: /s/ illegible
-------------
Title: CFO
---
Address: One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
/s/ Eugene Eidenberg
--------------------
EUGENE EIDENBERG
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
/s/ Christopher Sheeline
------------------------
CHRISTOPHER SHEELINE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
/s/ Rakesh Sood
---------------
RAKESH SOOD
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
________________
JAMES ZANZE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
COMDISCO, INC.
By: /s/ Jill C. Hanses
------------------
Title: Assistant Vice President
------------------------
Address: 6111 North River Road
Rosemont, IL 60018
The Holder's liability for UMB BANK, N.A., as Trustee for Brobeck,
indemnification under this Phleger & Harrison Retirement Savings Trust
agreement shall be limited F/B/O John A. Denniston
to the assets held in the
individually directed
account of the participant By: /s/ illegible
directing the purchase of Title: Assistant Trust Officer
this investment and shall
not extend to Address: UMB Bank, N.A.
other assets of the Brobeck P. O. Box 419692
Phleger and Harrison Kansas City, MO 64141-6692
Retirement Savings Plan or
to UMB Bank, n.a. in its
individual or any other
capacity.
/s/ Michael S. Kagnoff
----------------------
MICHAEL S. KAGNOFF
Address: 8121 Camino Del Sol
La Jolla, CA 92307
/s/ Kevin J. McQuillan
----------------------
KEVIN J. McQUILLAN
Address: 345 Cervantes Road
Portola Valley, CA 94028
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
/s/ Jennifer Gill Roberts
-------------------------
JENNIFER GILL ROBERTS
Address: 550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
/s/ Steven P. Bird
------------------
STEVEN P. BIRD
Address: c/o Comdisco, Inc.
3000 Sand Hill Road
Bldg. 1, Suite 290
Menlo Park, CA 94025
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
KPCB VII FOUNDERS FUND
By: /s/ Kevin Compton
-----------------
Title: General Partner
---------------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
By Kleiner Perkins Caufield & Byers VII on
behalf of KPCB VII Founders Fund, as a
result of the merger of these two
partnerships effective July 1, 1996, By KPCB
VII Assoicates, its General Partner
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
TRW, INC.
By: /s/ Roland Robertson VP
---------------------------------------
Title: Assist GM Systems Integration Group
-----------------------------------
Address: 1 Federal System Park Dr., FP2-3287
Fairfax, VA 22033-4411
Attn: Roland Robertson
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
/s/ David H. Ring
-----------------
DAVID H. RING
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT 10.36
CORSAIR COMMUNICATIONS, INC.
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT DATED OCTOBER 30, 1996
This Amendment No. 1 ("Amendment") to the Amended and Restated Investors'
Rights Agreement dated October 30, 1996 (the "Agreement") is made as of this 7th
day of March, 1997 by and among Corsair Communications, Inc., a Delaware
corporation (the "Company"), each of the individuals and entities listed as
Existing Investors on the signature page to the Agreement, (the "Existing
Investors") and each of the individuals and entities listed as New Investors on
the signature page to this Amendment (the "New Investors"). Capitalized terms
used herein which are not defined herein shall have the definition ascribed to
them in the Agreement.
RECITALS
--------
The Company desires to sell and issue to the New Investors and the New
Investors desire to purchase from the Company, shares of the Company's Series D
Preferred Stock pursuant to that certain Series D Preferred Stock Purchase
Agreement of even date herewith (the "Series D Agreement").
The Existing Investors desire for the New Investors to invest in the
Company and, as a condition thereof and to induce such investment, the Existing
Investors and the Company are willing to enter into this Amendment to permit the
New Investors to become a party to the Agreement.
In consideration of the foregoing and the promises and covenants contained
herein and other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. ADDITIONAL PARTIES TO THE AGREEMENT.
-----------------------------------
The New Investors hereby enter into and become parties to the Agreement.
The signature page to the Agreement is amended to include the New Investors.
2. AMENDMENTS TO AGREEMENT.
-----------------------
2.1 The New Investors and the Existing Investors are collectively
referred to as "Investors" for the purposes of the Agreement.
2.2 Section 1.1(c) of the Agreement is amended in its entirety to
read as follows:
<PAGE>
"(c) The term "Registrable Securities" means (1) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and/or Series D
Preferred Stock and (2) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock (or the Common Stock issued upon
conversion thereof), excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his rights under
this Section 1 are not assigned;
2.3 Section 2.4 of the Agreement is amended in its entirety to read
as follows:
"2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect
to future sales by the Company of its Shares (as hereinafter defined).
For purposes of this Section 2.4, a Major Investor shall mean (a) any
Investor who holds at least (i) 10% of the original investment such
Investor made in the Company pursuant to that certain Series A
Preferred Stock Purchase Agreement dated December 10, 1994 (the
"Series A Agreement"), (ii) 10% of the original investment such
Investor made in the Company pursuant to that certain Series B
Preferred Stock Purchase Agreement dated October 31, 1995 (the "Series
B Agreement"), (iii) 10% of the original investment such Investor made
in the Company pursuant to that certain Series C Preferred Stock
Purchase Agreement dated October 30, 1996 or (iv) 10% of the original
investment such Investor makes in the Company pursuant to the Series D
Agreement and (b) any person who acquired or will acquire at least (i)
10% of the Series A Preferred Stock (or the common stock issued upon
conversion thereof) issued pursuant to the Series A Agreement, (ii)
10% of the Series B Preferred Stock (or Common Stock issued upon
conversion thereof) issued pursuant to the Series B Agreement, (iii)
10% of the Series C Preferred Stock (or the common stock issued upon
conversion thereof) issued pursuant to the Series C Agreement or (iv)
10% of the Series D Preferred Stock (or the common stock issued upon
conversion thereof) issued pursuant to the Series D Agreement. For
purposes of this Section 2.4, an Investor includes any general
partners and affiliates of an Investor. An Investor shall be entitled
to apportion the right of first offer hereby granted it among itself
and its partners and affiliates in such proportions as it deems
appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock
<PAGE>
("Shares"), the Company shall first make an offering of such Shares to each
Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to
offer such Shares, (ii) the number of such Shares to be offered, and (iii)
the price and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, each
Major Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which
equals the proportion that the number of shares of common stock issued and
held, or issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock
then held, by such Major Investor bears to the total number of shares of
common stock of the Company then outstanding (assuming full conversion and
exercise of all convertible or exercisable securities). The Company shall
promptly, in writing, inform each Major Investor which purchases all the
shares available to it ("Fully-Exercising Investor") of any other Major
Investor's failure to do likewise. During the ten-day period commencing
after receipt of such information is given, each Fully-Exercising Investor
shall be entitled to obtain that portion of the Shares not subscribed for
by the Major Investors which is equal to the proportion that the number of
shares of common stock issued and held, or issuable upon conversion of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and/or Series D Preferred Stock then held by such Fully-Exercising
Investor bears to the total number of shares of common stock issued and
held, or issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock
then held, by all Fully-Exercising Investors who wish to purchase some of
the unsubscribed shares.
(c) If all Shares that Investors are entitled to obtain pursuant
to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 60-day period
following the expiration of the period provided in subsection 2.4(b)
hereof, offer the remaining unsubscribed portion of such Shares to any
person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the
Company does not enter into an agreement for the sale of the Shares within
such period, or if such agreement is not consummated within 60 days of the
execution thereof, the right provided hereunder shall be deemed to be
revived and such Shares shall not be offered unless first reoffered to the
Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable: (i) to the issuance or sale of common stock (or options
therefor) to employees, consultants and directors, directly or pursuant to
a stock option plan
-3-
<PAGE>
or agreement or restricted stock plan or agreement approved by the Board of
Directors of this Company, provided each employee executes an agreement
containing the provisions set forth in Section 2.5(b) hereof, (ii) to or
after consummation of a bona fide, firmly underwritten public offering of
shares of common stock, registered under the Act pursuant to a registration
statement on Form S-1, at an offering price of at least $10.00 per share
(appropriately adjusted for any stock split, dividend, combination or other
recapitalization) and $15,000,000 in the aggregate, (iii) to the issuance
of securities pursuant to the conversion or exercise of convertible or
exercisable securities, (iv) to the issuance of securities in connection
with a bona fide business acquisition of or by the Company, whether by
merger, consolidation, sale of assets, sale or exchange of stock or
otherwise or (v) to the issuance of stock, warrants or other securities or
rights to persons or entities with which the Company has business
relationships, provided such issuances are for other than primarily equity
financing purposes.
3. WAIVER AND CONSENT.
------------------
Each Existing Investor, pursuant to any rights such Existing Investor
may have under the Agreement, hereby, on behalf of himself and the other
Investors under the Agreement, (a) waives all rights under, and any notice
required by, Section 2.4 of the Agreement relating to any rights to purchase or
rights of first offer with respect to the sale of the shares of Series D
Preferred Stock, (b) consents to adding the New Investors as parties to the
Agreement, and (c) consents to the registration rights hereby provided the New
Investors, which consent is given pursuant to Section 1.14 of the Agreement.
4. EFFECT OF AMENDMENT.
-------------------
Except as amended and set forth above, the Agreement shall continue in full
force and effect.
5. COUNTERPARTS.
------------
This Amendment may be executed in any number of counterparts, each which
will be deemed an original, and all of which together shall constitute one
instrument.
6. SEVERABILITY.
------------
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from this
Amendment and the balance of the Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
-4-
<PAGE>
7. ENTIRE AGREEMENT.
----------------
This Amendment, together with the Agreement, constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
8. GOVERNING LAW.
-------------
This Amendment shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE>
This Amendment is hereby executed as of the date first above written.
CORSAIR COMMUNICATIONS, INC., a Delaware
corporation
By: /s/ Mary Ann Byrnes
----------------------------------------------
Mary Ann Byrnes, President
Address: 3408 Hillview Avenue
Palo Alto, California 94304
EXISTING INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII, L.P.
By: /s/ Kevin Compton
----------------------------------------------
Title: General Partner
-------------------------------------------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By: /s/ John Jaggers
----------------------------------------
General Partner
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
By: /s/ John Jaggers
----------------------------------------------
Title: Vice President
-------------------------------------------
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
NORWEST EQUITY PARTNERS IV, a
Minnesota Limited Partnership
By: Itasca Partners
Its: General Partner
By: /s/ Promod Haque
----------------------------------------
Title: Partner
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
NORWEST EQUITY PARTNERS, V, a Minnesota Limited
Liability Partnership
By: Itasca Partners V, L.L.P.
Its: General Partner
By: /s/ Promod Haque
----------------------------------------
Title: Partner
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
Its: _________________________________________
By:______________________________________
Title:___________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM CAPITAL PARTNERS, L.P.
By:___________________________________________
Title:________________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By:___________________________________________
Title:________________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its: General Partner
By: /s/ G. Carter Sednaoui
----------------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL INVESTORS '95 L.P.
By: /s/ G. Carter Sednaoui
----------------------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL KEIRETSU L.P.
By: Accel Partners & Co. Inc.
Its: General Partner
By: /s/ G. Carter Sednaoui
----------------------------------------
Title: Chief Financial Officer
-------------------------------------
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ELLMORE C. PATTERSON PARTNERS
By: /s/ illegible
--------------------------------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
TECHNOLOGY CROSSOVER VENTURES, L.P.
By: /s/ Robert C. Bensky
--------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
TECHNOLOGY CROSSOVER VENTURES, C.V.
By: /s/ Robert C. Bensky
--------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
Its: General Partner
By: /s/ Pamela K. Hogenah
--------------------------------------
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
INTEGRAL CAPITAL PARTNERS INTERNATIONAL II, C.V.
By: Integral Capital Management II, L.P.
Its: Investment General Partner
By: /s/ Pamela K. Hogenah
--------------------------------------
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
KPCB INFORMATION SCIENCES ZAIBATSU FUND II, L.P.
By: /s/ Kevin Compton
--------------------------------------------
Title: General Partner
-----------------------------------------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
DAVID H. RING CHARITABLE REMAINDER UNITRUST UTA
Dated 5/20/96
By:_____________________________________________
David H. Ring, Trustee
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
UST PRIVATE EQUITY INVESTORS FUND, INC.
By: /s/ illegible
------------------------------------------
Title: Pres & CEO
---------------------------------------
Address: 114 West 47th Street
New York, NY 10036-1532
ORCHID AND CO., Nominee for
T. Rowe Price Threshold Fund III, L.P.
By: T. ROWE PRICE THRESHOLD FUND ASSOCIATES,
INC.,
General Partner
By: /s/ illegible
-------------------------------------
Title: President
----------------------------------
Address: 100 East Pratt Street
Baltimore, MD 21202
COLUMBIA CAPITAL INVESTMENTS, LLC
By: /s/ illegible
-------------------------------------------
Title: Vice President
----------------------------------------
Address: 201 N. Union Street, Suite 300
Alexandria, VA 22314
SPINNAKER FUND
By:____________________________________________
Title:_________________________________________
Address: 22 Gatehouse Road
P. O. Box 110236
Stamford, CT 06911-0236
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ANDBACH VENTURES VI, L.P.
By:____________________________________________
Title:_________________________________________
Address: 803 N. Church Street
Rockford, IL 61103
TRAILHEAD VENTURES, L.P.
By: /s/ illegible
-------------------------------------------
Title: General Partner
----------------------------------------
Address: 5949 Sherry Lane, Suite 1450
Dallas, TX 75225
SOUNDVIEW PARTNERS
By:____________________________________________
Title:_________________________________________
Address: Two Embarcadero Center
Suite 1655
San Francisco, CA 94111
HAMBRECHT & QUIST CALIFORNIA, a California
corporation
By:____________________________________________
Title:_________________________________________
Address: One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
______________________________________
EUGENE EIDENBERG
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
______________________________________
CHRISTOPHER SHEELINE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
______________________________________
RAKESH SOOD
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
______________________________________
JAMES ZANZE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
COMDISCO, INC.
By:_______________________________________________
Title:____________________________________________
Address: 6111 North River Road
Rosemont, IL 60018
UMB BANK, N.A., as Trustee for Brobeck, Phleger &
Harrison Retirement Savings Trust F/B/O John A.
Denniston
By: /s/ illegible
----------------------------------------------
Title: Assistant Trust Officer
-------------------------------------------
Address: UMB Bank, N.A.
P. O. Box 419692
Kansas City, MO 64141-6692
__________________________________________________
MICHAEL S. KAGNOFF
Address: 8121 Camino Del Sol
La Jolla, CA 92307
__________________________________________________
KEVIN J. McQUILLAN
Address: 345 Cervantes Road
Portola Valley, CA 94028
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
/s/ Jennifer Gill Roberts
----------------------------------------------
JENNIFER GILL ROBERTS
Address: 550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
______________________________________________
STEVEN P. BIRD
Address: c/o Comdisco, Inc.
3000 Sand Hill Road
Bldg. 1, Suite 290
Menlo Park, CA 94025
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
KPCB VII FOUNDERS FUND
By: /s/ Kevin R Compton
----------------------------------------
Title: General Partner
-------------------------------------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
TRW, INC.
By: /s/ illegible
-----------------------------------------
Title: Vice President
--------------------------------------
Address: 1 Federal System Park Dr., FP2-3287
Fairfax, VA 22033-4411
Attn: Roland Robertson
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
_____________________________________________
DAVID H. RING
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
NEW INVESTORS:
SUMITOMO CORPORATION
By: /s/ Toshiaki Matsuo
--------------------------------------
Title: Attorney-in-Fact
-----------------------------------
Address:
SUMITOMO CORPORATION OF
AMERICA
By: /s/ Toshiaki Matsuo
--------------------------------------
Title: Senior Vice President
-----------------------------------
Address: 345 Park Avenue
New York, NY 10154
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT 10.37
CORSAIR COMMUNICATIONS, INC.
DIRECTED SHARE AGREEMENT
THIS DIRECTED SHARE AGREEMENT ("Agreement") is made as of the 30th day of
October, 1996 by and among Corsair Communications, Inc., a Delaware corporation
(the "Company"), and each of the Investors listed on Exhibit A hereto (each
---------
individually, an "Investor" and collectively, the "Investors").
WHEREAS, the Company desires to sell and issue to the Investors and the
Investors desire to purchase from the Company, shares of the Company's Series C
Preferred Stock pursuant to a certain Series C Preferred Stock Purchase
Agreement dated of even date herewith (the "Series C Agreement").
WHEREAS, the Company wishes to provide a further inducement to the
Investors to purchase shares of the Company's Series C Preferred Stock pursuant
to the terms of the Series C Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
I. RIGHT TO ACQUIRE DIRECTED SHARES.
--------------------------------
(a) In a timely manner, upon selecting a managing underwriter or a group of
managing underwriters (collectively, the "Underwriters") to conduct an initial
public offering ("IPO") of the Company's Common Stock, the Company shall request
that the Underwriters designate a number of shares equal to $2,500,000 divided
by the price to the public of the Company's Common Stock sold in the IPO for
sale to the Investors (the "Company Request"). Any shares designated by the
Underwriters for sale to the Investors in response to this request shall be
referred to herein as the "Directed Shares."
(b) The Company Request shall propose that, to the extent the Underwriters
designate any Directed Shares, the Underwriters deliver a notice ("Notice") to
each Investor, stating the proposed number of shares to be offered in the IPO
and the proposed range within which it is anticipated the shares of Common Stock
sold in the Company's IPO will be priced, and notifying each Investor of their
ability to purchase up to that portion of the Directed Shares which equals the
proportion that the number of shares of Common Stock issued or issuable upon
conversion of the Series C Preferred Stock held by such Investor bears to the
total number of shares of Common Stock issued or issuable upon conversion of the
Series C Preferred Stock of the Company.
(c) The Company Request shall further propose that the Underwriters deliver
a notice (the "Second Notice") to each Investor which elects to purchase all of
the Directed Shares made available to it pursuant to the Notice ("Fully-
Exercising Investor") of any other Investor's failure to do likewise, and
provide each Fully-Exercising Investor
<PAGE>
with the opportunity to obtain all or any portion of the Directed Shares not
subscribed for by the Investors pursuant to the Notice (the "Unsubscribed
Shares"). If (i) the total number of additional shares that the Fully-
Exercising Investors elect to purchase pursuant to the Second Notice is more
than the total number of Unsubscribed Shares and (ii) each Fully-Exercising
Investor has elected to purchase a portion of the Unsubscribed Shares that is
equal to or greater than the proportion that the number of shares of Common
Stock issued or issuable upon conversion of the Series C Preferred Stock then
held by such Fully-Exercising Investor bears to the total number of shares of
Common Stock issued or issuable upon conversion of the Series C Preferred Stock
then held by all Fully-Exercising Investors who wish to purchase some of the
Unsubscribed Shares (the "Pro Rata Portion"), then each Fully-Exercising
Investor shall be limited to its Pro Rata Portion. If (i) the total number of
additional shares that the Fully-Exercising Investors elect to purchase pursuant
to the Second Notice is more than the total number of Unsubscribed Shares and
(ii) one or more Fully-Exercising Investors has elected to purchase a portion of
the Unsubscribed Shares that is less than its Pro Rata Portion, then the
difference shall be allocated among the other Fully-Exercising Investors
pursuant to mutual agreement among them and the Underwriters.
II. LIMITATION OF RIGHT. Notwithstanding anything else set forth in this
-------------------
Agreement, to the extent that the Underwriters advise the Company that inclusion
of the full amount of Directed Shares would require the Underwriters to exclude
shares of Common Stock ("Excluded Shares") designated by the Underwriters for
sale in the IPO to persons and entities (other than the Investors) designated by
the Company as part of the IPO (which total number of shares, including any
Excluded Shares, shall in no event exceed five percent (5%) of the total number
of shares of Common Stock sold in the IPO), then the Investors agree that the
number of Directed Shares shall be reduced in a manner determined by the
Underwriters.
III. MISCELLANEOUS PROVISIONS.
------------------------
3.1 Notice. Unless otherwise provided, any notice required or permitted
------
under this Agreement shall be given in writing and shall be deemed effectively
given upon (a) personal delivery to the party to be notified, (b) upon
telefacsimile transmission to the party to be notified at the telefacsimile
number indicated for such party on the signature page hereof, if any, or (c)
upon deposit with an overnight courier service or the United States Post Office,
by registered or certified mail, postage prepaid and addressed to the party to
be notified at the address(es) indicated for such party on the signature page
hereof, or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties.
3.2 Severability. In the event one or more of the provisions of this
------------
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed and interpreted in such manner as to be effective and valid
under applicable law.
-2-
<PAGE>
3.3 Waiver or Modification. Any amendment or modification of this
----------------------
Agreement shall be effective only if evidenced by a written instrument executed
by (i) Investors holding not less than a majority of the Common Stock issued or
issuable upon conversion of the Series C Preferred Stock, then held by all
Investors and (ii) the Company.
3.4 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California as applied in contracts
among California residents entered into and performed entirely within
California.
3.5 Attorneys' Fees. In the event of any dispute involving the terms
---------------
hereof, the prevailing parties shall be entitled to collect legal fees and
expenses from the other party to the dispute.
3.6 Further Assurances. Each party agrees to act in accordance herewith
------------------
and not to take any action which is designed to avoid the intention hereof.
3.7 Successors and Assigns. This Agreement and the rights and obligations
----------------------
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year indicated above.
CORSAIR COMMUNICATIONS, INC., a Delaware
corporation
By: /s/ Mary Ann Byrnes
-------------------
Mary Ann Byrnes, President
Address: 3408 Hillview Avenue
Palo Alto, CA 94304
INVESTORS:
UST PRIVATE EQUITY INVESTORS FUND, INC.
By: /s/ illegible
-------------
Title: President & CFO
---------------
Address: 114 West 47th Street
New York, NY 10036-1532
TECHNOLOGY CROSSOVER VENTURES, L.P.
By: /s/ Robert C. Bensky
--------------------
Title: Chief Financial Officer
-----------------------
Technology Crossover Management, L.L.C.
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
TECHNOLOGY CROSSOVER VENTURES, C.V.
By: /s/ Robert C. Bensky
--------------------
Title: Chief Financial Officer
-----------------------
Technology Crossover Management, L.L.C.
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
ORCHID & CO., Nominee for
T. Rowe Price Threshold Fund III, L.P.
By: T. ROWE PRICE THRESHOLD FUND ASSOCIATES,
INC.,
General Partner
By: /s/ illegible
-------------
Title: Vice President of Gen. Par.
---------------------------
Address: 100 East Pratt Street
Baltimore, MD 21202
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
Its: General Partner
Integral Capital management II, L.P. its
General Partner
By: /s/ illegible
-------------
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
INTEGRAL CAPITAL PARTNERS INTERNATIONAL II, C.V.
By: Integral Capital Management II, L.P.
Its: Investment General Partner
By: /s/ illegible
-------------
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
COLUMBIA CAPITAL INVESTMENTS, LLC
By: /s/ illegible
-------------
Title: Manager
-------
Address: 201 N. Union Street, Suite 300
Alexandria, VA 22314
SPINNAKER TECHNOLOGY FUND, L.P.
By: SoundView Asset Management
General Partner
By: /s/ Lawrence A. Bowman
----------------------
Title: President
---------
Address: 22 Gatehouse Road
P. O. Box 110236
Stamford, CT 06911-0236
KLEINER PERKINS CAUFIELD & BYERS VII, L.P.
By: /s/ Kevin Compton
-----------------
Title: Partner
-------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
KPCB INFORMATION SCIENCES ZAIBATSU FUND II, L.P.
By: /s/ Kevin Compton
-----------------
Title: Partner
-------
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
ACCEL IV L.P.
By: Accel IV Associates, L.P.
Its: General Partner
By: /s/ G. Carter Sednaoui
----------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL INVESTORS '95 L.P.
By: /s/ G. Carter Sednaoui
----------------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
ACCEL KEIRETSU L.P.
By: Accel Partners & Co. Inc.
Its: General Partner
By: /s/ G. Carter Sednaoui
----------------------
Title: CFO
---
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ELLMORE C. PATTERSON PARTNERS
By: /s/ illegible
-------------
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
NORWEST EQUITY PARTNERS V, a Minnesota Limited
Liability Partnership
By: Itasca Partners V, L.L.P.
Its: General Partner
By: /s/ Promod Haque
----------------
Title: Partner
-------
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301-1426
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By: /s/ John Jaggers
--------------------------------------
General Partner
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
ANDBACH VENTURES VI, L.P.
By: Andbach Capital Partners
Its: General Partner
By: /s/ illegible
--------------------------------------------
Title: Its Managing Partner
-----------------------------------------
Address: 803 N. Church Street
Rockford, IL 61103
SOUNDVIEW FINANCIAL GROUP, GATEHOUSE PARTNERS, LLC
INC.
By: /s/ Kenny Tyler
Title: VP Finance By: /s/ Kenny Tyler
--------------------------------------------
22 Gatehouse Road Title: Financial Manager
-----------------------------------------
Stanford, CT 06902
Address: 22 Gatehouse Road
Stanford, CT 06902
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
Its: ------------------------------------------
By: /s/ John Michaelson
--------------------------------------
Title:------------------------------------
Address: 445 Park Avenue, Third Floor
New York, NY 10022
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
NEEDHAM CAPITAL PARTNERS, L.P.
By: /s/ John Michaelson
--------------------------------------------
Title:------------------------------------------
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM EMERGING GROWTH
PARTNERS
By: /s/ Ray Rajaratnam
--------------------------------------------
Title: Managing General Partner
-----------------------------------------
Address: 445 Park Avenue, Third Floor
New York, NY 10022
HAMBRECHT & QUIST CALIFORNIA, a California
corporation
By: /s/ illegible
--------------------------------------------
Title: CFO
-----------------------------------------
Address: One Bush Street
San Francisco, CA 94144
/s/ Eugene Eidenberg
------------------------------------------------
EUGENE EIDENBERG
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
/s/ Christopher Sheeline
------------------------------------------------
CHRISTOPHER SHEELINE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
/s/ Rakesh Sood
------------------------------------------------
RAKESH SOOD
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
________________________________________________
JAMES ZANZE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
COMDISCO, INC.
By: /s/ Jill C. Hanses
--------------------------------------------
Title: Assistant Vice President
-----------------------------------------
Address: 6111 North River Road
Rosemont, IL 60018
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
DAVID H. RING CHARITABLE
REMAINDER UNITRUST UTA Dated
5/20/96
By: /s/ David H. Ring, Trustee
--------------------------------------------
David H. Ring, Trustee
Address: 4140 23rd Street
San Francisco, CA 94114
TRAILHEAD VENTURES, L.P.
By: /s/ illegible
--------------------------------------------
Title: General Partner
-----------------------------------------
Address: 5949 Sherry Lane, Suite 1450
Dallas, TX 75225
UMB BANK, N.A., as Trustee for Brobeck, Phleger &
Harrison Retirement Savings Trust F/B/O John A.
Denniston
By: /s/ illegible
--------------------------------------------
Title: Assistant Trust Officer
-----------------------------------------
Address: UMB Bank, N.A.
P. O. Box 419692
Kansas City, MO 64141-6692
/s/ Michael S. Kagnoff
------------------------------------------------
MICHAEL S. KAGNOFF
Address: 8121 Camino Del Sol
La Jolla, CA 92307
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
/s/ Kevin J. McQuillan
------------------------------------------------
KEVIN J. McQUILLAN
Address: 345 Cervantes Road
Portola Valley, CA 94028
/s/ Jennifer Gill Roberts
------------------------------------------------
JENNIFER GILL ROBERTS
Address: 550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
/s/ Steven P. Bird
------------------------------------------------
STEVEN P. BIRD
Address: c/o Comdisco, Inc.
3000 Sand Hill Road
Bldg. 1, Suite 290
Menlo Park, CA 94025
[SIGNATURE PAGE TO DIRECTED SHARE AGREEMENT]
<PAGE>
EXHIBIT A
INVESTORS
---------
Kleiner Perkins Caufield & Byers VII, L.P.
KPCB Information Sciences Zaibatsu Fund II, L.P.
Sevin-Rosen Fund IV L.P.
UST Private Equity Investors Fund, Inc.
Orchid and Co., Nominee for T. Rowe Price Threshold Fund III, L.P.
Spinnaker Fund
Andbach Ventures VI, L.P.
Trailhead Ventures, L.P.
Hambrecht & Quist California
Eugene Eidenberg
Christopher Sheeline
Rakesh Sood
James Zanze
SoundView Partners
Columbia Capital Investments, LLC
Norwest Equity Partners V
Accel IV L.P.
Accel Investors '95 L.P.
Accel Keiretsu L.P.
Ellmore C. Patterson Partners
Needham Capital SBIC, L.P.
Needham Capital Partners, L.P.
Needham Emerging Growth Partners
Technology Crossover Ventures, L.P.
Technology Crossover Ventures, C.V.
Integral Capital Partners II, L.P.
Integral Capital Partners International II, C.V.
David H. Ring Charitable Remainder Unitrust UTA Dated 5/20/96
Comdisco, Inc.
UMB Bank, N.A., as Trustee
Michael S. Kagnoff
Kevin J. McQuillan
Jennifer Gill Roberts
Steve Bird
A-1
<PAGE>
EXHIBIT 10.38
PROMISSORY NOTE
---------------
$200,000.00 November 14, 1996
Palo Alto, California
MARY ANN BYRNES, an individual resident of the State of California
("Obligor"), for value received, hereby promises to pay to the order of CORSAIR
COMMUNICATIONS, INC., a Delaware corporation, or holder ("Payee"), in lawful
money of the United States at 3408 Hillview Avenue, Palo Alto, CA 94304, the
principal sum of Two Hundred Thousand Dollars ($200,000.00).
Unpaid principal of this Note shall bear interest at a rate equal to 7% per
annum. Interest shall be computed on the basis of a 360 day year for the actual
number of days elapsed.
All unpaid principal under this Note shall be due and payable on the
earlier of (a) November 13, 2000; (b) the expiration of the 60-day period
following the date the Obligor ceases for any reason to remain in the employment
on a regular and full-time basis by Payee; (c) the expiration of the 190-day
period following the date on which Payee completes a successful initial public
offering of shares of its common stock; or (d) the date on which Payee completes
the consummation of any corporate transaction in which (i) more than fifty
percent (50%) of the outstanding shares of common stock of Payee are acquired by
a single purchaser or by a group of purchasers acting in concert in a merger or
any other transaction and Obligor receives cash or publicly traded securities in
connection therewith; or (ii) all or substantially all of the assets of Payee
are acquired by a single purchaser or a group of purchasers acting in concert
and Obligor receives cash or publicly traded securities in connection therewith.
This Note may be prepaid, in whole or in part, at any time without premium or
penalty. Each payment under this Note shall be applied first to the payment of
accrued interest and thereafter to the reduction of the unpaid principal balance
of this Note.
For purposes of applying the provisions of this Note, the Obligor shall be
considered to remain in the employment of Payee on a regular and full-time basis
for so long as the Obligor renders services as a director or full-time employee
of Payee, any successor entity or one or more of Payee's fifty percent (50%)-or
more owned (directly or indirectly) subsidiaries. However, nothing in this Note
shall confer upon the Obligor any right to continue in the employment of Payee
(or its successors or subsidiaries) for any period of specific duration or
interfere with or otherwise restrict in any way the rights of Payee or the
Obligor, which rights are hereby expressly reserved to each, to terminate
Obligor's employment at any time for any reason whatsoever, with or without
cause.
<PAGE>
Upon payment in full of all principal payable hereunder, this Note shall be
surrendered to Obligor for cancellation.
This Note may be transferred only upon surrender of the original Note for
registration of transfer, duly endorsed, or accompanied by a duly executed
written instrument of transfer in form satisfactory to Obligor. Thereupon, a
new note for like principal amount and interest will be issued to, and
registered in the name of, the transferee. Principal is payable only to the
registered holder of this Note.
Obligor waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest, and notice of dishonor. No delay on
the part of Payee in exercising any right hereunder shall operate as a waiver of
such right under this Note. This Note is being delivered in and shall be
construed in accordance with the laws of the State of California.
If the indebtedness represented by this Note or any part thereof is
collected at law or in equity or in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after default, Obligor agrees to pay, in addition to the principal and interest
payable hereon, reasonable attorneys' fees and costs incurred by Payee.
Any payment shall be deemed made upon receipt by Payee.
This Note is the Note referred to in that certain Pledge Agreement ("Pledge
Agreement") dated the same date as this Note between Obligor and Payee, and is
subject to the terms thereof. The Pledge Agreement, among other things,
contains provisions for acceleration of the maturity of this Note upon the
happening of any one or more of the stated "Events of Default" set forth
therein. OBLIGOR UNDERSTANDS THAT THIS IS A FULL RECOURSE PROMISSORY NOTE AND
THAT PAYEE MAY, AT ITS OPTION, PROCEED AGAINST ASSETS OF THE UNDERSIGNED OTHER
THAN ANY COLLATERAL UNDER THE PLEDGE AGREEMENT IN THE EVENT OF DEFAULT. OBLIGOR
ACKNOWLEDGES AND UNDERSTANDS THAT THE RULE 144 HOLDING PERIOD MAY BE TOLLED WITH
RESPECT TO ANY COMMON STOCK PLEDGED PURSUANT TO THE PLEDGE AGREEMENT.
Obligor acknowledges and agrees that she has been provided the opportunity
and encouraged to consult with counsel of Obligor's own choosing with respect to
this Agreement and that Brobeck, Phleger & Harrison LLP solely represents the
interests of the Payee.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, Obligor has duly executed this Note, as of the date
first above written.
/s/ Mary Ann Byrnes
---------------------------------
Mary Ann Byrnes
<PAGE>
AMENDMENT NO. 1 TO
PROMISSORY NOTE
This Amendment No. 1 ("Amendment") to the Promissory Note dated November
14, 1996 in the principal amount of $200,000 made by Mary Ann Byrnes in favor of
Corsair Communications, Inc. (the "Note") is made as of this 1st day of
December, 1996. Capitalized terms used herein which are not defined herein
shall have the definition ascribed to them in the Note.
RECITALS
--------
WHEREAS, an authorized officer of Corsair dated the Note November 14,
1996 in anticipation that the Note would be executed on such date.
WHEREAS, the Note was not executed by the parties until November 29,
1996.
WHEREAS, at the time of entering into the Note the parties mistakenly
failed to update the date contained in the Note to reflect the actual date of
execution.
WHEREAS, the Corsair and Mary Ann Byrnes each believe that it is in
their best interest to amend the Note to reflect the actual date of execution.
In consideration of the foregoing and the promises and covenants
contained herein and other good and valuable consideration the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO THE NOTE.
---------------------
All references contained in the Note or any schedule thereto to the
date November 14, 1996 shall be deleted and replaced with the date November 29,
1996.
2. EFFECT OF AMENDMENT.
-------------------
Except as amended and set forth above, the Note shall continue in full
force and effect.
3. COUNTERPARTS.
------------
This Amendment may be executed in any number of counterparts, each which
will be deemed an original, and all of which together shall constitute one
instrument.
<PAGE>
4. SEVERABILITY.
------------
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from this
Amendment and the balance of the Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
5. ENTIRE AGREEMENT.
----------------
This Amendment, together with the Note, constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
6. GOVERNING LAW.
-------------
This Amendment shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
[Remainder of This Page Intentionally Left Blank]
-2-
<PAGE>
This Amendment is hereby executed as of the date first above written.
CORSAIR COMMUNICATIONS, INC., a Delaware
corporation
By: /s/ Martin J. Silver
---------------------------------------------
Martin J. Silver, Chief Financial Officer
/s/ Mary Ann Byrnes
-------------------------------------------------
Mary Ann Byrnes
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO
PROMISSORY NOTE]
<PAGE>
EXHIBIT 10.39
CORSAIR COMMUNICATIONS, INC.
1997 OFFICER STOCK OPTION PLAN
------------------------------
ARTICLE I
GENERAL PROVISIONS
------------------
1. PURPOSE
This 1997 Executive Officer Stock Option Plan ("Plan") is intended to
promote the interests of Corsair Communications, Inc., a Delaware corporation
(the "Corporation"), by providing certain officers of the Corporation with the
opportunity to acquire ownership interests in the Corporation so as to encourage
them to continue to render services to the Corporation.
2. TERMINOLOGY
For the purposes of this Plan, any capitalized term shall have the
meaning assigned under Article III, Section 8 hereof.
3. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by either the Board or a committee
of two (2) or more Board members appointed by the Board to which the Board has
delegated administrative functions under the Plan (the "Plan Administrator").
Members of any committee to which the Board has delegated any administrative
functions shall serve for such terms as the Board shall determine and subject to
the Board's right of removal. All delegations of authority to any committee
shall be and remain revocable by the Board.
B. The Plan Administrator shall have full power and authority to
implement, interpret and administer the Plan, to establish all such rules and
regulations as it deems appropriate, and to make such determinations under the
Plan and any outstanding option grants as it deems necessary or advisable.
Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Plan or any outstanding option issuance.
4. SELECTION OF OPTIONEES
A. The persons eligible to receive option grants pursuant to the Plan
are limited to Officers of the Corporation, and the number of Officers receiving
options under the Plan shall not exceed ten.
<PAGE>
B. The Plan Administrator shall have the absolute discretion and
authority to determine, subject to the provisions of this Plan, the terms of any
option grant. In addition to any other matters over which the Plan
Administrator has discretion hereunder, the Plan Administrator shall determine
which, if any, eligible individuals will be granted options in accordance with
the Plan. The Plan Administrator will determine the number of shares to be
covered by each such grant, the time or times at which each granted option is to
become exercisable, the vesting schedule (if any) applicable to shares issued
pursuant to the granted options, and the maximum term for which the option may
remain outstanding. Any option issued pursuant to the Plan shall be a Non-
Statutory Option.
C. Common Stock issuable under the Plan, upon exercise of any option
may be subject to such restrictions on transfer, repurchase rights or other
restrictions as may be imposed by the Plan Administrator and set forth in the
documents governing such option.
5. STOCK SUBJECT TO THE PLAN
A. Authorized but unissued or reacquired Common Stock of the
Corporation will be issued under the Plan. The maximum number of shares of
Common Stock which may be issued over the term of the Plan shall not exceed
301,952 shares, subject to adjustment from time to time in accordance with the
provisions of this Section 5 of Article I.
B. Shares reserved for issuance under granted options but not in fact
issued pursuant to options granted under the Plan due to the expiration or
termination of the option or the cancellation of any option (including the
cancellation of any option in accordance with Section 3 of Article II will
remain available for issuance under the Plan. Shares actually issued under the
Plan pursuant to the exercise of an option which are subsequently repurchased by
the Corporation will not become available for future issuance.
C. In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock dividend, stock split, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments shall be
made to (i) the aggregate number and/or class of shares issuable under the Plan
and (ii) the aggregate number and/or class of shares and the option price per
share in effect under each outstanding option in order to prevent the dilution
or enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
-2-
<PAGE>
6. AMENDMENT OF THE PLAN AND AWARDS
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the rights and obligations of
an optionee with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any issuee with respect to Common Stock issued
under the Plan prior to such action unless such optionee or issuee consents to
such amendment.
7. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board, and
options to purchase shares of Common Stock may be granted after the effective
date.
B. The Plan shall terminate upon the earlier of (i) March 7, 2000, or
-------
(ii) the date on which all shares available for issuance under the Plan have
been issued pursuant to the exercise of options granted under Article II. The
termination of the Plan shall have no effect on any outstanding options or
shares issued and outstanding under the Plan, and such securities shall
thereafter continue to have force and effect in accordance with the provisions
of the agreements evidencing such options and issuances.
8. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon any person 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 of the optionee, which
rights are hereby expressly reserved by each, to terminate Service of the
optionee at any time for any reason whatsoever, with or without cause or to
engage in any Corporate Transaction.
ARTICLE II
OPTION GRANTS
-------------
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and shall be Non-Statutory Options. Each granted option
shall be evidenced by one or more instruments in the form approved by the Plan
Administrator; provided, however, that each such instrument shall comply with
--------
the terms and conditions of Sections 1 and 3 of this Article II.
A. OPTION PRICE.
------------
(I) The option price per share shall be fixed by the Plan
Administrator.
-3-
<PAGE>
(II) The option price per share shall be immediately due upon
exercise of the option and shall, subject to the provisions of Article III,
Section 1 and the agreement evidencing such grant, be payable in cash or check
drawn to the Corporation's order. Notwithstanding the above, should the
Corporation's outstanding Common Stock be registered under the 1934 Act, at the
time the option is exercised, then the option price may also be paid as follows:
- in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value; or
- through a special sale and remittance procedure pursuant
to which the optionee provides irrevocable written instructions (I) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, an amount sufficient to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and
State income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (II) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
Except to the extent such sale and remittance procedure is utilized, payment of
the option price must occur at the time the option is exercised.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
----------------------------
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement evidencing such option. However, no option
granted under the Plan shall have a term in excess of six (6) years from the
grant date.
C. NO ASSIGNMENT. During the lifetime of the Optionee, the option
-------------
shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death or in accordance with the terms of a Qualified
Domestic Relations Order. If such assignment is pursuant to a Qualified
Domestic Relations Order, the assigned option may only be exercised by the
person or persons who acquire a proprietary interest in the option. The terms
applicable to the assigned option (or portion thereof) shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
D. TERMINATION OF SERVICE. The following provisions shall govern
----------------------
the exercise period applicable to any options held by the optionee at the time
of cessation of Service or death:
-4-
<PAGE>
(I) Should the optionee cease to remain in Service for any reason
other than death or Permanent Disability, then the period during which each
outstanding option held by such optionee is to remain exercisable shall be
limited to the sixty (60) day period following the date of such cessation of
Service.
(II) Should such Service terminate by reason of Permanent Disability
or should the optionee die while holding one or more outstanding options, then
the period during which each such option is to remain exercisable shall be
limited to the six (6)-month period following the date of the optionee's
cessation of Service or death. During the limited exercise period following the
optionee's death, the option may be exercised by the personal representative of
the optionee's estate or by the person or persons to whom the option is
transferred pursuant to the optionee's will or in accordance with the laws of
descent and distribution.
(III) The Plan Administrator shall have full power and authority
to extend (either at the time the option is granted or at any time while the
option remains outstanding) the period of time for which the option is to remain
exercisable following the optionee's cessation of Service, from the limited
period otherwise applicable under subsection 1D of this Article II, to such
greater period of time as the Plan Administrator may deem appropriate under the
circumstances.
(IV) Notwithstanding the above no option shall be exercisable after
the specified expiration date of the option term.
(V) Each such option shall, during the applicable limited exercise
period, be exercisable only with respect to the shares for which the option was
exercisable on the date of the optionee's cessation of Service.
E. SHAREHOLDER RIGHTS. An optionee shall not have rights as a
------------------
shareholder with respect to any shares subject to an option until such optionee
shall have exercised the option and paid the option price.
F. UNVESTED SHARES. The Plan Administrator shall have the discretion to
---------------
grant options which are exercisable for unvested shares of Common Stock under
the Plan. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, all or (at the discretion of the Corporation) any of those unvested
shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
-5-
<PAGE>
2. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or a
different numbers of shares of Common Stock but having an option price per share
established at the time of such cancellation and regrant in accordance with the
provisions of this Plan.
3. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with such
Corporate Transaction. In addition, all outstanding repurchase rights under the
Plan shall terminate automatically in the event of any Corporate Transaction,
except to the extent the repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
--------
securities shall remain the same.
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
ARTICLE III
MISCELLANEOUS
-------------
1. LOANS
A. The Plan Administrator may assist any optionee in the exercise of
one or more options granted to such optionee under the Plan, including the
satisfaction of any Federal and State income and employment tax obligations
arising therefrom, by (i) authorizing the extension of a loan from the
Corporation to such optionee, or (ii) permitting the optionee to pay the option
price for the purchased Common Stock in installments over a period of years.
-6-
<PAGE>
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
authorized with or without security or collateral. In all events the maximum
credit available to each optionee may not exceed the sum of (i) the aggregate
---
option price payable for the purchased shares plus (ii) any Federal and State
income and employment tax liability incurred by the optionee in connection with
such exercise or purchase.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.
2. VESTING OF SHARES AND REPURCHASE RIGHTS
A. The Plan Administrator may impose such vesting requirements as it
deems appropriate with the Corporation retaining a right to repurchase any
unvested shares. The terms of the vesting schedule and of the Corporation's
repurchase rights shall be as determined by the Plan Administrator and set forth
in the agreement governing such issuance.
B. Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash dividend) which the
holder of unvested Common Stock may have the right to receive by reason of a
stock dividend, stock split, reclassification or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting and repurchase
limitations applicable to the unvested Common Stock with respect to which it was
paid or arose, and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.
C. No person to whom shares of Common Stock have been issued
pursuant to the Plan may transfer any such shares which have not vested.
Notwithstanding the above, the issuee shall have the right to make a gift of
unvested shares acquired under the Plan to his/her spouse, parents or issue or
to a trust established for such spouse, parents or issue, provided the
transferee of such shares delivers to the Corporation a written agreement to be
bound by all the provisions of the Plan or Stock Purchase Agreement executed by
the issuee at the time of his/her acquisition of the gifted shares.
3. MARKET STAND-OFF AGREEMENTS
The Plan Administrator may require each person to whom any shares are
issued under this Plan to enter into an agreement which restricts or prohibits
the sale of any stock of the Corporation by such person for a reasonable period
of time following a public offering of any shares of stock by the Corporation.
-7-
<PAGE>
4. RIGHT OF FIRST REFUSAL
Until such time as the Corporation's outstanding shares of Common
Stock are first registered under the 1934 Act, the Plan Administrator may
subject any shares issued pursuant to the Plan to a right of first refusal with
respect to any proposed disposition of such shares other than a transfer
permitted by Section 2.C of this Article III. Such right of first refusal shall
be exercisable by the Corporation (or its assignees) in accordance with the
terms and conditions specified in the instrument governing the issuance of such
shares.
5. SECURITIES LAWS; LEGENDS
A. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until the Corporation shall have determined
that there has been full and adequate compliance with all applicable
requirements of the Federal and state securities laws and all other applicable
legal and regulatory requirements.
B. Shares issued under the Plan shall bear such legends as the Plan
Administrator deems necessary or appropriate, including such restrictive legends
as the Plan Administrator shall require to reflect the terms of any agreement
between the issuee and the Corporation.
6. SHAREHOLDER RIGHTS
Subject to the rights of the Corporation set forth herein or in any
other agreement entered into between the Corporation and an issuee of shares
under the Plan, each person to whom shares of Common Stock have been issued
under the Plan shall have all the rights of a shareholder with respect to those
shares whether or not his/her interest in such shares is vested. Accordingly,
the issuee shall have the right to vote such shares and to receive any cash
dividends or other distributions paid or made with respect to such shares.
7. ACCELERATION
The Plan Administrator may, in its discretion, provide for the
automatic acceleration upon a change of control and\or Corporate Transaction of
the time at which any option will become exercisable or for the lapse of any
repurchase right tied to vesting by including a provision to such effect in the
documents evidencing the rights of the optionee or issuee.
-8-
<PAGE>
8. DEFINITIONS
The following definitions shall be in effect under this Plan:
A. BOARD shall mean the Board of Directors of the Corporation.
-----
B. COMMON STOCK shall mean the common stock of the Corporation.
------------
C. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) any transaction or series of related transactions
(including, without limitation, any reorganization, merger or
consolidation) in which more than fifty percent (50%) of the Corporation's
outstanding voting stock is transferred to a person or persons different
from those who held the stock immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
D. OFFICER shall mean an individual who is an officer of the
-------
Corporation or any Parent or Subsidiary in the position of Vice President or
higher.
E. FAIR MARKET VALUE per share of Common Stock on any relevant
-----------------
date under the Plan shall be the value determined in accordance with the
following provisions:
(i) If the Common Stock is not at the time listed or admitted to
trading on any Stock Exchange but is traded on the NASDAQ National Market
System, the Fair Market Value shall be the closing selling price per share
of Common Stock on the date in question, as the price is reported by the
National Association of Securities Dealers through the NASDAQ National
Market System or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed or admitted to
trading on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
-9-
<PAGE>
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on the NASDAQ National
Market System, then such Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
F. NON-STATUTORY OPTION shall mean a stock option not intended to
--------------------
meet the requirements of Code Section 422..
G. PERMANENT DISABILITY shall have the meaning assigned to such
--------------------
term in Code Section 22(e)(3).
H. SERVICE shall mean the provision of services to the
-------
Corporation or any Parent or Subsidiary by an individual in the capacity of an
Officer.
9. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
10. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any options shall be subject to the satisfaction of all applicable Federal,
State and local income and employment tax withholding requirements.
11. REGULATORY APPROVALS
The implementation of the Plan, and the issuance of Common Stock upon
the exercise of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it, and
the Common Stock issued pursuant to it.
-10-
<PAGE>
EXHIBIT 10.41
CORSAIR COMMUNICATIONS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests
of Corsair Communications, Inc., a Delaware corporation, by providing eligible
employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed two hundred fifty
thousand (250,000) shares.
B. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, 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, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date and (iii) the number and class of
securities and the price per share in effect under each outstanding purchase
right in order to prevent the dilution or enlargement of benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number
<PAGE>
of shares of Common Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated.
B. The initial offering period shall commence as of the Effective
Time of the Plan and shall continue until July 31, 1999. Thereafter, each
successive offering period shall be of 24 months duration. The next offering
period shall commence on the first business day in August 1999, and subsequent
offering periods shall commence as designated by the Plan Administrator.
Notwithstanding the above, the Plan Administrator may shorten the duration of
any offering period to less than twenty-four (24) months provided that such
action is taken prior to the start date of such offering period.
C. Each offering period shall be comprised of a series of one or more
successive Purchase Intervals. Purchase Intervals shall run from the first
business day in February each year to the last business day in July of the same
year and from the first business day in August each year to the last business
day in January of the following year. Accordingly, the first Purchase Interval
in effect under the initial offering period shall commence at the Effective Time
and terminate on the last business day in January 1998.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new
offering period shall have a duration of twenty four (24) months, unless a
shorter duration is established by the Plan Administrator within five (5)
business days following the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of
any offering period under the Plan may enter that offering period on such start
date or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such
2.
<PAGE>
forms with the Plan Administrator (or its designate) on or before his or her
scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock during an offering period may be any
multiple of one percent (1%) of the Base Salary paid to the Participant during
each Purchase Interval within that offering period, up to a maximum of ten
percent (10%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during the offering
period, reduce his or her rate of payroll deduction to become effective as
soon as possible after filing the appropriate form with the Plan
Administrator. The Participant may not, however, effect more than one (1)
such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement of any new
Purchase Interval within the offering period, increase the rate of his or
her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the ten percent (10%)
maximum) shall become effective on the start date of the first Purchase
Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be held in
any segregated account or trust fund and may be commingled with the general
assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.
D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
3.
<PAGE>
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
-----------------------
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
------------------------------
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant (other than Participants whose payroll deductions
have previously been refunded pursuant to the Termination of Purchase Right
provisions below) on each such Purchase Date. The purchase shall be effected by
applying the Participant's payroll deductions for the Purchase Interval ending
on such Purchase Date to the purchase of whole shares of Common Stock at the
purchase price in effect for the Participant for that Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which Common
--------------
Stock will be purchased on the Participant's behalf on each Purchase Date within
the offering period shall not be less than eighty-five percent (85%) of the
lower of (i) the Fair Market Value per share of Common Stock on the
- -----
Participant's Entry Date into that offering period or (ii) the Fair Market Value
per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
----------------------------
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Interval ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date but in no event may any Participant purchase
more than 7,500 shares on any Purchase Date.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to
-------------------------
the purchase of shares of Common Stock on any Purchase Date because they are
not sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the
4.
<PAGE>
purchase of Common Stock by reason of the limitation on the maximum number of
shares purchasable by the Participant on the Purchase Date shall be promptly
refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
-----------------------------
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next scheduled
Purchase Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan Administrator
(or its designate), and no further payroll deductions shall be collected
from the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the Purchase Interval in which such
termination occurs shall, at the Participant's election, be immediately
refunded or held for the purchase of shares on the next Purchase Date. If
no such election is made at the time such purchase right is terminated,
then the payroll deductions collected with respect to the terminated right
shall be refunded as soon as possible.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the offering
period for which the terminated purchase right was granted. In order to
resume participation in any subsequent offering period, such individual
must re-enroll in the Plan (by making a timely filing of the prescribed
enrollment forms) on or before his or her scheduled Entry Date into that
offering period.
(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in status)
while his or her purchase right remains outstanding, then that purchase
right shall immediately terminate, and all of the Participant's payroll
deductions for the Purchase Interval in which the purchase right so
terminates shall be immediately refunded. However, should the Participant
cease to remain in active service by reason of an approved unpaid leave of
absence, then the Participant shall have the right, exercisable up until
the last business day of the Purchase Interval in which such leave
commences, to (a) withdraw all the payroll deductions collected to date on
his or her behalf for that Purchase Interval or (b) have such funds held
for the purchase of shares on his or her behalf on the next scheduled
Purchase Date. In no event, however, shall any further payroll deductions
be collected on the Participant's behalf during such leave. Upon the
Participant's return to active service, his or her payroll deductions under
the Plan shall automatically resume at the rate in effect at the time the
leave began, unless the Participant withdraws from the Plan prior to his or
her return.
5.
<PAGE>
G. CORPORATE TRANSACTION. Each outstanding purchase right shall
---------------------
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Interval in which such Corporate Transaction occurs to the
purchase of whole shares of Common Stock at a purchase price per share not less
than eighty-five percent (85%) of the lower of (i) the Fair Market Value per
-----
share of Common Stock on the Participant's Entry Date into the offering period
in which such Corporate Transaction occurs or (ii) the Fair Market Value per
share of Common Stock immediately prior to the effective date of such Corporate
Transaction. However, the applicable limitation on the number of shares of
Common Stock purchasable per Participant shall continue to apply to any such
purchase.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Corporate Transaction,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
----------------------------
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by
-------------
the Participant and shall not be assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
------------------
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
6.
<PAGE>
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each successive
Purchase Date during the offering period on which such right remains
outstanding.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock under
one (1) or more other purchase rights at a rate equal to Twenty-Five
Thousand Dollars ($25,000) worth of Common Stock (determined on the basis
of the Fair Market Value per share on the date or dates of grant) for each
calendar year such rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE TIME AND TERM OF THE PLAN
A. The Plan shall become effective at the Effective Time, provided
--------
no purchase rights granted under the Plan shall be exercised, and no shares of
Common Stock shall be issued hereunder, until (i) the Plan shall have been
approved by the stockholders of the Corporation and (ii) the Corporation shall
have complied with all applicable requirements of the 1933 Act (including the
registration of the shares of Common Stock issuable under the Plan on a Form S-8
registration statement filed with the Securities and Exchange Commission), all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which the Common Stock is listed for trading and all
other applicable requirements established by law or regulation. In the event
such stockholder approval is not obtained, or such compliance is not effected,
within twelve (12) months after the date on which the Plan is adopted by the
Board, the Plan shall terminate and have no further force or effect, and all
sums collected from Participants during the initial offering period hereunder
shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in August 2006, (ii) the date on
--------
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights
7.
<PAGE>
exercised under the Plan or (iii) the date on which all purchase rights are
exercised in connection with a Corporate Transaction. No further purchase
rights shall be granted or exercised, and no further payroll deductions shall be
collected, under the Plan following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan or the maximum number of shares purchasable per
Participant on any one Purchase Date, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation.
B. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. The provisions of the Plan shall be governed by the laws of the
State of Delaware without resort to that State's conflict-of-laws rules.
8.
<PAGE>
SCHEDULE A
----------
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
------------------------
Corsair Communications, Inc.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the (i) regular base salary paid to a
-----------
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. The
following items of compensation shall NOT be included in Base Salary: (i) all
overtime payments, bonuses, commissions (other than those functioning as base
salary equivalents), profit-sharing distributions and other incentive-type
payments and (ii) any and all contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate under any employee benefit or welfare
plan now or hereafter established.
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE AFFILIATE shall mean any parent or subsidiary
-------------------
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
F. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation 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 transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation.
G. CORPORATION shall mean Corsair Communications, Inc., a Delaware
-----------
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Corsair Communications, Inc. which shall by
appropriate action adopt the Plan.
A-1.
<PAGE>
H. EFFECTIVE TIME shall mean the time at which the Underwriting
--------------
Agreement is executed and finally priced. Any Corporate Affiliate which becomes
a Participating Corporation after such Effective Time shall designate a
subsequent Effective Time with respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
-----------------
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first
----------
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(iii) For purposes of the initial offering period which begins
at the Effective Time, the Fair Market Value shall be deemed to be equal to
the price per share at which the Common Stock is sold in the initial public
offering pursuant to the Underwriting Agreement.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
--------
A-2.
<PAGE>
M. PARTICIPANT shall mean any Eligible Employee of a Participating
-----------
Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and such
-------------------------
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan as of the Effective Time are listed in
attached Schedule A.
O. PLAN shall mean the Corporation's Employee Stock Purchase Plan, as
----
set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
------------------
Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each Purchase
-------------
Interval. The initial Purchase Date shall be the last business day in January
1998.
R. PURCHASE INTERVAL shall mean each successive six (6)-month period
-----------------
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in
----------------------
February and August each year on which an Eligible Employee may first enter an
offering period.
T. STOCK EXCHANGE shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-3.
<PAGE>
EXHIBIT 10.42
CORSAIR COMMUNICATIONS, INC.
1997 STOCK INCENTIVE PLAN
-------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1997 Stock Incentive Plan is intended to promote the interests of
Corsair Communications, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity
programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
- 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,
- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and
- the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Six shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12 Registration Date, the Discretionary
Option Grant and Stock Issuance Programs shall be administered by the Board.
Beginning with the Section 12 Registration Date, the Primary Committee 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.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant,
Salary Investment Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of such
programs and any outstanding options or stock issuances thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant, Salary
Investment Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
2.
<PAGE>
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under this program.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders and other highly
compensated Employees shall be eligible to participate in the Salary Investment
Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
D. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to non-employee Board members
who are elected or appointed to the Board after the Effective Date. A non-
employee Board member who has previously been in the employ of the Corporation
(or any Parent or Subsidiary) shall not be eligible to receive an option grant
under the Automatic Option Grant Program at the
3.
<PAGE>
time he or she first becomes a non-employee Board member, but shall be eligible
to receive periodic option grants under the Automatic Option Grant Program while
he or she continues to serve as a non-employee Board member.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan is 2,013,428 shares.
Such authorized share reserve is comprised of (i) the number of shares which
remain available for issuance, as of the Plan Effective Date, under the
Predecessor Plans as last approved by the Corporation's stockholders, including
the shares subject to the outstanding options to be incorporated into the Plan
and the additional shares which would otherwise be available for future grant,
plus (ii) an additional increase of 500,000 shares authorized by the Board but
subject to stockholder approval prior to the Section 12 Registration Date. On
the first day of each calendar year, beginning with the 1998 calendar year, the
share reserve for the Plan will increase by an amount equal to 2.0% of the
shares of Common Stock outstanding on December 31 of the immediately preceding
calendar 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.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 750,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1997 calendar year.
C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plans) shall be
available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
4.
<PAGE>
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, 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, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under this Plan per calendar year, (iii) the number
and/or class of securities for which grants are subsequently to be made under
the Automatic Option Grant Program to new and continuing non-employee Board
members, (iv) the number and/or class of securities and the exercise price per
share in effect under each outstanding option under the Plan and (v) the number
and/or class of securities and price per share in effect under each outstanding
option incorporated into this Plan from the Predecessor Plans. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article Six and
the documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
5.
<PAGE>
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable written instructions to (a)
a Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit 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
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
----------------------------
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
--------------------------------
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom
the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution.
(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
6.
<PAGE>
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
limited exercise period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in no
event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the Optionee
would have vested had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
-----------------
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, subject to the
express terms of the Option Agreement, a Non-Statutory Option may be assigned in
whole or in part during the Optionee's lifetime with the prior consent of the
Plan Administrator. The assigned portion
7.
<PAGE>
may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Six shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.
---
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
-----------
B. EXERCISE PRICE. The exercise price per share shall not be less
--------------
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
-----------------
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent
the Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in
8.
<PAGE>
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
those option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
The determination of option comparability under clause (i) above shall be made
by the Plan Administrator, and its determination shall be final, binding and
conclusive.
B. All outstanding repurchase rights shall terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
- --------
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and do not
otherwise accelerate. Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
-------
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator may
provide that one or more of the Corporation's outstanding repurchase rights with
respect to shares held by the Optionee at
9.
<PAGE>
the time of such Involuntary Termination shall immediately terminate, and the
shares subject to those terminated repurchase rights shall accordingly vest in
full.
F. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control. Each option so accelerated shall remain exercisable for fully-
vested shares until the earlier of (i) the expiration of the option term or (ii)
-------
the expiration of the one (1)-year period measured from the effective date of
the Involuntary Termination. In addition, the Plan Administrator may provide
that one or more of the Corporation's outstanding repurchase rights with respect
to shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate, and the shares subject to those terminated repurchase
rights shall accordingly vest in full.
G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
H. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plans) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
10.
<PAGE>
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution from
the Corporation in an amount equal to the excess of (a) the Fair Market
Value (on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (b) the aggregate exercise price payable for such
shares.
(ii) No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so approved,
then the distribution to which the Optionee shall be entitled may be made
in shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the
Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion thereof)
on the option surrender date and may exercise such rights at any time prior
to the later of (a) five (5) business days after the receipt of the
-----
rejection notice or (b) the last day on which the option is otherwise
exercisable in accordance with the terms of the documents evidencing such
option, but in no event may such rights be exercised more than ten (10)
years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender each
such option to the Corporation, to the extent the option is at the time
exercisable for vested shares of Common Stock. In return for the
surrendered option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over Price of
the shares of Common Stock which are at the time vested under each
surrendered option (or surrendered portion thereof) over (B) the aggregate
exercise price payable for such shares. Such
11.
<PAGE>
cash distribution shall be paid within five (5) days following the option
surrender date.
(iii) Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such option
surrender and cash distribution.
(iv) The balance of the option (if any) shall remaining
outstanding and exercisable in accordance with the documents evidencing
such option.
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
--------------------------------------
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for those calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). The Primary Committee shall have complete
discretion to determine whether to approve the filed authorization in whole or
in part. To the extent the Primary Committee approves the authorization, the
individual who filed that authorization shall be granted an option under the
Salary Investment Grant Program as soon as possible after the start of the
calendar year for which the salary reduction is to be in effect. All grants
under the Salary Investment Option Grant Program shall be at the sole discretion
of the Primary Committee.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
--------
that each such document shall comply with the terms specified below.
12.
<PAGE>
A. EXERCISE PRICE.
--------------
1. The exercise price per share shall be equal to the excess of
(i) the Fair Market Value of the Common Stock on the option grant date, over
(ii) the amount of the approved Salary Reduction divided by the number of shares
subject to the Option.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
-----------------------
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x C), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the
Optionee's base salary for the calendar year,
B is the Fair Market Value per share of Common Stock on the
option grant date, and
C is a percentage between 33 1/3% and 66 2/3% fixed by the Plan
Administrator, in its sole discretion, for purposes of the Salary
Investment Option Grant Program with respect to options to be
granted during the current year of the Plan.
C. EXERCISE AND TERM OF OPTIONS. The option shall become
----------------------------
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
--------------------------------
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
-------
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or
13.
<PAGE>
all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
Such right of exercise shall lapse, and the option shall terminate, upon the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the three
- -------
(3)-year period measured from the date of the Optionee's cessation of Service.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and shall remain exercisable for the
fully-vested shares until the earlier of (i) the expiration of the ten (10)-year
-------
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
Any options not exercised prior to the Change in Control may be repurchased by
the Corporation at the time of the Change in Control at a repurchase price equal
to the salary reduction incurred in connection with the issuance of the option.
Any option which is neither exercised or repurchased shall remain so exercisable
until the earlier or (i) the expiration of the ten (10)-year option term or (ii)
-------
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Service.
C. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
14.
<PAGE>
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. PURCHASE PRICE.
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Six,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING PROVISIONS.
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
15.
<PAGE>
(i) the Service period to be completed by the Participant
or the performance objectives to be attained,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of 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 shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect to
any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.
16.
<PAGE>
5. The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock which would
otherwise occur upon the cessation of the Participant's Service or the non-
attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase/cancellation
rights under the Stock Issuance Program shall terminate automatically, and all
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase/cancellation rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed in the
Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase/cancellation rights
are assigned to the successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
17.
<PAGE>
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. GRANT DATES. On the date of each Annual Stockholders Meeting
-----------
held after 1997, option grants shall be made to each Eligible Director who is a
member of the Board immediately after that particular Annual Meeting. Each
automatic option grant shall be a Non-Statutory Option. The number of shares of
Common Stock subject to the option shall be equal to 2,500 shares. There shall
be no limit on the number of such automatic option grants any one Eligible
Director may receive over his or her period of Board service, and non-employee
Board members who have previously been in the employ of the Corporation (or any
Parent or Subsidiary) or who have otherwise received a stock option grant from
the Corporation prior to the Effective Date shall be eligible to receive one or
more such annual option grants over their period of continued Board service.
B. EXERCISE PRICE.
--------------
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
-------------------------------
exercisable only with respect to option shares with respect to which the
automatic option grant has become vested. Provided that the non-employee
director continues to be a Member of the Board, each automatic option grant
shall vest in twelve equal monthly installments commencing with the date which
is one month after the date of the Annual Meeting to which the option grant
relates. No portion of the automatic option grant shall vest after the optionee
has ceased to be a member of the Board.
E. TERMINATION OF BOARD SERVICE. The following provisions shall
----------------------------
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
18.
<PAGE>
(i) The Optionee (or, in the event of Optionee's death,
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution) shall have a
twelve (12)-month period following the date of such cessation of Board
service in which to exercise each such option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares of Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member
by reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable after
the expiration of the option term. Upon the expiration of the twelve (12)-
month exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Board service for any
reason other than death or Permanent Disability, terminate and cease to be
outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as fully-
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, each automatic option grant shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the
19.
<PAGE>
Change in Control, become fully exercisable for all of the shares of Common
Stock at the time subject to such option and may be exercised for all or any
portion of those shares as fully-vested shares of Common Stock. Each such
option shall remain exercisable for such fully-vested option shares until the
expiration or sooner termination of the option term or the surrender of the
option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to 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 at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. No approval or
consent of the Board or any Plan Administrator shall be required in connection
with such option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
--------
payable for such securities shall remain the same.
E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
20.
<PAGE>
ARTICLE SIX
MISCELLANEOUS
-------------
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation withhold,
-----------------
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at
--------------
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
21.
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan
Effective Date. However, the Salary Investment Option Grant Program shall not
be implemented until such time as the Primary Committee may deem appropriate.
Options may be granted under the Discretionary Option Grant or Automatic Option
Grant Program at any time on or after the Plan Effective Date. However, no
options granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's stockholders.
If such stockholder approval is not obtained within twelve (12) months after the
Plan Effective Date, then all options previously granted under this Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plans,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plans after the Section 12 Registration Date. All options
outstanding under the Predecessor Plans on the Section 12 Registration Date
shall be incorporated into the Plan at that time and shall be treated as
outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plans which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) the tenth
--------
anniversary of the Plan Effective Date, (ii) the date on which all shares
available for issuance under the Plan shall have been issued as fully-vested
shares or (iii) the termination of all outstanding options in connection with a
Corporate Transaction. Upon such plan termination, all outstanding option
grants and unvested stock issuances shall thereafter continue to have force and
effect in accordance with the provisions of the documents evidencing such grants
or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain
22.
<PAGE>
amendments may require stockholder approval if so determined by the Board or
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained any required approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such approval is not obtained within twelve
(12) months after the date the first such excess issuances are made, then (i)
any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
23.
<PAGE>
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
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 such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
24.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
------------------------------
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of 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) 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 members 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 the Board approved such election or
nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
E. COMMON STOCK shall mean the Corporation's common stock.
------------
F. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation 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 transaction, or
A-1.
<PAGE>
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
G. CORPORATION shall mean Corsair Communications, Inc., a Delaware
-----------
corporation, and its successors.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
----------------------------------
grant program in effect under the Plan.
I. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
-----------------
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
J. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), 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.
K. EXERCISE DATE shall mean the date on which the Corporation shall have
-------------
received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question, as
such price is reported on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) For purposes of any option grants made on the Underwriting
Date, the Fair Market Value shall be deemed to be equal to the
A-2.
<PAGE>
price per share at which the Common Stock is to be sold in the initial
public offering pursuant to the Underwriting Agreement.
(iv) For purposes of any option grants made prior to the
Underwriting Date, the Fair Market Value shall be determined by the Plan
Administrator, after taking into account such factors as it deems
appropriate.
M. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
-----------------
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of 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.
N. INCENTIVE OPTION shall mean an option which satisfies the requirements
----------------
of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of the Service of
-----------------------
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and participation in
any corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) 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 without the
individual's consent.
P. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by the Optionee or Participant, 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 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, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
A-3.
<PAGE>
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is granted under the
--------
Discretionary Option Grant, Salary Investment Option Grant or the Automatic
Option Grant Program.
T. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PARTICIPANT shall mean any person who is issued shares of Common Stock
-----------
under the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
--------------------------------------------
of the Optionee or the Participant to engage in 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) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
W. PLAN shall mean the Corporation's 1997 Stock Incentive Plan, as set
----
forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean the date on which the Plan was adopted
-------------------
by the Board.
Z. PREDECESSOR PLANS shall mean the Corporation's 1995 and 1996 Stock
-----------------
Option/Stock Issuance Plans and 1997 Officer Stock Option Plan in effect
immediately prior to the Plan Effective Date hereunder.
A-4.
<PAGE>
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-
-----------------
employee Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders and
to administer the Salary Investment Option Grant Program with respect to all
eligible individuals.
AB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
--------------------------------------
investment option grant program in effect under the Plan.
AC. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
-------------------
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
AD. SECTION 12 REGISTRATION DATE shall mean the date on which the Common
----------------------------
Stock is first registered under Section 12(g) or Section 15 of the 1934 Act.
AE. SECTION 16 INSIDER shall mean an officer or director of the
------------------
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AF. SERVICE shall mean the performance of services for the Corporation (or
-------
any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
AG. STOCK EXCHANGE shall mean either the American Stock Exchange or the
--------------
New York Stock Exchange.
AH. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
------------------------
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
AI. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
----------------------
under the Plan.
AJ. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AK. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
--------------- -------
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered
A-5.
<PAGE>
option is an Incentive Option, the Take-Over Price shall not exceed the clause
(i) price per share.
AL. TAXES shall mean the Federal, state and local income and employment
-----
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
AM. 10% STOCKHOLDER shall mean the owner of stock (as determined under
---------------
Code Section 424(d)) 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).
AN. UNDERWRITING AGREEMENT shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
AO. UNDERWRITING DATE shall mean the date on which the Underwriting
-----------------
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
A-6.
<PAGE>
EXHIBIT 10.44
CORSAIR COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
- --------
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
---------------
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. If this option is designated an
-----------------------
Incentive Option in the Grant Notice, then this option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime with the consent of the Plan
Administrator. The assigned portion shall be exercisable only by the person or
persons who acquire a proprietary interest in the option pursuant to such
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for this option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
4. DATES OF EXERCISE. This option shall become exercisable for the
-----------------
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes
<PAGE>
exercisable for such installments, those installments shall accumulate and the
option shall remain exercisable for the accumulated installments until the
Expiration Date or sooner termination of the option term under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
--------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while this
option is outstanding, then Optionee shall have a period of three (3)
months (commencing with the date of such cessation of Service) during which
to exercise this option, but in no event shall this option be exercisable
at any time after the Expiration Date.
(ii) Should Optionee die while this option is outstanding,
then the personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to Optionee's will or in
accordance with the laws of descent and distribution shall have the right
to exercise this option. Such right shall lapse, and this option shall
cease to be outstanding, upon the earlier of (A) the expiration of the
-------
twelve (12)-month period measured from the date of Optionee's death or (B)
the Expiration Date.
(iii) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a
period of twelve (12) months (commencing with the date of such cessation of
Service) during which to exercise this option. In no event shall this
option be exercisable at any time after the Expiration Date.
(iv) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more
than the number of vested Option Shares for which the option is exercisable
at the time of Optionee's cessation of Service. Upon the expiration of such
limited exercise period or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding for any vested Option
Shares for which the option has not been exercised. However, this option
shall, immediately upon Optionee's cessation of Service for any reason,
terminate and cease to be outstanding with respect to any Option Shares in
which Optionee is not otherwise at that time vested or for which this
option is not otherwise at that time exercisable.
2.
<PAGE>
(v) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to
remain outstanding.
6. SPECIAL ACCELERATION OF OPTION.
------------------------------
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
the Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully-vested shares of Common Stock. No such acceleration of
this option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
Option Shares at the time of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent pay-out in accordance with the
option exercise/vesting schedule set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
--------
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change 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. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, 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, appropriate adjustments shall be
3.
<PAGE>
made to (i) the total number and/or class of securities subject to this option
and (ii) the Exercise Price in order to reflect such change and thereby preclude
a dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
---------------------------
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in accordance
with Paragraph 13;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable written
instructions (I) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit 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 Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (II) to the Corporation to deliver the
certificates for the purchased
4.
<PAGE>
shares directly to such brokerage firm in order to complete the sale
transaction.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
----------------------
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
5.
<PAGE>
12. NOTICES. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal 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 the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
13. FINANCING. The Plan Administrator may, in its absolute
---------
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this Agreement
-------------
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
--------------------------------------------------
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
- This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares: (A) more than three (3)
months after the date Optionee ceases to be an Employee for any reason
other than death or Permanent Disability or (B) more than twelve (12)
months after the date Optionee ceases to be an Employee by reason of
Permanent Disability.
6.
<PAGE>
- No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent)
the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which such installment first becomes exercisable
hereunder would, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other
securities for which this option or any other Incentive Options
granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate. Should such One
Hundred Thousand Dollar ($100,000) limitation be exceeded in any
calendar year, this option shall nevertheless become exercisable for
the excess shares in such calendar year as a Non-Statutory Option.
- Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for
favorable tax treatment as an Incentive Option only to the extent the
aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which this option first becomes exercisable in the
calendar year in which the Corporate Transaction occurs does not, when
added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this
option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. Should the applicable One Hundred
Thousand Dollar ($100,000) limitation be exceeded in the calendar year
of such Corporate Transaction, the option may nevertheless be
exercised for the excess shares in such calendar year as a Non-
Statutory Option.
- Should Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become
exercisable for the first time in the same calendar year as this
option, then the foregoing limitations on the exercisability of such
options as Incentive Options shall be applied on the basis of the
order in which such options are granted.
18. LEAVE OF ABSENCE. The following provisions shall apply upon the
----------------
Optionee's commencement of an authorized leave of absence:
(a) The exercise schedule in effect under the Grant Notice
shall be frozen as of the first day of the authorized leave, and this
option shall not become exercisable for any additional installments of
the Option Shares during the period Optionee remains on such leave.
7.
<PAGE>
(b) Should Optionee resume active Employee status within
sixty (60) days after the start date of the authorized leave, Optionee
shall, for purposes of the exercise schedule set forth in the Grant
Notice, receive Service credit for the entire period of such leave. If
Optionee does not resume active Employee status within such sixty (60)-
day period, then no Service credit shall be given for the period of
such leave.
(c) If the option is designated as an Incentive Option in
the Grant Notice, then the following additional provision shall apply:
- If the leave of absence continues for more than
ninety (90) days, then this option shall automatically convert to
a Non-Statutory Option under the Federal tax laws on the ninety-
first (91st) day of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by written
agreement. Following any such conversion of the option, all
subsequent exercises of such option, whether effected before or
after Optionee's return to active Employee status, shall result
in an immediate taxable event, and the Corporation shall be
required to collect from Optionee the Federal, state and local
income and employment withholding taxes applicable to such
exercise.
(d) In no event shall this option become exercisable for
any additional Option Shares or otherwise remain outstanding if
Optionee does not resume Employee status prior to the Expiration Date
of the option term.
8.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Corsair Communications, Inc. (the "Corporation") that
I elect to purchase _______ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $_______ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 1997 Stock Incentive Plan on_________, 199___.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
_____________________ , 199__
Date
______________________________________
Optionee
Address:______________________________
______________________________________
Print name in exact manner
it is to appear on the
stock certificate: ______________________________________
Address to which certificate
is to be sent, if different
from address above: ______________________________________
______________________________________
Social Security Number: ______________________________________
Employee Number: ______________________________________
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
---------
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation 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 transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
F. CORPORATION shall mean Corsair Communications, Inc., a Delaware
-----------
corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), 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.
H. EXERCISE DATE shall mean the date on which the option shall have been
-------------
exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified in
--------------
the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
---------------
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
A-1.
<PAGE>
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
L. GRANT DATE shall mean the date of grant of the option as specified in
----------
the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the requirements
----------------
of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee 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 all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
------------------
attached hereto as Exhibit I.
A-2.
<PAGE>
R. OPTION SHARES shall mean the number of shares of Common Stock subject
-------------
to the option as specified in the Grant Notice.
S. OPTIONEE shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
T. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PERMANENT DISABILITY shall mean the inability of Optionee to engage in
--------------------
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
V. PLAN shall mean the Corporation's 1997 Stock Incentive Plan.
----
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
------------------
Board acting in its administrative capacity under the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
--------------
Stock Exchange.
Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
<PAGE>
EXHIBIT 10.45
LANDLORD
San Tomas Investment Company
TENANT
Corsair Communications
DATED: January 10,1997
ADDRESS OF PREMISES:
3408 Hillview Avenue, Palo Alto, California 94304
<PAGE>
LEASE SUMMARY
-------------
Parties:
Landlord: San Tomas Investment Company, a California limited
partnership
Tenant: Corsair Communications, a Delaware corporation
Premises: All that certain building located at 3408 Hillview Avenue,
Palo Alto, California, comprised of approximately 55,000
square feet together with adjacent parking and landscaping
improvements as depicted on Exhibit B attached hereto.
Floor Area: Approximately 55,000 square feet
Commencement
Date: June 1, 1997
Expiration Date: May 31, 2002
Rent: Initial monthly Base Rent of $132,000, to be increased in
accordance with Paragraph 3.1.
Security Deposit: $132,000
Tenant's Share
of Building: 100%
Option(s)
to Extend: Two (2) options to extend the term for a period of two and
one-half (2-1/2) years each.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. MASTER LEASE; PREMISES............................................... 1
2. TERM; DELIVERY OF POSSESSION; CONSENT OF LANDLORD'S LENDER........... 1
2.1. Term........................................................... 1
2.2. Tenant Currently in Possession................................. 2
2.3. Required Consents.............................................. 2
3. RENT................................................................. 2
3.1. Base Rent...................................................... 2
3.2. Manner of Payment.............................................. 2
3.3. Late Payment Charge............................................ 3
4. SECURITY DEPOSIT..................................................... 3
5. TAXES................................................................ 3
5.1. Tenant's Personal Property..................................... 3
5.2. Real Property Taxes............................................ 3
6. USE.................................................................. 4
6.1. Permitted Uses................................................. 5
6.2. Compliance with Law............................................ 5
6.3. Hazardous Materials............................................ 5
6.4. Restrictions on Use............................................ 7
7. DIRECT OPERATING EXPENSES............................................ 7
7.1. Landlord to Maintain and Control Outside Areas................. 7
7.2. Tenant to Pay.................................................. 7
7.3. Monthly Payments............................................... 9
8. MAINTENANCE AND REPAIRS.............................................. 9
8.1. Tenant's Obligations........................................... 9
8.2. Landlord's Obligations......................................... 10
9. ALTERATIONS.......................................................... 10
9.1. Landlord's Consent Required.................................... 10
9.2. Plans and Permits.............................................. 11
9.3. Construction Work Done by Tenant............................... 11
9.4. Roof Repairs................................................... 11
9.5. Title to Alterations........................................... 11
9.6. Removal of Alterations......................................... 12
10. MECHANICS' LIENS..................................................... 12
11. UTILITIES............................................................ 12
12. INDEMNITY............................................................ 12
13. WAIVER OF CLAIMS..................................................... 13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
14. INSURANCE............................................................ 13
14.1. Tenant's Liability Insurance.................................. 13
14.2. Landlord's Liability Insurance................................ 14
14.3. Property Insurance............................................ 14
14.4. Payment....................................................... 14
14.5. Insurance Policies............................................ 15
14.6. Waiver of Subrogation......................................... 15
14.7. No Limitation of Liability.................................... 15
14.8. Impounding of Premiums........................................ 15
15. DAMAGE OR DESTRUCTION................................................ 16
15.1. Partial Damage-Insured........................................ 16
15.2. Partial Damage-Uninsured...................................... 16
15.3. Total Destruction............................................. 16
15.4. Damage Near End of Term....................................... 17
15.5. Abatement of Rent............................................. 17
15.6. Waiver........................................................ 17
15.7. Tenant's Property............................................. 17
15.8. Notice of Damage.............................................. 17
15.9. Replacement Cost.............................................. 17
15.10. Damage and Destruction-Tenant's Termination Rights............ 18
16. CONDEMNATION......................................................... 18
16.1. Partial Taking................................................ 18
16.2. Total Taking.................................................. 18
16.3. Distribution of Award......................................... 19
16.4. Sale Under Threat of Condemnation............................. 19
16.5. Temporary Taking.............................................. 19
17. ASSIGNMENT AND SUBLETTING............................................ 19
17.1. Documentation................................................. 19
17.2. Terms and Conditions.......................................... 20
17.3. Partnership................................................... 20
17.4. Corporation................................................... 20
17.5. Landlord's Remedies........................................... 21
17.6. Encumbrances, Licenses and Concession Agreements.............. 21
18. DEFAULT BY TENANT.................................................... 21
18.1. Event of Default.............................................. 21
18.2. Remedies...................................................... 22
18.3. No Relief From Forfeiture After Default....................... 24
18.4. Landlord's Right to Perform Tenant's Obligations.............. 24
18.5. Interest on Past Due Obligations.............................. 24
18.6. Additional Rent............................................... 24
18.7. Remedies Not Exclusive........................................ 24
19. DEFAULT BY LANDLORD.................................................. 25
19.1. Cure Period................................................... 25
19.2. Mortgagee Protection.......................................... 25
20. ADVERTISEMENTS AND SIGNS............................................. 25
21. ENTRY BY LANDLORD.................................................... 25
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
22. SUBORDINATION AND ATTORNMENT......................................... 26
22.1. Subordination................................................. 26
22.2. Attornment.................................................... 26
22.3. Cooperation Regarding Agreements.............................. 26
23. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS....................... 27
24. NOTICES.............................................................. 27
25. WAIVER............................................................... 27
26. NO ACCORD AND SATISFACTION........................................... 27
27. ATTORNEY'S FEES...................................................... 28
28. SURRENDER............................................................ 28
29. HOLDING OVER......................................................... 28
30. TRANSFER OF PREMISES BY LANDLORD..................................... 29
31. RULES AND REGULATIONS OF BUILDING.................................... 29
31.1................................................................. 29
31.2................................................................. 29
31.3................................................................. 29
31.4................................................................. 29
31.5................................................................. 29
31.6................................................................. 29
31.7................................................................. 30
32. GENERAL PROVISIONS................................................... 30
32.1. Entire Agreement.............................................. 30
32.2. Time.......................................................... 30
32.3. Captions...................................................... 30
32.4. California Law................................................ 30
32.5. Gender; Singular and Plural................................... 30
32.6. Partial Invalidity............................................ 30
32.7. No Warranties................................................. 30
32.8. Joint and Several Liability................................... 31
32.9. Successors and Assigns........................................ 31
32.10. Rules and Regulations......................................... 31
32.11. Authority..................................................... 31
32.12. Memorandum of Lease........................................... 31
32.13. Merger........................................................ 31
32.14. Force Majeure................................................. 31
32.15. Real Estate Brokers........................................... 32
33. OPTION(S) TO EXTEND.................................................. 32
33.1. Options....................................................... 32
33.2. Extended Term Rent............................................ 32
34. CONSTRUCTION OF TENANT IMPROVEMENTS.................................. 33
34.1. Definitions................................................... 33
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
34.2. Procedure and Time Schedules.................................. 34
34.3. Delivery of Possession........................................ 35
35. PARKING LOT LIGHTING................................................. 35
</TABLE>
EXHIBITS
Exhibit "A" - Description of Land subject to the Master Lease
Exhibit "B" - Premises
iv
<PAGE>
LEASE
This Lease is made and entered into as of January 10, 1997, by and between
San Tomas Investment Company, a California limited partnership ("Landlord"),
whose address is 3000 Sandhill Road, Building 4, Suite 180, Menlo Park,
California 94025, and Corsair Communications, Inc., a Delaware corporation
("Tenant"), whose present address is, and from and after the Commencement Date
(as defined below) shall be, the address of the premises, which is 3408 Hillview
Avenue, Palo Alto, California 94304.
Landlord and Tenant agree to the terms, covenants and conditions of this
Lease, as follows:
1. MASTER LEASE; PREMISES.
Landlord is the lessee under that certain Lease dated October 15, 1976 (the
"Master Lease"), by and between Landlord and The Board of Trustees of The Leland
Stanford Junior University ("Stanford"), as lessor, by which Landlord leases the
parcel of land more particularly described on Exhibit "A" attached hereto for a
term expiring on October 31, 2027. This Lease shall be subject to the Master
Lease, but the terms and conditions of the Master Lease shall not be
incorporated herein, with the effect that the rights and obligations of Landlord
and Tenant with respect to each other and with respect to the premises described
below shall be set forth only in this Lease.
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord for
the term, at the rental, and upon all of the other terms, covenants and
conditions set forth herein, all of that certain building comprised of
approximately 55,000 square feet, together with adjacent parking and landscaping
improvements, located at 3408 Hillview Avenue, situated in the City of Palo
Alto, County of Santa Clara, State of California, as shown on Exhibit "B"
attached hereto.
The building described above is hereafter called the "Building."
The portion of the Building, or the entire Building, as the case may be,
together with the related parking and landscaping improvements leased by
Landlord to Tenant is hereafter called the "premises."
The parcel of land described above, together with the Building and all
other improvements now or hereafter located thereon, is hereafter called the
"Project."
The portion of the parcel of land described above not covered by the
Building is hereafter called the "Outside Areas."
"Tenant's Share" as used in this Lease means that percentage of the total
number of square feet of leasable space in the Building which is contained in
the premises, which the parties agree is one hundred percent (100%).
2. TERM; DELIVERY OF POSSESSION; CONSENT OF LANDLORD'S LENDER
2.1. Term.
The term of this Lease shall be for sixty (60) months, commencing on June
1, 1997 (the "Commencement Date"), and ending on May 31, 2002 (tile "Expiration
Date"), unless sooner terminated pursuant to the provisions hereof. Tenant shall
have the right to extend the term of this Lease in accordance with the
provisions of Paragraph 33 below.
2.2. Tenant Currently in Possession.
Tenant currently occupies the entire around floor of the Building pursuant
to that certain Sublease Agreement dated effective as March 31, 1995, by and
between Tenant, as sublessee, and Syntex (U.S.A.), Inc., a Delaware corporation
("Syntex"), as sublessor. The second floor of the Building is currently
occupied by Xerox Corporation pursuant to a
/s/ illegible /s/ MAB
- ------------- -------
Landlord 1 Tenant
<PAGE>
sublease agreement by and between Xerox, as sublessee, and Syntex, as sublessor.
Syntex's leasehold interest in the premises and both subleases described above
expire on May 31, 1997. Tenant intends, effective as of the Commencement Date,
to sublease all or a portion of the second floor of the Building to Xerox
pursuant to a sublease agreement which shall be subject to this Lease. Tenant
shall submit to Landlord the documentation required by Paragraph 17 below to
obtain Landlord's consent to the proposed sublease between Tenant and Xerox.
Tenant acknowledges and agrees Landlord shall have not obligation to alter or
improve the premises under this Lease, and Tenant shall accept the premises in
its "as-is" condition.
2.3. Required Consents.
Landlord's obligations under this Lease shall be subject to the approval of
this Lease by Landlord's lender, which holds a security interest in the Project,
and the approval of the lessor under the Master Lease. Stanford has waived its
right of first refusal applicable to this Lease under the Master Lease. Landlord
shall take all necessary actions to obtain such consents and waiver as soon as
possible following the execution of this Lease and shall notify Tenant whether
such parties have approved or disapproved this Lease and granted such waiver, as
applicable, on or before the date which is thirty (30) days following the date
hereof.
3. RENT.
3.1. Base Rent.
Tenant shall pay to Landlord for each calendar month of the term of this
Lease, monthly base rent (hereafter called "Base Rent"), in installments as
follows:
<TABLE>
<CAPTION>
Applicable Period of
--------------------
Lease Term Monthly Base Rent
---------- -----------------
<S> <C>
06/01/97 - 05/31/98 $132,000
06/01/98 - 05/31/99 $135,960
06/01/99 - 05/31/00 $140,039
06/01/00 - 05/31/01 $144,240
06/01/01 - 05/31/02 $148,567
</TABLE>
3.2. Manner of Payment.
Tenant shall pay to Landlord the rent calculated as set forth above
without deduction, offset, or abatement, and without prior notice or demand, in
advance on the first day of each calendar month of the term of this Lease. Rent
shall be payable in lawful money of the United States to Landlord at the address
stated in the preamble paragraph to this Lease or to such other places as
Landlord may from time to time designate in writing to Tenant reasonably in
advance. Tenant's obligation to pay rent for any partial month shall be prorated
on the basis of a thirty (30) day month.
3.3. Late Payment Charge.
If any installment of rent or any other sum due from Tenant is not received
by Landlord within five (5) days after the due date, Tenant shall pay to
Landlord an additional sum equal to five percent (5) of the amount overdue as a
late charge. The amount of the late charge shall represent liquidated damages
for, and a reasonable estimate of, Landlord's administrative costs of
collection, the exact amount of which would be extremely difficult or
impractical to fix. Landlord's acceptance of such late charge shall not excuse
any default by Tenant hereunder, and shall not preclude Landlord from pursuing
any other rights and remedies it may have relating to such default.
/s/ illegible /s/ MAB
- ------------- -------
Landlord 2 Tenant
<PAGE>
4. SECURITY DEPOSIT.
Upon execution of this Lease, and on April 30, 1997, Tenant shall deposit
with Landlord in cash the sum of Sixty-Six Thousand Dollars ($66,000), for a
total payment of One Hundred Thirty-Two Thousand Dollars ($132,000) (the
"Deposit") as security for the faithful performance by Tenant of all of its
obligations hereunder. If Tenant fails to pay rent or any other sums due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Landlord may use, apply, or retain all or any portion of the Deposit for the
payment of any rent or other sum in default, or to compensate Landlord for the
payment of any other sum which Landlord may become obligated to spend by reason
of Tenant's default, or to compensate Landlord for any expenditures, loss or
damage which Landlord may suffer thereby. If Landlord so uses or applies all or
any portion of the Deposit, Tenant shall, within fifteen (15) days after written
demand therefor, deposit with Landlord an amount in cash sufficient to restore
the Deposit to the full mount hereinabove stated. Landlord shall not be
required to keep the Deposit separate from its general funds. The Deposit, less
any portion thereof which Landlord is entitled to retain, shall be returned,
without payment of interest, to tenant within thirty (30) days after the later
of the expiration of the term hereof, or the date on which Tenant vacates the
premises.
5. TAXES.
5.1. Tenant's Personal Property.
Tenant shall pay directly to the charging authority prior to delinquency
all taxes assessed against and levied upon Tenant's leasehold improvements,
trade fixtures, furnishings, equipment and all other personal property and
merchandise of Tenant situated in or about the premises.
5.2. Real Property Taxes.
(a) Tenant shall pay to Landlord Tenant's Share of all Real Property
Taxes (as hereafter defined) levied with respect to the Project. Tenant shall
pay to Landlord all Real Property Taxes on or before the later of (1) five (5)
days prior to delinquency thereof, or (2) ten (10) days following the date on
which Tenant receives a copy of the tax bill or other reasonable evidence of the
amount of Real Property Taxes due and payable by Tenant hereunder.
(b) The term "Real Property Taxes" as used herein shall mean (i) all
taxes, assessments, levies, and other charges of any kind or nature whatsoever,
general and special, foreseen and unforeseen (including all installments of
principal and interest required to pay for any general or special assessments
for public improvements, services, or benefits and any increases resulting from
reassessments caused by any change in ownership, new construction, or change in
valuation), now or hereafter imposed by any governmental or quasi-governmental
authority or special district having the direct or indirect power to tax or levy
assessments, which are levied or assessed against or with respect to (a) the
value, occupancy or use of the Project (as now constructed or as may at any time
hereinafter be constructed, altered, or otherwise changed, (b) the fixtures,
equipment, and other real or personal property of Landlord that are an integral
part of the Project, (c) the gross receipts and rentals from the Project, or (d)
the use of the Outside Areas, public utilities, or energy within the Project;
(ii) all charges, levies or fees imposed by reason of environmental regulation
or other governmental control of the Project; (iii) all new exercise,
transaction, sales, privilege or other taxes now or hereafter imposed upon
Landlord as a result of this Lease; and (iv) all reasonable costs and fees
(including reasonable attorneys' fees) incurred by Landlord in contesting in
good faith any Real Property Taxes and in negotiating with public authorities as
to any Real Property Taxes. If at any time during the lease term the taxation or
assessment of the Project prevailing as of the Commencement Date shall be
altered so that in lieu of or in addition to any Real Property Taxes described
above there shall be levied, assessed or imposed (whether by reason of a change
in the method of taxation or assessment, creation of a new tax or charge, or any
other cause) an alternate, substitute, or additional tax or charge (i) on the
value, use or occupancy of the Project, (ii) on or measured by the gross
receipts or rentals from the Project, or (iii) computed in any
/s/ illegible /s/ MAB
- ------------- -------
Landlord 3 Tenant
<PAGE>
manner with respect to the operation of the Project, then any such tax or
charge, however designated, shall be included within the meaning of the term
"Real Property Taxes" for purposes of the Lease. Notwithstanding the foregoing,
the following shall not constitute Real Property Taxes for the purposes of this
Lease, and nothing contained herein shall be deemed to require Tenant to pay any
of the following: (i) any state, local, federal, personal or corporate income
tax measured by the income of Landlord; (ii) any estate or inheritance taxes;
(iii) any franchise, succession or transfer taxes; (iv) interest on taxes or
penalties resulting from Landlord's failure to pay taxes, except to the extent
such failure is due to Tenant's failure to pay such taxes to Landlord when
provided for under this Lease; or (v) any environmental tax, surcharge or other
fee affecting the premises due to Landlord's activities with respect to
Hazardous Materials (as defined in Paragraph 6.3(a) below), as opposed to
general, area-wide taxes or surcharges with respect to the remediation or
testing for Hazardous Materials. If assessments affecting the premises are
payable in installments and Landlord should prepay such assessments in advance
of the date such installments would become due, Tenant shall be solely
responsible for the portion of such assessments that would have normally come
due as an installment, unless consented to by Tenant in the writing.
(c) Tenant's liability to pay Real Property Taxes shall be prorated on
the basis of a 365-day year to account for any fractional portion of a fiscal
tax year included in the Lease term at the commencement or expiration of the
term.
(d) If Landlord's lender requires Landlord to pay any or all Real
Property Taxes into an impound account on a periodic basis during the term of
this Lease, Tenant, on notice from Landlord indicating this requirement, shall
pay a sum of money toward its liability under Paragraph 5.2 to Landlord on a
periodic basis in accordance with the lender's requirements.
6. USE.
6.1. Permitted Uses.
The premises shall be used and occupied only for the following purposes:
software research and development, and light manufacturing, assembly, general
office and shipping and receiving uses which are related to software research
and development, and for no other use or purpose. Landlord does not make any
warranty to Tenant regarding the suitability of the premises, or the suitability
of the Building electrical and other systems servicing the premises, for
Tenant's intended use thereof, and this Lease shall not be construed to imply
any such warranty.
6.2. Compliance with Law.
Tenant shall accept possession of the premises "as is" in their condition
existing as of the date of Landlord's delivery of possession thereof to Tenant
and Tenant acknowledges that neither Landlord nor its agents has made any
representations to Tenant regarding the condition of the premises. Landlord
shall have no obligation to make any alterations, improvements, or repairs to
the premises unless otherwise expressly required in this Lease. Tenant
acknowledges that its possession and use of the premises is subject to all
applicable laws, ordinances, codes, rules, orders, directions and regulations of
lawful governmental authority regulating the use or occupancy of the premises,
and all matters disclosed by any exhibits attached hereto (collectively called
"regulations"). Tenant, at Tenant's sole expense, shall promptly comply with all
such regulations as may now or hereafter be in effect relating to or affecting
the condition, use or occupancy of the premises, except that Tenant shall not be
required to make changes to structural elements of the premises except to the
extent the requirement to make such changes results from alterations voluntarily
made to the premises by Tenant or Tenant's specific use of the premises (as
opposed to office and industrial uses generally).
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6.3. Hazardous Materials.
(a) As used herein, "Hazardous Materials" means any substance or
material which is now or hereafter regulated by any local, state or federal
governmental entity due to its dangerous, hazardous, toxic, flammable or
corrosive characteristics.
(b) Tenant shall not cause or authorize any Hazardous Materials to be
released from or about the Project, including, without limitation, releases into
the groundwater, soils or air underlying, adjacent to or in the vicinity of the
Project. Tenant shall provide Landlord with at least five (5) days prior written
notice before bringing, using, or storing any Hazardous Materials on the
premises. Notwithstanding anything to the contrary herein, Tenant shall have the
right, without the prior notice obligation set forth in the preceding sentence,
to use on the premises Hazardous Materials which consist of office or janitorial
supplies of the kind and quantities commonly used in typical office operations
(collectively, "Permitted Hazardous Materials"), provided that such Permitted
Hazardous Materials are only used or stored in customary amounts and are at all
times used in compliance with applicable Laws (as defined in Paragraph 6.3(c)
below).
(c) Tenant, at its sole expense shall comply with all applicable
governmental rules, regulations, codes, ordinances, statutes, directives and
other requirements (collectively, "Laws") respecting Hazardous Materials in
connection with Tenant's activities and the activities of its agents, employees,
contractors and invitees on or about the Project. Tenant, at its sole cost,
shall perform all investigations, clean-up and other response actions which may
be required of Tenant by any governmental authority in, on, or about the
Project.
(d) Tenant shall indemnify, protect, defend, (by legal counsel subject
to Landlord's approval, which shall not unreasonably be withheld) and hold
harmless Landlord from and against all costs (including, but not limited to,
environmental response costs), expenses, claims, judgments, losses, demands,
liabilities, causes of action, governmental directives, proceedings or hearings,
including Landlord's reasonable attorneys and experts' fees and costs, relating
to or arising in connection with the use, handling, generation, storage,
transportation, release or disposal of Hazardous Materials by handling,
generation, storage transportation, release or disposal of Hazardous Materials
by Tenant, its employees, agents, invitees or contractors, on, in, beneath,
about or from the Project, and/or relating to the breach of any of Tenant's
obligations under this Paragraph 6.3. Tenant shall reimburse Landlord of (i)
losses in or reductions to rental income, (ii) all costs of clean-up or other
alterations to the premises, the Building or the Project, and (iii) any
diminution in the fair market value of the Project caused by Tenant's use,
handling, generation, storage, transportation, release or disposal of Hazardous
Materials.
(e) Tenant shall immediately notify Landlord in writing upon becoming
aware of any environmental investigation, clean-up or other environmental
response action or any claim or action requested, demanded, instituted or to be
instituted by any person, including but not limited to a governmental entity,
relating to any release or migration of Hazardous Materials on, in, beneath, or
adjacent to the Project.
(f) Landlord shall have the right, but not the obligation, in its sole
discretion, to conduct any Hazardous Materials inspections of the premises, the
Building or the Project. Landlord shall give Tenant forty-eight (48) hours
advance written notice of any such inspection, except in the event of an
emergency situation. When conducting any such inspections, Landlord shall avoid
unreasonably disrupting Tenant's activities. Tenant shall provide Landlord with
reasonable cooperation to facilitate any such inspection by Landlord, its agents
or representatives. Tenant shall not conduct any Hazardous Materials
investigation on or about the Project which includes any form of drilling or
subsurface penetration or any structural modifications without the prior written
consent of Landlord.
(g) Under no circumstances shall Tenant install, temporarily or
permanently, any underground or below-floor tanks, sumps or floor drains
relating to the use, storage or disposal of Hazardous Materials.
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(h) Upon Landlord's reasonable and good faith determination, after
consultation with Landlord's environmental consultant, that Tenant may have
released Hazardous Materials on or about the Project, Tenant, at Tenant's sole
cost, shall engage the services of a qualified environmental engineering firm
reasonably acceptable to Landlord to determine whether any Hazardous Materials
have been released by Tenant on or about the Project. The manner and scope of
such examination shall be reasonably approved by both Tenant and Landlord. If
such examination discloses that Tenant did not cause any release of Hazardous
Materials on or about the Project, Landlord shall reimburse Tenant the cost of
such examination within ten (10) days. If any Hazardous Materials contamination
is discovered on or about the Project which has been caused by Tenant, Tenant
shall undertake all investigative and remedial action required to restore the
Project to a condition reasonably satisfactory to Landlord and any governmental
agency with jurisdiction over the Project. Tenant agrees that it shall be
reasonable for Landlord to withhold its approval of any investigative or
remedial actions undertaken by Tenant unless such actions are completed by
Tenant with the effect that Landlord shall not be subject to any losses, costs
or further liabilities with respect to any Hazardous Materials contamination
which was caused by Tenant.
(i) To the extent any of the other provisions of this Lease conflict
with the provisions of this Paragraph 6.3, the provisions of this Paragraph 6.3
shall be controlling. The obligations of Tenant under this Paragraph 6.3 shall
survive the expiration of the Lease term.
6.4. Restrictions on Use.
Tenant shall not use or permit the use of the premises in any manner that
will tend to create waste on the premises or constitute a nuisance to any other
occupant or user of the Building or any neighboring building. Tenant shall not
use any apparatus, machinery or other equipment in or about the premises that
may cause substantial noise or vibration or overload existing electrical
systems, or otherwise place any unusual loads upon the floors, walls, or
ceilings of the premises which may overload the premises or jeopardize the
structural integrity of the Building or any part thereof. Tenant shall not make
any penetrations of the roof or exterior of the Building without the prior
written approval of Landlord, which shall not be unreasonably withheld or
delayed. No materials or articles of any nature shall be stored upon any portion
of the Outside Areas unless located within an enclosure approved by Landlord.
7. DIRECT OPERATING EXPENSES.
7.1. Landlord to Maintain and Control Outside Areas.
Landlord shall maintain, in good condition and working order, the Outside
Areas, together with all facilities and improvements now or hereafter located
thereon, and together with all street improvements or other improvements
adjacent thereto as may be required from time to time by governmental authority.
The manner in which such areas shall be maintained and the expenditures therefor
shall be at the sole discretion of Landlord. Landlord shall at all times have
exclusive control of the Outside Areas and may at any time temporarily close any
part thereof, may exclude and restrain anyone from any part thereof (except the
bona fide customers, employees and invitees of Tenant who use the Outside Areas
in accordance with the rules and regulations that Landlord may from time to time
promulgate), and Landlord may change the configuration of the Outside Areas or
the location of facilities thereon so long as any such change by Landlord does
not unreasonably interfere with Tenant's use of the premises. Notwithstanding
the foregoing, no such changes shall: (i) reduce parking available to Tenant or
Tenant's customers, (ii) materially interfere with Tenant's business or use of
the premises, (iii) unreasonably impair customer access to or visibility of the
premises, or (iv) in any way alter the first class, dignified and high-quality
character and standards of the Building existing as of the date of this Lease.
Landlord shall also be entitled to employ third parties to operate and maintain
all or any part of such areas on such terms and conditions as Landlord shall in
its sole discretion deem reasonable and proper. The surface parking facilities
shall be available for the automobiles of Tenant and Tenant's customers,
employees and invitees on a non-assigned, non-exclusive basis. In
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Landlord 6 Tenant
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exercising any such rights, Landlord shall make a reasonable effort to minimize
any disruption of Tenant's business.
7.2. Tenant to Pay.
Tenant shall pay Tenant's Share of such reasonable costs and expenses as
may be paid or incurred by Landlord in maintaining, operating and repairing the
Outside Areas and such adjacent areas referred to in Paragraph 7.1 (hereinafter
referred to as the "Direct Operating Expenses") during the term of this Lease.
The Direct Operating Expenses may include, without limitation, the cost of
labor, equipment rental, materials, supplies and services used or consumed in
maintaining, operating and repairing the Outside Areas and such adjacent areas
referred to in Paragraph 7.1, including without limitation, the following: (a)
landscaping maintenance and replacement; (b) cleaning and repairing concrete
walkways and patios; (c) sweeping and repairing paved parking areas; (d)
operating and maintaining the parking and landscaping pole lighting, if any; (e)
maintaining all directional and security signs; (f) furnishing water for
landscaping; (g) pest control service (exterior only); and (h) security patrol
service. The following shall not constitute Direct Operating Costs for the
purposes of this Lease, and nothing contained herein shall be deemed to require
Tenant to pay any of the following: (i) legal fees, brokerage commissions,
advertising costs and other related expenses incurred in connection with the
leasing of the Building; (ii) repairs, alterations, additions, improvements or
replacements made to rectify or correct any defect in the design, materials or
workmanship of the Outside Areas or to comply with any requirements of any
governmental authority in effect as of the date of this Lease; (iii) repairs,
improvements, alterations or expenditures of a capital nature with a cost
greater than Five Thousand Dollars ($5,000), except that Direct Operating
Expenses shall include the amortized portion of the cost of any repair,
improvement, alteration or expenditure of a capital nature with a cost greater
than Five Thousand Dollars ($5,000), which cost shall be amortized over a period
of ten (10) years; (iv) damage and repairs to the extent the costs thereof are
actually reimbursed or paid under any warranty or insurance policy carried by
Landlord in connection with the Building or Project; (vi) damage and repairs
necessitated by the negligence or willful misconduct of Landlord or Landlord's
employees, contractors or agents; (vii) executive salaries of Landlord; (viii)
salaries of service personnel to the extent that such service personnel perform
services not solely in connection with the management, operation, repair or
maintenance of the Outside Area; (ix) Landlord's general overheard expenses not
related to the Project; (x) payments of principal or interest on any mortgage or
other encumbrance including ground lease payments and points, commissions and
legal fees associated with financing; (xi) depreciation; (xii) legal fees,
accountants' fees and other expenses incurred in connection with disputes with
Tenant or other tenants or occupants of the Building or associated with the
enforcement of any leases or defense of Landlord's title to or interest in the
Building or any part thereof (provided such exclusion from Direct Operating
Expenses shall not affect Landlord's right to recover attorneys' fees under
Paragraph 27 below: (xiii) costs incurred due to violation by Landlord or of the
terms and conditions of this Lease; (xiv) charitable or political contributions;
(xv) any cost or expense related to the testing for, removal, transportation or
storage of Hazardous Materials from the Project, Building or premises, except to
the extent caused by Tenant or its employees, agents, contractors or
transferees, (xvi) interest, penalties or other costs arising out of Landlord's
failure to make timely payments of its obligations; (xvii) property management
fees of any property management firm in excess of three percent (3%) of the
gross revenues of the Building; and (xviii) costs incurred in advertising and
promotional activities for the Building. Landlord and Tenant acknowledge and
agree that the limitation set forth in subparagraph (iii) above shall be a
cumulative, annual limitation, with the effect that if Landlord expends less
than Five Thousand Dollars ($5,000) in any calendar year with respect to the
repair, improvement or alteration of any item which is a part of the Outside
Areas (e.g., the parking lot), then Landlord shall be entitled to add to the
fully reimbursable (without amortization) amount which may be expended on
repair, alteration or improvement of such item in subsequent years, the
difference between Five Thousand Dollars ($5,000) and the amount actually
expended for such item in any calendar year. Notwithstanding anything to the
contrary set forth above, any full replacement of any portion of the Outside
Areas (e.g., full replacement of the parking lot) shall be paid for by Landlord,
at its sole cost, and such full replacement costs shall not be charged to Tenant
as Direct Operating Expenses under this Lease, excepting only replacement of
landscape items, the costs of
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Landlord 7 Tenant
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which shall be fully reimbursable to Landlord, subject to the limitations set
forth in subparagraph (iii) above.
7.3. Monthly Payments.
Tenant shall pay to Landlord on the first day of each calendar month,
commencing on the Commencement Date, an amount estimated by Landlord to be the
monthly installment of Tenant's Share of the Direct Operating Expenses for the
next twelve (12) month period. Landlord estimates that such monthly installment
of Tenant's Share of the Direct Operating Expenses for the initial twelve (12)
month period will be One Thousand One Hundred Fifty Dollars ($1,150). During
each succeeding year of the term of this Lease, Tenant shall pay to Landlord on
the first day of each calendar month thereof in advance a monthly installment of
Tenant's Share (to the nearest $5.00) of the actual Direct Operating Expenses
for the one (1) year period immediately prior thereto. Within sixty (60) days
following the end of each calendar year Landlord shall furnish Tenant a
statement, certified as true and correct by Landlord, stating in reasonable
detail the Direct Operating Expenses incurred during the calendar year and the
payments made by Tenant with respect to such period as set forth in this
Paragraph 7.3. If Tenant's payments for said Direct Operating Expenses did not
equal the actual amount of said Direct Operating Expenses, Tenant shall pay to
Landlord the deficiency within thirty (30) days after receipt of such statement.
If said payments exceed the actual Direct Operating Expenses, Landlord shall
either credit the excess against payments next due to Landlord pursuant to this
Paragraph 7.3, or refund the amount of the overpayments to Tenant within thirty
(30) days of discovery thereof, in cash, as Landlord shall elect. Direct
Operating Expenses shall be prorated as of the Commencement Date and the
Expiration Date (or the date of any sooner termination of the term of this
Lease) to reflect the portion of the calendar year occurring within the lease
term.
8. MAINTENANCE AND REPAIRS.
8.1. Tenant's Obligations.
Except as provided in Paragraphs 8.2, 15, and 16, Tenant shall, at
Tenant's expense, keep in good and safe condition, order and repair the premises
and every part thereof, including without limitation, all plumbing, heating, air
conditioning, ventilating, fire sprinklers, electrical and lighting facilities,
systems, appliances, and equipment within the premises; and all fixtures,
interior walls, interior surfaces of exterior walls, floors, ceilings, windows,
doors, entrances, glass (including plate glass), and skylights located within
the premises, and the roof membrane, flashing and related improvements required
to keep the premises weathertight. Tenant shall, at Tenant's expense, maintain
in full force at all times during the term of this Lease a heating, ventilating
and air conditioning ("HVAC") systems preventive maintenance contract with a
qualified service company satisfactory to Landlord covering all HVAC systems
servicing the premises, which shall provide for and include, without limitation,
replacement of filters, oiling and lubricating of machinery, parts replacement,
adjustment of drive belts, oil changes, weatherproofing of all exposed HVAC
equipment and ducts, and other preventive maintenance; provided, however, that
Tenant shall have the benefit of all warranties available to Landlord regarding
the equipment in said systems. Said contract shall call for periodic servicing
no less than every sixty (60) days. Tenant shall also maintain continuously
throughout the lease term a service contract for the washing of all windows of
the premises (both interior and exterior surfaces) with a contractor approved by
Landlord which provides for periodic washing of all such windows sufficiently
often that such windows remain clean. Tenant shall furnish Landlord with copies
of all such service contracts, which shall provide that they may not be
cancelled or changed without at least thirty (30) days prior written notice to
Landlord. All repairs required to be made by Tenant shall be made promptly with
new materials of like kind and quality. If the repair work affects the
structural parts of the Building, or if the estimated cost of any item of repair
exceeds $5,000, then Tenant shall first obtain Landlord's written approval of
the scope of work, plans therefor, materials to be used, and the contractor.
Tenant hereby waives the benefit of any statute now or hereafter in effect which
would otherwise afford Tenant the right to make replacement at Landlord's
expense or to terminate this Lease because of Landlord's failure to keep the
premises in good condition, order and repair.
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Tenant specifically waives all rights it may have under Sections 1932(1), 1941,
and 1942 of the California Civil Code, and any similar or successor statute or
law. In no event shall Tenant's obligation to repair under this Paragraph 8.1
extend to (i) damage and repairs to the extent the cost thereof is actually
reimbursed or paid for under any insurance policy carried by Landlord in
connection with the premises; (ii) damage caused in whole or in part by the
negligence or willful misconduct of Landlord or Landlord's agents, employees,
invitees or licensees, (iii) repairs covered under Direct Operating Expenses;
(iv) reasonable wear and tear; (v) conditions to the extent the cost thereof is
actually reimbursed or paid for under any warranties of Landlord's contractors;
or (vi) damage by fire and other casualties, or acts of governmental authorities
(not including compliance directives), or acts of God and the elements.
8.2. Landlord's Obligations.
Landlord shall, at Landlord's expense, keep in good condition, order and
repair all structural elements of the Building, including the foundation, floors
and subfloors (but not floor coverings) and exterior and load bearing walls and
columns of the Building (excluding the interior of all walls and the exterior
and interior of all windows, doors, plate glass, and show cases), and the
structural portions of the exterior roof of the Building (except that Tenant
shall repair at Tenant's expense any damage, to the extent the cost thereof is
not actually reimbursed or paid for by insurance, caused by the activities of
Tenant, Tenant's HVAC maintenance service contractor, and/or Tenant's other
agents or contractors on the roof, including but not limited to the installation
of air conditioning equipment and/or duct work, or other roof penetrations, and
improper flashing or caulking, and any damage to exposed air conditioning
equipment and duct-work installed by or for Tenant). Notwithstanding anything to
the contrary in Paragraph 8.1 above, in the event a full replacement of the roof
membrane installed on the Building is required, such full replacement shall be
performed by Landlord at Landlord's sole cost. Landlord shall exercise
reasonable diligence in performing such repairs as soon as practicable. However,
Landlord shall have no obligation to make repairs under this Paragraph 8.2 until
a reasonable time after Landlord's receipt of written notice from Tenant of the
need for such repairs or Landlord otherwise acquires knowledge of such need.
Except as otherwise specifically provided herein, there shall be no abatement of
rent or other sums payable by Tenant prior to or during any repairs by Tenant or
Landlord, and Tenant waives all claims for loss of business or lost profits
relating to any such repairs.
9. ALTERATIONS
9.1. Landlord's Consent Required.
Tenant shall not, without Landlord's prior written consent, which shall not
be unreasonably withheld, make any alterations, improvements, additions, or
utility installations (collectively called "alterations") in, on or about the
premises, except for nonstructural alterations which individually do not exceed
Five Thousand Dollars ($5,000) in cost. As used in this Paragraph 9.1, the term
"utility installation" means power panels, wiring, fluorescent fixtures, space
heaters, conduits, air conditioning and plumbing. Should Tenant make any
alterations requiring the prior written consent of Landlord without obtaining
such consent, Tenant shall immediately remove the same at Tenant's expense upon
demand by Landlord.
9.2. Plans and Permits.
Any alteration that Tenant shall desire to make in or about the premises
and which requires the consent of Landlord shall be presented to Landlord in
written form, with proposed detailed plans and specifications therefor prepared
at Tenant's sole expense. Any consent by Landlord thereto shall be deemed
conditioned upon Tenant's acquisition of all permits required to make such
alteration from all appropriate governmental agencies, the furnishing of copies
thereof to Landlord prior to commencement of the work, and the compliance by
Tenant with all conditions of said permits in a prompt and expeditious manner,
all at Tenant's sole expense. Upon completion of any such alteration, Tenant,
at
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Tenant's sole cost, shall immediately deliver to Landlord "as-built" plans and
specifications therefor.
9.3. Construction Work Done by Tenant.
All construction work required or permitted to be done by Tenant shall be
performed by a licensed contractor in a prompt, diligent, and good and
workmanlike manner, and shall not diminish the value of the Building.
Furthermore, all such construction work shall conform in quality and design with
the premises existing as of the time such work is performed. In addition, all
such construction work shall be performed in compliance with all applicable
statutes, ordinances, regulations, codes and orders of governmental authorities
and insurers of the premises. Tenant or its agents shall obtain and pay for all
licenses and permits necessary therefor.
9.4. Roof Repairs.
All installation of air conditioning equipment and duct work requiring
penetration of the roof shall be properly flashed and caulked. Any electrical or
refrigeration conduits or other piping or materials installed by Tenant in the
Building shall be installed beneath the surface of the roof (and not on the
surface of the roof), and Tenant shall thereafter repair and re-roof the
affected portions of the roof surface. Any equipment placed by Tenant on the
roof shall be elevated and supported by Tenant so as not to inhibit drainage or
Landlord's replacement of the roof pursuant to Paragraph 8.2.
9.5. Title to Alterations.
Unless Landlord requires the removal thereof as set forth in Paragraphs 9.1
or 9.6, any alterations which may be made on the premises shall remain upon and
be surrendered with the premises at the expiration or sooner termination of the
term of this Lease, and shall become the property of Landlord at that time.
Notwithstanding the preceding sentence, Tenant shall be entitled to remove any
computer rooms or false fronts which are installed in the premises by Tenant.
Without limiting the generality of the foregoing, all heating, lighting,
electrical (including all wiring, conduits, main and subpanels), air
conditioning, partitioning, drapery, and carpet installations made by Tenant,
regardless of how affixed to the premises, together with all other alterations
that have become an integral part of the premises, shall not be deemed trade
fixtures, and shall remain upon and be surrendered with the premises at the
expiration or sooner termination of this Lease, and shall become the property of
the Landlord at that time. Notwithstanding the provisions of this Paragraph 9.5,
Tenant's furnishings, machinery and equipment (including computer rooms and
false fronts), other than that which is affixed to the premises so that it
cannot be removed without material damage to the premises, shall remain the
property of Tenant and may be removed by Tenant, provided Tenant at Tenant's
expense immediately after removal repairs any damage to the premises caused
thereby.
9.6. Removal of Alterations.
Landlord may elect, by notice to Tenant at least ninety (90) days before
expiration of the Lease term, or within five (5) days after sooner termination
thereof, to require Tenant to remove any alterations that Tenant has made to the
premises and to restore the premises as hereafter provided. If Landlord so
elects, Tenant shall, at its sole expense, upon expiration of the Lease term or
within twenty (20) days after any sooner termination thereof, remove such
alterations, repair any damage occasioned thereby, and restore the premises to
the condition required by Paragraph 28 below. The obligations of Tenant set
forth in this paragraph shall survive the termination of this Lease.
10. MECHANICS' LIENS.
Tenant shall keep the premises, the Building, and the Project free from any
liens arising out of any work performed, materials furnished or obligations
incurred by Tenant. In the event that Tenant shall not, within ten (10) days
following the imposition of any such lien, cause the same to be released of
record, Landlord shall have, in addition to all other
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remedies provided herein and by law, the right, but no obligation, to cause the
same to be released by such means as Landlord shall deem proper, including
payment of the claim giving rise to such lien. All sums paid by Landlord for
such purpose, and all expenses incurred by it in connection therewith, shall be
payable to Landlord by Tenant on demand with interest at the rate of ten percent
(10%) per annum, or the maximum rate permitted by law, whichever is less.
Tenant shall give Landlord notice of the date of commencement of any work in the
premises not less than five (5) business days prior thereto, and Landlord shall
have the right to post notices of non-responsibility or similar notices in or on
the premises in connection therewith.
11. UTILITIES.
Tenant shall pay when due directly to the charging authority all charges
for water, gas, electricity, telephone, refuse pickup, janitorial services, and
all other utilities and services supplied or furnished to the premises during
the term of this Lease, together with any taxes thereon. In no event shall
Landlord be liable to Tenant for failure or interruption of any such utilities
or services, unless caused by the gross negligence or willful misconduct of
Landlord or Landlord's agents, employees or contractors, and no such failure or
interruption shall entitle Tenant to terminate this Lease or to withhold rent or
other sums due hereunder. Landlord shall not be responsible for providing
security guards or other security protection for all or any portion of the
premises, and Tenant shall at its own expense provide or obtain such security
services as Tenant shall desire to insure the safety of the premises.
12. INDEMNITY.
Tenant shall indemnify, protect, defend, and hold harmless Landlord from
and against any and all claims, damages, losses, proceedings, causes of action,
costs, expense or liability due to, but not limited to, bodily injury, including
death resulting at any time therefrom, and/or property damage, now or hereafter
arising from any act, work or things done or permitted to be done or otherwise
suffered, or any omission in or about the premises, the Building, or the
Project, by Tenant or by any of Tenant's agents, employees, contractors, or
invitees, or from any breach or default by Tenant in the performance of any
obligation on the part of Tenant to be performed under the terms of this Lease,
except to the extent such damage, loss, expense or liability is caused by the
active negligence or willful misconduct of Landlord or its employees,
contractors or agents. Tenant shall also indemnify Landlord from and against all
damage, loss, expense (including without limitation, reasonable attorneys' fees,
costs of investigation, and expert witness fees), and liability incurred or
suffered by Landlord in the defense of or arising out of or resulting from any
claim or any action or proceeding brought thereon. In the event any action or
proceeding shall be brought against Landlord by reason of any such claim, Tenant
upon notice from Landlord shall defend the same at Tenant's expense with counsel
reasonably satisfactory to Landlord. The obligations of Tenant contained in this
paragraph shall survive the termination of this Lease.
13. WAIVER OF CLAIMS.
Except to the extent caused by the active negligence or willful misconduct
of Landlord or Landlord's agents, employees or contractors, Tenant hereby waives
any claims against Landlord for injury to Tenant's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Tenant, or for injury or death of Tenant's agents, employees,
invitees, or any other person in or about the premises, the Building, and the
Project, from any cause, regardless of whether the same results from conditions
existing upon the premises or from other sources or places, and regardless of
whether the cause of such damage or injury or the means of repairing the same is
inaccessible to Tenant.
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14. INSURANCE.
14.1. Tenant's Liability Insurance.
Tenant shall, at its sole cost and expense, obtain and keep in force during
the term of this Lease commercial general liability insurance applying to the
condition, use, occupancy, and maintenance of the premises and the business
operated by Tenant, or any other occupant, on the premises. Such insurance shall
include Broad Form Contractual liability insurance coverage insuring all of
Tenant's indemnity obligations under this Lease. Such coverage shall have a
minimum combined single limit of liability of at least Three Million Dollars
($3,000,000). All such policies shall be written to apply to all bodily injury,
property damage, personal injury and other covered loss, however occasioned. All
such policies shall be endorsed to add Landlord and any lender named by Landlord
as an additional insured and to provide that any insurance maintained by
Landlord shall be excess insurance only. Such coverage shall also contain
endorsements: (i) deleting any employee exclusion on personal injury coverage;
(ii) including employees as additional insureds; and (iii) providing for
coverage of employer's automobile non-ownership liability. All such insurance
shall provide for severability of interests; shall provide that an act or
omission of one of the named insureds shall not reduce or avoid coverage to the
other named insureds; and shall afford coverage for all claims based on acts,
omissions, injury and damage, which claims occurred or arose (or the onset of
which occurred or arose) in whole or in part during the policy period. Tenant
shall also maintain Workers' Compensation insurance in accordance with
California law, and employers liability insurance with a limit no less than One
Million Dollars ($1,000,000) per employee and One Million Dollars ($1,000,000)
per occurrence. The limits of all insurance described in this Paragraph 14.1
shall not, however, limit the liability of Tenant hereunder. Not more frequently
than once each calendar year if, in the reasonable opinion of Landlord, the
amount of insurance required hereunder is not adequate, Tenant shall increase
said insurance coverage as reasonably required by Landlord; provided that, in no
event shall any such increase result in an increase in the premium therefor of
greater than fifty percent (50%) of the amount of the premium during the
preceding year of the term of this Lease or require Tenant to maintain insurance
coverage in excess of amounts then typically maintained by lessees of similar
buildings in the vicinity of the premises. The failure of Landlord to require
any additional insurance coverage at any time shall not relieve Tenant from the
obligation to provide increased coverage at any later time or relieve Tenant
from any other obligations under this Lease.
14.2. Landlord's Liability Insurance.
Landlord shall maintain a policy or policies of commercial general
liability insurance insuring Landlord (and such other persons as may be
designated by Landlord) against liability for personal injury, bodily injury or
death and damage to property occurring or resulting from an occurrence in, on,
or about the Project with a combined single limit of not less than Three Million
Dollars ($3,000,000), or such greater coverage as Landlord may from time to time
determine is reasonably necessary for its protection.
14.3. Property Insurance.
(a) Landlord shall obtain and keep in force during the term of this
Lease a policy or policies of insurance covering loss or damage to the Project,
but excluding coverage of merchandise, fixtures, equipment and leasehold
improvements and alterations of Tenant, in the amount of the full replacement
value thereof, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
special extended perils (all risk), including boiler and machinery coverage and
an inflation endorsement, and, at Landlord's option, flood and/or earthquake. In
addition, Landlord shall obtain and keep in force, during the term of this
Lease, a policy of rental loss insurance covering a period of one year,
commencing on the date of loss, with proceeds payable to Landlord, which
insurance may also cover all Real Property Taxes, Direct Operating Expenses,
insurance premiums, and other sums payable by Tenant to Landlord hereunder for
said period. The insurance coverage may include sprinkler leakage insurance if
the Building contains fire sprinklers. Tenant shall have no interest in or right
to the proceeds of any such insurance carried by Landlord.
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Landlord 12 Tenant
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(b) Tenant shall, at Tenant's sole expense, obtain and keep in force
during the term of this Lease, a policy of fire and extended coverage insurance
including a standard "all risk" endorsement, and a sprinkler leakage endorsement
(if the premises shall be sprinklered), insuring the inventory, fixtures,
equipment, personal property, and leasehold improvements and alterations of
Tenant within the premises for the full replacement value thereof, as the same
may increase from time to time due to inflation or otherwise. The proceeds from
any of such policies shall be used for the repair or replacement of such items
so insured.
14.4. Payment.
Tenant shall pay to Landlord Tenant's Share of the premiums for the
insurance obtained by Landlord pursuant to Paragraphs 14.2 and 14.3(a). Tenant
shall pay to Landlord the entire amount of any deductibles and other amounts not
paid by Landlord's insurance carriers relating to claims under Landlord's
insurance policies resulting from the acts or omissions of Tenant, or its
agents, employees, and invitees. Notwithstanding the foregoing, if the premises
are damaged and the deductible portion of Landlord's insurance associated
therewith exceeds a sum equal to one month's Base Rent due hereunder, Tenant
shall have the option to pay the entire amount of such deductible or to pay a
portion of such deductible equal to one month's Base Rent as a lump sum to
Landlord within thirty (30) days of request therefor and the remaining portion
of the deductible shall be amortized over the remaining term of the Lease, with
interest thereon at eight percent (8%) per annum, and paid by Tenant to Landlord
in equal monthly installments at the same time and in the same manner as Base
Rent is due hereunder. Notwithstanding the foregoing, landlord may obtain
liability insurance and property insurance for the Project separately, or
together with other buildings and improvements under blanket policies of
insurance. In the latter case Tenant shall be liable for only such portion of
the premiums for such blanket policies as are allocable to the premises, as
reasonably determined by the insurer or Landlord. Tenant shall pay such premiums
and/or deductibles and other amounts to Landlord within thirty (30) days after
receipt by Tenant of a copy of the premium statement or other reasonable
evidence of the amount due. If the term of this Lease does not commence or
expire concurrently with the commencement or expiration, respectively, of the
period covered by such insurance, Tenant's liability for premiums shall be
prorated accordingly.
14.5. Insurance Policies.
The insurance required to be obtained by Tenant pursuant to Paragraphs 14.1
and 14.3(b) shall be primary insurance and (a) shall provide that the insurer
shall be liable for the full amount of the loss up to and including the total
amount of liability set forth in the declarations without the right of
contribution from any other insurance coverage of Landlord, (b) shall be in a
form satisfactory to Landlord, (c) shall be carried with companies acceptable to
Landlord, and (d) shall specifically provide that such policies shall not be
subject to cancellation, reduction of coverage or other change except after at
least fifteen (15) days prior written notice to Landlord. The policy or
policies, or duly executed certificates for them, together with satisfactory
evidence of payment of the premium thereon, shall be deposited with Landlord on
or prior to the Commencement Date, and upon each renewal of such policies, which
shall be effected not less than ten (10) days prior to the expiration date of
the term of such coverage. Tenant shall not do or permit to be done anything
which shall invalidate any of the insurance policies referred to in Paragraphs
14.1,14.2, and 14.3.
14.6. Waiver of Subrogation.
Tenant and Landlord each hereby waives any and all rights of recovery
against the other, or against the officers, employees, agents, partners and
beneficiaries of the other, for loss of or damage to the property of the waiving
party, or the property of others under its control, to the extent of proceeds
received as a result of such loss or damage under any insurance policy carried
by Landlord or Tenant. Tenant and Landlord shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carrier or carriers
that the foregoing mutual waiver is contained in this Lease.
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Landlord 13 Tenant
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14.7. No Limitation of Liability.
Landlord makes no representation that the limits of liability specified to
be carried by Tenant or Landlord under the terms of this Lease are adequate to
protect any party. If Tenant believes that the insurance coverage required under
this Lease is insufficient to adequately protect Tenant, Tenant shall provide,
at its own expense, such additional insurance as Tenant deems adequate.
14.8. Impounding of Premiums.
If Landlord's lender requires Landlord to pay insurance premiums into an
impound account on a periodic basis during the term of this Lease, Tenant, upon
notice from Landlord indicating this requirement, shall pay a sum of money
toward its liabilities under this Paragraph 14 to Landlord on a periodic basis
in accordance with the lender's requirements. Landlord shall impound the
insurance premiums received from Tenant in accordance with the requirements of
the lender.
15. DAMAGE OR DESTRUCTION.
15.1. Partial Damage-Insured.
If the premises or the Building, as the case may be, are damaged to the
extent of less than fifty percent (50%) of the then replacement value thereof
(excluding excavations and foundations with respect to the Building), and if
such damage was caused by an act or casualty covered under an insurance policy
maintained pursuant to Paragraph 14.3(a), and if the proceeds of such insurance
received by Landlord are sufficient to repair the damage (not taking into
account the effect of any deductible amount under such insurance policy), and if
Landlord is permitted, under all applicable laws, to restore the premises and/or
the Building to their prior condition, Landlord shall at Landlord's expense
repair such damage as soon as reasonably possible and this Lease shall continue
in full force and effect.
15.2. Partial Damage-Uninsured.
Subject to the provisions of Paragraph 15.3, if at any time during the term
hereof the premises or the Building, as the case may be, are damaged and the
insurance proceeds received by Landlord are not sufficient to repair such damage
(not taking into account the effect of any deductible amount under such
insurance policy), or such damage was caused by an act or casualty not covered
under an insurance policy maintained by Landlord pursuant to Paragraph 14.3(a),
Landlord may at Landlord's option either (a) repair such damage as soon as
reasonably possible at Landlord's expense, in which event this Lease shall
continue in full force and effect, or (b) give written notice of termination of
this Lease to Tenant within thirty (30) days after the date of the occurrence of
such damage, with the effective date of such termination to be the date of the
occurrence of such damage. In the event Landlord gives such notice of
termination of this Lease, Tenant shall have the right, within ten (10) days
after receipt of such notice, to agree in writing on a basis satisfactory to
Landlord to pay for the entire cost of repairing such damage less only the
amount of insurance proceeds, if any, received by Landlord, in which event the
notice of termination shall be ineffective and this Lease shall continue in full
force and effect, and Landlord shall proceed to make such repairs as soon as
reasonably possible. If Tenant does not give such notice within such ten (10)
day period this Lease shall be terminated pursuant to such notice of termination
by Landlord.
15.3. Total Destruction.
If at any time during the term hereof either the premises or the Building
is destroyed to the extent of fifty percent (50%) or more of the then
replacement value thereof (excluding excavations and foundations with respect to
the Building), from any cause whether or not covered by the insurance maintained
by Landlord pursuant to Paragraph 14.3(a), or if, regardless of the extent of
the damage, Landlord is not permitted under all applicable laws to restore the
premises and/or the Building to the condition which existed prior to the
casualty, this Lease shall at the option of Landlord terminate as of the date of
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Landlord 14 Tenant
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such destruction. Landlord shall exercise its right to terminate this Lease by
delivery of notice of termination to Tenant within thirty (30) days after the
date that Tenant notifies Landlord of the occurrence of such damage. In the
event Landlord does not elect to terminate this Lease, Landlord shall at
Landlord's expense repair such damage as soon as reasonably possible, and this
Lease shall continue in full force and effect.
15.4. Damage Near End of Term.
Notwithstanding anything to the contrary in Paragraph 15, if the premises
or the Building, as the case may be, are destroyed or damaged in whole or in
part during the last six (6) months of the term of this Lease, such that the
cost of repair would equal Fifty Thousand Dollars ($50,000) or more, whether
from an insured or uninsured casualty, either party may at its option cancel and
terminate this Lease as of the date of occurrence of such damage by giving
written notice to the other party of its election to do so within thirty (30)
days after the date of occurrence of such damage.
15.5. Abatement of Rent.
Notwithstanding anything to the contrary contained in Paragraph 3 or
elsewhere in this Lease, if the premises are partially damaged and this Lease is
not terminated, the rent, including Tenant's Share of Direct Operating Expenses,
Real Property Taxes, and insurance premiums, payable hereunder for the period
commencing on the occurrence of such damage and ending upon completion of such
repair or restoration shall be abated in proportion to the extent to which
Tenant's use of the premises is impaired during the period of repair. Except for
abatement of rent, if any, Tenant shall have no claim against Landlord for any
damage suffered by reason of any such damage, destruction, repair or
restoration.
15.6. Waiver.
Tenant waives the provisions of California Civil Code Sections 1932(2) and
1933(4), and any similar or successor statutes relating to termination of leases
when the thing leased is substantially or entirely destroyed, and agrees that
any such occurrence shall instead be governed by the terms of this Lease.
15.7. Tenant's Property.
Landlord's obligation to rebuild or restore shall not include
restoration of Tenant's trade fixtures, equipment, merchandise, or any
improvements, alterations or additions made by Tenant to the premises.
15.8. Notice of Damage.
Tenant shall notify Landlord within five (5) days after the occurrence
thereof of any damage to all or any portion of the premises of which Tenant has
actual knowledge. In no event shall Landlord have any obligation to repair or
restore the premises pursuant to this Paragraph 15 until a reasonable period of
time after Landlord's receipt of notice from Tenant of the nature and scope of
any damage to the premises, and a reasonable period of time to collect insurance
proceeds arising from such damage (unless such damage is clearly not covered by
insurance then in effect covering the premises).
15.9. Replacement Cost.
The determination in good faith by Landlord (after consultation with
Landlord's architect or contractor) of the estimated cost of or time period
required for repair of any damage, or of the replacement cost, shall be
conclusive for purposes of this Paragraph 15. If Tenant does not agree that
Landlord has made any such determination reasonably and in good faith, Tenant
shall have the right to require that any such determination be submitted to
arbitration in accordance with the rules of the American Arbitration
Association. In the event of any such arbitration, the one hundred eighty (180)
day time period set forth in Paragraph 15.10 below shall be extended by the
period of time required to complete such arbitration proceedings.
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Landlord 15 Tenant
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15.10. Damage and Destruction-Tenant's Termination Rights.
Within fifteen (15) business days following any damage to or destruction of
the premises, Landlord shall determine in good faith (after consultation with
Landlord's architect or contractor) the estimated period required to repair and
restore the premises, and shall deliver such determination to Tenant. If the
premises is damaged or destroyed to the extent that the premises cannot with
reasonable diligence be fully repaired or restored by Landlord within one
hundred eighty (180) days after the date of the damage or destruction (as such
period is determined by Landlord as set forth above), Tenant may terminate this
Lease upon notice thereof to Landlord delivered in writing within ten (10) days
of Tenant's receipt of Landlord's notice and the obligation of Tenant, if any,
to pay Rent to Landlord shall terminate as of the date of such notice.
16. CONDEMNATION.
16.1. Partial Taking.
Subject to Paragraph 16.5, if part of the premises is taken for any public
or quasi-public use, under any statute or right of eminent domain (collectively
a "taking"), and a part of the premises remains which is reasonably suitable for
Tenant's continued occupancy for the uses permitted by this Lease, and a portion
of the parking area within the Project remains which is equivalent to at least
fifty percent (50%) of the parking area in the Project as of the Commencement
Date, this Lease shall, as to the part so taken, terminate as of the date the
condemner or purchaser takes possession of the property being taken, and the
monthly Base Rent payable hereunder shall be reduced in the same proportion that
the floor area of the portion of the premises so taken bears to the floor area
of the premises as of the Commencement Date. Landlord shall, at its own cost and
expense, make all necessary repairs or alterations to the premises in order to
make the portion of the premises not taken a complete architectural unit. Such
work shall not, however, exceed the scope of the work done by Landlord in
originally constructing the premises. Each party hereto waives the provisions of
California Code of Civil Procedure Section 1265.130 allowing either party to
petition the superior court to terminate this Lease in the event of a partial
taking of the premises. In any portion of the premises is condemned, and such
partial condemnation renders the premises unusable for Tenant's business, as
reasonably determined by Tenant in good faith, Tenant shall have the right to
terminate this Lease by giving notice to Landlord of Tenant's desire to
terminate, and this Lease shall terminate as of the date of the notice. If such
partial condemnation does not result in termination of the Lease, Landlord shall
promptly restore the remaining premises to the same condition they were in prior
to such condemnation, and this Lease shall continue in full force and effect
except that Base Rent and Tenant's Share shall be adjusted on the basis of the
square footage condemned as of the date the premises is condemned.
16.2. Total Taking.
Subject to Paragraph 16.5, if all of the premises are taken, or such part
thereof is taken so that there does not remain a portion of the premises
suitable for Tenant's continued occupancy for the uses permitted hereunder, or
more than fifty percent (50%) of the parking area in the Project as of the
Commencement Date is taken, such taking shall be treated as a total taking and
this Lease shall terminate upon the date possession shall be taken by the
condemning authority.
16.3. Distribution of Award.
All compensation awarded upon a taking governed by Paragraph 16.1 or
Paragraph 16.2 shall belong to and be paid to Landlord, except that Tenant shall
receive from the award a sum attributable to Tenant's improvements or
alterations made to the premises by Tenant at Tenant's expense and a sum for
relocation costs.
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Landlord 16 Tenant
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16.4. Sale Under Threat of Condemnation.
A sale by Landlord to any authority having the power of eminent domain,
either under threat of condemnation or while condemnation proceedings are
pending, shall be deemed a taking under the power of eminent domain for purposes
of this Paragraph 16.
16.5. Temporary Taking.
If all or any part of the premises is occupied, taken, or appropriated by
military or other public or quasi-public use or other governmental authority for
less than one hundred eighty (180) consecutive days, it shall not constitute a
taking of the premises which would be governed by Paragraph 16.1 or Paragraph
16.2. In such event, during such a "temporary taking," all of the provisions of
this Lease shall remain in force and effect, except that the monthly Base Rent
payable during such temporary taking shall be reduced in the same proportion
that the floor area of the portion of the premises so occupied, taken, or
appropriated bears to the floor area of the premises as of the Commencement
Date. Any award that may be paid in connection with such a temporary taking
shall be paid to Landlord. In the event a taking which appears, at its
commencement, to be only a temporary taking nevertheless continues for one
hundred eighty (180) consecutive days or more, a partial or total taking, as the
case may be, shall be deemed to have occurred on the one hundred eightieth
(180th) consecutive day of such taking, and shall be governed by the provisions
of either Paragraph 16.1 or Paragraph 16.2 as the case may be.
17. ASSIGNMENT AND SUBLETTING.
Tenant shall not assign this Lease, or any interest therein, voluntarily or
involuntarily, and shall not sublet the premises or any part thereof, or any
right or privilege appurtenant thereto, or suffer any other person (the agents
and servants of Tenant excepted) to occupy or use the premises, or any portion
thereof, without the prior written consent of Landlord in each instance pursuant
to the terms and conditions set forth below, which consent shall not
unreasonably be withheld.
17.1. Documentation.
Prior to any assignment or sublease which Tenant desires to make, Tenant
shall provide to Landlord the name and address of the proposed assignee or
sublessee, a statement of the proposed use of the premises by the assignee or
sublessee (including an indication of the extent to and manner in which
Hazardous Materials [as defined in Paragraph 6.3(a)] will be utilized), and true
and complete copies of all documents relating to Tenant's prospective agreement
to assign or sublease, and shall specify all consideration to be received by
Tenant for such assignment or sublease in the form of lump sum payments,
installments of rent, or otherwise. For purposes of this Paragraph 17, the term
"consideration" shall include, without limitation, all monies or other
consideration of any kind, if such sums are related to Tenant's interest in this
Lease or in the premises, including but not limited to, bonus money, and
payments (in excess of book value thereof) for Tenant's assets, fixtures,
inventory, accounts, good will, equipment, furniture, general intangibles, and
any capital stock or other equity ownership of Tenant. Within thirty (30) days
after the receipt of such written notice, Landlord shall either consent in
writing to such proposed assignment or sublease subject to the terms and
conditions hereinafter set forth, or notify Tenant in writing that Landlord
refuses such consent, specifying reasonable grounds for such refusal.
17.2. Terms and Conditions.
As a condition to Landlord's granting its consent to any assignment or
sublease, (a) Landlord may require that Tenant pay to Landlord, as and when
received by Tenant, one-half of the amount of any excess of such consideration
to be received by Tenant in connection with said assignment or subletting over
and above the rental amount fixed by this Lease and payable by Tenant to
Landlord (prorated to reflect the rent allocable to the portion of the premises
subject to such assignment or sublease); provided that Tenant shall first be
entitled to retain an amount of such excess consideration equal to Tenant's
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Landlord 17 Tenant
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reasonable direct costs of assigning or subletting, including (i) real estate
brokerage commissions, if any, (ii) legal fees, (iii) the cost of improvements
made to the premises to be sublet or assigned by Tenant at Tenant's expense for
the purpose of such transfer, (iv) the unamortized cost of any improvements
previously made by Tenant in the area to be transferred at Tenant's expense
(which shall be amortized over the initial term of this Lease), but not
including carrying costs due to vacancy or otherwise, and (b) Tenant and the
proposed assignee or sublessee must demonstrate to Landlord's reasonable
satisfaction that the assignee or sublessee is financially responsible and
proposes to use the premises for substantially the same use or a use which is
otherwise satisfactory to Landlord, and that the proposed use does not pose an
unreasonable risk (as determined by Landlord in its sole discretion) of
contamination of the Project with Hazardous Materials and is not otherwise
injurious to the premises. Each assignment or sublease agreement to which
Landlord has consented shall be an instrument in writing in form satisfactory to
Landlord, and shall be executed by both Tenant and the assignee or sublessee, as
the case may be. Each such assignment or sublease agreement shall recite that it
is and shall be subject and subordinate to the provisions of this Lease, that
the assignee or sublessee accepts such assignment or sublease and agrees to
perform all of the obligations of Tenant hereunder, and that the termination of
this Lease shall, at Landlord's sole election, constitute a termination of every
such assignment or sublease. In the event Landlord shall consent to an
assignment or sublease, Tenant shall nonetheless remain primarily liable for all
obligations and liabilities of Tenant under this Lease, including but not
limited to the payment of rent. Tenant agrees to reimburse Landlord upon demand
for reasonable attorneys' fees incurred by Landlord in connection with the
negotiation, review, and documentation of any such requested assignment or
subleasing. Tenant hereby stipulates that the foregoing terms and conditions are
reasonable.
17.3. Partnership.
If Tenant is a partnership, a transfer, voluntary or involuntary, of all or
any part of an interest in the partnership, or the dissolution of the
partnership, shall be deemed an assignment requiring Landlord's prior written
consent.
17.4. Corporation.
If Tenant is a corporation, any dissolution, merger, consolidation, or
other reorganization of Tenant, or the transfer, either all at once or in a
series of transfers, of a controlling percentage of the capital stock of Tenant,
or the sale, or series of sales within any one (1) year period, of all or
substantially all of Tenant's assets located in, on, or about the premises,
shall be deemed an assignment. The phrase "controlling percentage" means the
ownership of, and the right to vote, stock possessing at least fifty-one percent
(51%) of the total combined voting power of all classes of Tenant's capital
stock issued, outstanding, and entitled to vote for the election of directors.
Notwithstanding the foregoing, Tenant may assign this Lease or sublet any
portion of the premises without Landlord's consent to any of the following: (a)
any corporation which controls, is controlled by or is under common control with
Tenant; (b) any corporation resulting from the merger or consolidation of Tenant
or (c) any person or entity which acquires all of the assets of Tenant as a
going concern of the business that is being conducted on the premises, provided
that: (i) such transferee assumes in full the obligations of Tenant under the
Lease, (ii) the successor to Tenant has a net worth, computed in accordance with
generally accepted accounting principles, at least equal to the net worth of
Tenant herein named on the date of this Lease (or such lesser net worth which is
adequate for such successor to meet all its reasonably anticipated obligations,
including its obligations under this Lease, which such lesser net worth must be
approved by Landlord, such approval not to be unreasonably withheld), and (iii)
proof satisfactory to Landlord of such net worth shall have been delivered to
Landlord at least ten (10) days prior to the effective date of any such
transaction.
17.5. Landlord's Remedies.
Any assignment or sublease without Landlord's prior written consent shall
at Landlord's election be void, and shall constitute a default. The consent by
Landlord to any assignment or sublease shall not constitute a waiver of the
provisions of this Paragraph 17,
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including the requirement of Landlord's prior written consent, with respect to
any subsequent assignment or sublease. if Tenant shall purport to assign this
Lease, or sublease all or any portion of the premises, or permit any person or
persons other than Tenant to occupy the premises, without Landlord's prior
written consent, Landlord may collect rent from the person or persons then or
thereafter occupying the premises and apply the net amount collected to the rent
reserved herein, but no such collection shall be deemed a waiver of Landlord's
rights and remedies under this Paragraph 17, or the acceptance of any such
purported assignee, sublessee or occupant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained.
17.6. Encumbrances, Licenses and Concession Agreements.
Tenant shall not encumber its interest under this Lease or any rights of
Tenant hereunder, or enter into any license or concession agreement respecting
all or any portion of the premises, without Landlord's prior written consent
which consent shall not unreasonably be withheld subject to the terms and
conditions referred to in Paragraph 17.2 above, and Tenant's granting of any
such encumbrance, license, or concession agreement shall constitute an
assignment for purposes of this Paragraph 17.
18. DEFAULT BY TENANT.
18.1. Event of Default.
The occurrence of any one or more of the following events (an "Event of
Default") shall constitute a default and breach of this Lease by Tenant:
(a) The failure by Tenant to make any payment of rent or any other
payment requited to be made by Tenant hereunder, as and when due, and such
failure shall not have been cured within three (3) business days after written
notice thereof from Landlord. Any such notice shall constitute the notice
required under Section 1161 of the California Code of Civil Procedure (and/or
any related or successor statutes regarding unlawful detainer actions), provided
such notice is given in accordance with the requirements of such statute.
Furthermore, if three or more such failures shall occur in any one year period
during the term of this Lease, then, unless applicable law requires otherwise,
each and every succeeding failure to pay any sum payable hereunder when due
shall constitute an Event of Default, and Tenant shall not be entitled to a
three (3) day cure period or notice from Landlord with respect to any such
failure to pay;
(b) Tenant's failure to perform any other term, covenant or condition
contained in this Lease and such failure shall have continued for fifteen (15)
days after written notice of such failure is given to Tenant; provided that,
where such failure cannot reasonably be cured within said fifteen (15) day
period, Tenant shall not be in default if Tenant commences such cure within said
fifteen (15) day period and thereafter diligently continues to pursue all
reasonable efforts to complete said cure until completion thereof;
(c) Tenant's failure to continuously and uninterruptedly conduct
its business in the premises for a period of more than forty-five (45)
consecutive days, or Tenant's removal of all or substantially all of its
equipment and other possessions from the premises;
(d) Tenant's assignment of its assets for the benefit of its
creditors;
(e) The sequestration of, attachment of, or execution on, any
substantial part of the property of Tenant or on any property essential to the
conduct of Tenant's business on the premises, and Tenant shall have failed to
obtain a return or release on such property within sixty (60) days thereafter,
or prior to sale pursuant to such sequestration, attachment or execution,
whichever is earlier;
(f) An entry of any of the following orders by a court having
jurisdiction, and such order shall have continued for a period of sixty (60)
days: (1) an order for relief in any proceeding under Title 11 of the United
States Code, or an order adjudicating Tenant
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Landlord 19 Tenant
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to be bankrupt or insolvent; (2) an order appointing a receiver, trustee or
assignee of Tenant's property in bankruptcy or any other proceeding; or (3) an
order directing the winding up or liquidation of Tenant; or
(g) The filing of a petition to commence against Tenant an involuntary
proceeding under Title 11 of the United States Code, and Tenant shall fail to
cause such petition to be dismissed within sixty (60) days thereafter.
18.2. Remedies.
Upon any Event of Default, Landlord shall have the following remedies, in
addition to all other rights and remedies provided by law or equity:
(a) Landlord, as described in California Civil Code Section 1951.4,
shall be entitled to keep this Lease in full force and effect for so long as
Landlord does not terminate Tenant's right to possession (whether or not Tenant
shall have abandoned the premises) and Landlord may enforce all of its rights
and remedies under this Lease, including the right to recover rent and other
sums as they become due under this Lease, plus interest at the lesser of twelve
percent (12%) per annum or the highest rate then allowed by law, from the due
date of each installment of rent or other sum until paid; or
(b) Landlord may terminate the Tenant's right to possession by giving
Tenant written notice of termination. On the giving of the notice, this Lease
and all of Tenant's rights in the premises shall terminate. Any termination
under this paragraph shall not release Tenant from the payment of any sum then
due Landlord or from any claim for damages or rent previously accrued or then
accruing against Tenant.
In the event this Lease is terminated pursuant to this Paragraph 18.2(b),
Landlord may recover from Tenant:
(1) the worth at the time of award of the unpaid rent which had
been earned at the time of termination; plus
(2) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss for the same period that Tenant
proves could have been reasonably avoided; plus
(3) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss for the same period that Tenant proves could be
reasonably avoided; plus
(4) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which in the ordinary course of things would be likely to
result therefrom, including without limitation, the following: (i) expenses for
cleaning, repairing or restoring the premises; (ii) expenses for altering,
remodeling or otherwise improving the premises for the purpose of reletting,
including installation of leasehold improvements (whether such installation be
funded by a reduction of rent payable by a new tenant, direct payment or
allowance to a new tenant, or otherwise); (iii) real estate leasing commissions,
advertising costs and other expenses of reletting the premises; (iv) costs
incurred as owner of the premises including without limitation taxes and
insurance premiums thereon, utilities and building security; (v) expenses in
retaking possession of the premises; (vi) attorneys' fees and court costs; and
(vii) any unamortized lease commission paid in connection with this Lease.
The "worth at the time of award" of the amounts referred to in
subparagraphs (1) and (2) of this Paragraph 18.2(b) shall be computed by
allowing interest at the lower of twelve percent (12%) per annum, or the maximum
rate then permitted by law. The "worth at the time of award" of the amount
referred to in subparagraph (3) of this paragraph shall be computed by
discounting such amount at the discount rate of the Federal Reserve Board of San
Francisco at the time of award plus one percent (1%). The term "time of award"
as
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used in subparagraphs (1), (2), and (3) shall mean the date of entry of a
judgment or award against Tenant in an action or proceeding arising out of
Tenant's breach of this Lease. The term "rent" as used in this Paragraph shall
include all sums required to be paid by Tenant to Landlord pursuant to the terms
of this Lease.
(c) This lease may be terminated by a judgment specifically providing
for termination, or by Landlord's delivery to Tenant of written notice
specifically terminating this Lease. In no event shall any one or more of the
following actions by Landlord, in the absence of a written election by Landlord
to terminate this Lease, constitute a termination of this Lease or a waiver of
Landlord's right to recover damages under this Paragraph 18:
(1) appointment of a receiver in order to protect Landlord's
interest hereunder;
(2) consent to any subletting of the premises or assignment of
this Lease by Tenant, whether pursuant to provisions hereof concerning
subletting and assignment or otherwise; or
(3) any other action by Landlord or Landlord's agents intended to
mitigate the adverse effects of any breach of this Lease by Tenant, including
without limitation any action taken to maintain and preserve the premises, or
any action taken to relet the premises or any portion thereof for the account of
Tenant and in the name of Tenant.
18.3. No Relief From Forfeiture After Default.
Tenant waives all rights of redemption or relief from forfeiture under
California Code of Civil Procedure Sections 1174 and 1179, and under any other
present or future law, in the event Tenant is evicted or Landlord otherwise
lawfully takes possession of the premises by reason of any event of Default.
18.4. Landlord's Right to Perform Tenant's Obligations.
If Tenant at any time shall fail to make any payment or perform any other
act required to be made or performed by Tenant under this Lease, then Landlord
may, but shall not be obligated to, make such payment or perform such other act
to the extent Landlord may deem desirable, and may, in connection therewith, pay
any and all expenses incidental thereto and employ counsel. No such action by
Landlord shall be deemed a waiver by Landlord of any rights or remedies Landlord
may have as a result of such failure by Tenant, or a release of Tenant from
performance of such obligation. All sums so paid by Landlord, including without
limitation all penalties, interest and costs in connection therewith, shall be
due and payable by Tenant to Landlord on the day immediately following any such
payment by Landlord. Landlord shall have the same rights and remedies for the
nonpayment of any such sums as Landlord may be entitled to in the case of
default by Tenant in the payment of rent.
18.5. Interest on Past Due Obligations.
Any amount due to Landlord hereunder not paid when due shall bear interest
at the lower of twelve percent (12%) per annum, or the highest rate then allowed
by law, from the date due until paid in full. Payment of such interest shall not
excuse or cure any default by Tenant under this Lease.
18.6. Additional Rent.
All sums payable by Tenant to Landlord or to Allied parties under this
Lease in addition to such sums payable pursuant to Paragraph 3 hereof shall be
payable as additional sums of rent. For purposes of any unlawful detainer action
by Landlord against Tenant pursuant to California Code of Civil Procedure
Sections 1161-1174, or any similar or successor statutes, Landlord shall be
entitled to recover as rent not only such sums specified in Paragraph 3 as may
then be overdue, but also all such additional sums of rent as may then be
overdue.
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18.7. Remedies Not Exclusive.
No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies herein provided or
permitted at law or in equity.
19. DEFAULT BY LANDLORD.
19.1. Cure Period.
Landlord shall not be deemed to be in default in the performance of any
obligation required to be performed by it hereunder unless and until it has
failed to perform such obligation within the period of time specifically
provided herein, or if no period of time has been provided, then within thirty
(30) days after receipt of written notice by Tenant to Landlord specifying
wherein Landlord has failed to perform such obligation; provided, however, that
if the nature of Landlord's obligation is such that more than thirty (30) days
are reasonably required for its performance, then Landlord shall not be deemed
to be in default if it shall commence such performance within such thirty (30)
day period and thereafter diligently prosecute the same to completion.
19.2. Mortgagee Protection.
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgagee of a mortgage encumbering the premises whose address shall have been
furnished to Tenant, and before Tenant shall have any right to terminate this
Lease, Tenant shall grant such beneficiary or mortgagee the same time period
within which to cure the default provided to Landlord hereunder.
20. ADVERTISEMENTS AND SIGNS.
Tenant shall not place or permit to be placed any sign, display,
advertisement, or decoration ("sign") on the exterior of the Building, or
elsewhere in the Project or on the premises, without the prior written consent
of Landlord, Stanford and the City of Palo Alto as to the color, size, style,
character, content, and location of each such sign. Landlord hereby approves of
the existing signage installed in the Project as of the date of this Lease. Upon
termination of this Lease, Tenant shall remove any sign which it has placed in
the Project or on the premises or the Building, and shall repair any damage
caused by the installation or removal of such sign.
21. ENTRY BY LANDLORD.
Landlord and its agents shall be entitled to enter into and upon the
premises at all reasonable times, upon at least twenty-four (24) hours prior
notice (except m the case of an emergency, in which event no notice shall be
required), for the following purposes:
(a) to inspect or make repairs, alterations or additions to all or any
portion of the premises which Landlord may deem appropriate (i) to comply with
any laws, ordinances, rules, regulations, or policies of any governmental
authority or Landlord's insurance carrier(s), or (ii) to prevent waste or
deterioration of the Project, or (iii) to promote the general welfare and safety
of occupants of the Project, or (iv) to enhance the value of the Project, or (v)
to perform construction work elsewhere in the Building adjacent to, above, or
below the premises, including the erection and maintenance of such scaffolding,
canopies, fences and props as may be required; or
(b) to post notices of non-responsibility for alterations, additions,
or repairs; or
(c) to place upon the premises any ordinary "for sale" signs and to
show the premises to prospective purchasers or lenders; and, during the ninety
(90) day period prior to the expiration of this Lease, or upon any Event of
Default, to place upon the premises
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any usual or ordinary "for lease" signs and exhibit the premises to prospective
tenants at reasonable hours.
Landlord's rights of entry as set forth in this Paragraph 21 shall be
subject to the reasonable security regulations of Tenant, and to the requirement
that Landlord shall use reasonable efforts to minimize interference with
Tenant's business activities on the premises. The preceding sentence shall not
require the use of overtime labor or the conduct of any work or other activities
of Landlord during Tenant's non-business hours.
Landlord shall be entitled to exercise the foregoing rights without any
abatement of rent and without liability to Tenant for any injury or
inconvenience to or interference with Tenant's business, quiet enjoyment of the
premises, or any other loss occasioned thereby.
22. SUBORDINATION AND ATTORNMENT.
22.1. Subordination.
Tenant agrees that this Lease may, at the option of Landlord, be subject and
subordinate to any mortgage, deed of trust, or other instrument of security now
of record or which is recorded after the date of this Lease affecting the
Project or any portion thereof, including the premises, and such subordination
is hereby made effective without any further act of Tenant; provided that, no
such subordination shall be effective unless Landlord first obtains from a
lender a written agreement that provides in essence that as long as Tenant is
not in default beyond any applicable cure period in its obligations under this
Lease, no foreclosure of, deed given in lieu of foreclosure of, or sale under,
the encumbrance, and not steps or procedures taken under the encumbrance, shall
affect Tenant's rights under this Lease. Tenant shall execute and return to
Landlord the written agreement and any other documents required by the lender to
accomplish the purposes of this paragraph, within ten (10) days after delivery
thereof to Tenant, and the failure of Tenant to execute and return any such
instruments shall constitute a default hereunder.
22.2. Attornment.
Tenant shall attorn to any third party purchasing or otherwise acquiring
the premises at any sale or other proceeding, or pursuant to the exercise of any
rights, powers or remedies under any mortgages or deeds of trust or ground
leases now or hereafter encumbering all or any part of the premises, as if such
third party had been named as Landlord under this Lease. Tenant shall execute a
new lease with such new Landlord on the same terms of this Lease if so required
by such new Landlord.
22.3. Cooperation Regarding Agreements.
Landlord shall cooperate with Tenant in connection with Tenant's obtaining:
(a) a recognition and attornment agreement executed by Landlord and Stanford, in
a form reasonably satisfactory to Landlord, and (b) a non-disturbance agreement
from Landlord's lender holding an interest in the Project as of the date of this
Lease. Such cooperation shall be at no cost or expense to Landlord.
23. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
Tenant shall within ten (10) days following request by Landlord: (a)
execute and deliver to Landlord any documents, including estoppel certificates,
(1) certifying that this Lease has not been modified and is in full force and
effect or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect, (2) stating the
date to which the rent and other charges are paid in advance, if at all, (3)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or if there are uncured defaults on the part of
Landlord, stating the nature of such uncured defaults, and (4) evidencing the
status of this Lease as may be required either by a lender making a loan to
Landlord to be secured by a deed of trust or mortgage encumbering the premises
or a purchaser of the premises from Landlord; and (b) deliver to Landlord the
current financial statements of Tenant with an opinion of a certified
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public accountant, if available, including a balance sheet and profit and loss
statement for the then current fiscal year, and the two (2) immediately prior
fiscal years (if available), all prepared in accordance with generally accepted
accounting principles consistently applied. Tenant's failure to deliver any such
documents, including an estoppel certificate, or any such financial statements
within ten (10) days following such request shall be an Event of Default under
this Lease.
24. NOTICES.
Any notice, approval, request, demand, or consent (collectively "notice")
required or desired to be given under this Lease shall be in writing and shall
be personally served or delivered by commercial courier (with signed receipt) or
United States mail, registered or certified, postage prepaid, and addressed to
the party to be served at the last address given by that party to the other
party under the provisions of this paragraph. At the date of execution of this
Lease, the addresses of Landlord and Tenant are as set forth above in the
preamble to this Lease. Either party may change its address by notice to the
other party. Any notice delivered by United States mail pursuant to this
paragraph shall be deemed to have been delivered three (3) days after the posted
date of mailing.
25. WAIVER.
The waiver by either party of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No term, covenant or condition shall be deemed to have been waived by
either party unless such waiver is in writing and signed by the party making
such waiver.
26. NO ACCORD AND SATISFACTION.
No payment of Tenant, or receipt by Landlord, or an amount which is less
than the full amount of rent and all other sums payable by Tenant hereunder at
such time shall be deemed to be other than on account of (a) the earliest of
such other sums due and payable, and thereafter (b) to the earliest rent due and
payable hereunder. No endorsement or statement on any check or any letter
accompanying any payment of rent or such other sums shall be deemed an accord
and satisfaction, and Landlord may accept any such check or payment without
prejudice to Landlord's right to receive payment of the balance of such rent
and/or the other sums, or Landlord's right to pursue any remedies to which
Landlord may be entitled to recover such balance.
27. ATTORNEY'S FEES.
If any action proceeding at law or in equity, or an arbitration proceeding
(collectively an "action"), shall be brought to recover any rent under this
Lease, or for or on account of any breach of or to enforce or interpret any of
the terms, covenants, or conditions of this Lease, or for the recovery of
possession of the premises, the prevailing party shall be entitled to recover
from the other party as a part of such action, or in a separate action brought
for that purpose, its reasonable attorney's fees and costs and expenses
(including expert witness fees) incurred in connection with the prosecution or
defense of such action. "Prevailing party" within the meaning of this paragraph
shall include, without limitation, a party who brings an action against the
other after the other is in breach or default, if such action is dismissed upon
the other's payment of the sums allegedly due or upon the other's performance of
the covenants allegedly breached, or if the party commencing such action or
proceeding obtains substantially the relief sought by it in such action, whether
or not such action proceeds to a final judgment or determination.
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28. SURRENDER.
Tenant shall, upon expiration or sooner termination of this Lease,
surrender the premises to Landlord in the same condition as existed on the date
Tenant originally took possession thereof (reasonable wear and tear and damage
due to causes beyond the reasonable control of Tenant excepted) with all
interior walls cleaned, all holes in walls repaired, and all HVAC equipment in
operating order and in good repair, all to the reasonable satisfaction of
Landlord. Tenant shall at such time also surrender to Landlord such alterations
(as defined in Paragraph 9) as Landlord does not require Tenant to remove in
accordance with Paragraph 9.6 above. Tenant, on or before the expiration or
sooner termination of this Lease, shall remove all of its personal property and
trade fixtures from the premises, and all property not so removed shall be
deemed abandoned by Tenant. Tenant shall be liable to Landlord for costs of
removal of any such abandoned trade fixtures or equipment of Tenant, or of any
alterations Tenant fails to remove if so required by Landlord, together with the
cost of returning the premises to its condition as of the date Tenant originally
took possession thereof, and the transportation and storage costs of such items.
If the premises are not so surrendered at the expiration or sooner termination
of this Lease, Tenant shall indemnify Landlord against loss or liability
resulting from delay by Tenant in so surrendering the premises, including
without limitation, any claims made by any succeeding tenant founded on such
delay, losses to Landlord due to lost opportunities to lease to succeeding
tenants, and attorneys' fees and costs. All keys to the premises or any part
thereof shall be surrendered to Landlord upon expiration or sooner termination
of the Lease term.
29. HOLDING OVER.
This Lease shall terminate without further notice at the expiration of the
Lease term. Any holding over by Tenant after expiration shall not constitute a
renewal or extension of the Lease term or give Tenant any rights in or to the
premises unless otherwise expressly provided in this Lease. Any holding over
after expiration of the Lease term with the express written consent of Landlord
shall be construed to be a tenancy from month to month, at one hundred twenty-
five percent (125%) of the monthly Base Rent for the last month of the Lease
term, and shall otherwise be on the terms and conditions herein specified
insofar as applicable, unless otherwise mutually agreed in writing by the
parties.
30. TRANSFER OF PREMISES BY LANDLORD.
The term "Landlord" as used in this Lease, so far as the covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner at the time in question of the lessee's interest under
the Master Lease. In the event of any transfer of such interest, the Landlord
herein named (and in case of any subsequent transfer or conveyance, the then
grantor) shall after the date of such transfer or conveyance be automatically
freed and relieved of all liability thereafter arising with respect to
performance of any covenants or obligations on the part of Landlord contained in
this Lease to be performed; provided, that any funds in the hands of Landlord or
the then grantor at the time of such transfer in which Tenant has an interest,
shall be turned over to the grantee. The covenants and obligations contained in
this Lease on the part of Landlord shall, subject to the foregoing, be binding
upon each Landlord hereunder only during his or its respective period of
ownership.
31. RULES AND REGULATIONS OF BUILDING.
31.1.
The sash doors, sashes, windows, glass doors, lights, and skylights that
reflect or admit light into the halls or other places of the Building shall not
be covered or obstructed. The toilets and urinals shall not be used for any
purpose other than those for which they were constructed, and no rubbish,
newspapers or other substances of any kind shall be thrown into them. Waste and
excessive or unusual use of water shall not be allowed. Tenant shall not mark
nor in any way deface the walls, ceilings, partitions, floors, wood, stone or
iron
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work. The expense of any breakage, stoppage or damage resulting from a violation
of this rule shall be borne by Tenant.
31.2.
All keys to locks installed on the premises shall be surrendered to
Landlord upon termination of the tenancy.
31.3.
Tenant and its guests and employees shall not bring into or keep within the
Building any animal (with the exception of guide dogs for the blind) or
motorcycle or other motor vehicle.
31.4.
No awnings are allowed. Any window covering installed by Tenant must be of
such uniform shape, color, material and make as may first be approved by
Landlord.
31.5.
Except for authorized maintenance personnel, neither Tenant nor its
employees or invitees shall go upon the roof.
31.6.
Tenant shall not use or keep in the Building any kerosene, gasoline or
inflammable or combustible fluid or material.
31.7.
Landlord shall have the right to prohibit any advertising by Tenant which,
in Landlord's reasonable opinion, tends to impair the reputation of the Building
or the Project, and upon written notice from Landlord, Tenant shall refrain from
or discontinue such advertising.
32. GENERAL PROVISIONS.
32.1. Entire Agreement.
This instrument including the Exhibits attached hereto contains all of the
agreements and conditions made between the parties hereto and may not be
modified orally or in any manner other than by an agreement in writing signed by
all of the parties hereto or their respective successors in interest. Any
executed copy of this Lease shall be deemed an original for all purposes.
32.2. Time.
Time is of the essence with respect to the performance of each and every
provision of this Lease in which time of performance is a factor. All
references to days contained in this Lease shall be deemed to mean calendar
days, unless otherwise specifically stated.
32.3. Captions.
The captions and headings of the numbered paragraphs of this Lease are
inserted solely for the convenience of the parties hereto, and are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.
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32.4. California Law.
This Lease shall be construed and interpreted in accordance with the laws
of the State of California. The language in all parts of this Lease shall in all
cases be construed as a whole according to its fair meaning and not strictly for
or against either Landlord or Tenant, and without regard to which party prepared
this Lease.
32.5. Gender; Singular and Plural.
When required by the context of this Lease, the neuter includes the
masculine, the feminine, a partnership, a corporation, or a joint venture, and
the singular shall include the plural.
32.6. Partial Invalidity.
If any provision of this Lease is held by a court of competent jurisdiction
to be invalid, void, or unenforceable, the remainder of the provisions hereof
shall nonetheless continue in full force and effect and shall in no way be
affected, impaired, or invalidated thereby.
32.7. No Warranties.
Any agreements, warranties or representations not expressly contained
herein shall not bind either Landlord or Tenant, and Landlord and Tenant
expressly waive all claims for damages by reason of any statement,
representation, warranty, promise or agreement, if any, not expressly contained
in this Lease.
32.8. Joint and Several Liability.
If Tenant is more than one person or entity, each such person or entity
shall be jointly and severally liable for the obligations of Tenant hereunder.
32.9. Successors and Assigns.
The covenants and conditions herein contained, subject to the provisions as
to assignment, shall inure to the benefit of and bind the heirs, executors,
administrators, assigns, and any other person or entity succeeding lawfully, and
pursuant to the provisions of this Lease, to the rights or obligations of the
respective parties hereto.
32.10. Rules and Regulations.
Landlord may from time to time promulgate reasonable rules and regulations
in addition to those set forth in Paragraph 31 above for the use, safety, care
and cleanliness of the premises, and the preservation of good order thereon.
Such rules and regulations shall be binding upon Tenant upon delivery of a copy
thereof to Tenant, and Tenant shall abide by all such rules and regulations. If
there is a conflict between such rules and regulations and any of the provisions
of this Lease, the provisions of this Lease shall prevail.
32.11. Authority.
The individuals signing this Lease hereby represent and warrant that they
have all necessary power and authority to execute and deliver this Lease on
behalf of Landlord and Tenant, respectively.
32.12. Memorandum of Lease.
Neither Landlord nor Tenant shall record this Lease or a short form
memorandum hereof without the prior written consent of the other.
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32.13. Merger.
The voluntary or other surrender of this Lease, or a mutual cancellation
thereof, shall not work an automatic merger, but shall, at the sole option of
Landlord, either terminate all or any existing subleases or subtenancies, or
operate as an assignment to Landlord of any or all of such subleases or
subtenancies.
32.14. Force Majeure.
Any prevention of or delay in the performance by a party hereto of its
obligations under this Lease caused by inclement weather, labor disputes
(including strikes and lockouts), inability to obtain materials or reasonable
substitutes therefor, governmental restrictions, regulations, controls, action
or inaction, civil commotion, fire or other causes beyond the reasonable control
of the party obligated to perform (except financial inability), shall excuse the
performance by such party of its obligations hereunder (except the obligation of
Tenant to pay rent and other sums hereunder) for a period of one day for each
such day of delay.
32.15. Real Estate Brokers.
Each party represents to the other that it has not had any dealings with
any real estate broker, finder, or other person, with respect to this Lease, and
each party shall indemnify and hold harmless the other party from all damages,
expenses, and liabilities resulting from any claims that may be asserted against
the indemnified party by any broker, finder, or other person with whom the
indemnifying party has or purportedly has dealt.
33. OPTION(S) TO EXTEND.
33.1. Options.
Subject to the remaining provisions of this Paragraph 33, Tenant shall have two
(2) option(s) (each an "Option") to extend the term of this Lease, with each
Option respecting the time period (each an "Extended Term") set forth below:
First Option 2 1/2 years
Second Option 2 1/2 years
Tenant shall exercise an Option, if at all, by giving Landlord written notice of
Tenant's intention to do so at least one hundred eighty (180) days prior to the
expiration of the original term hereof or the then current Extended Term, as the
case may be. Notwithstanding the foregoing, Tenant shall not have the right to
exercise an Option if (a) Tenant has not exercised all prior available Options
to extend the term of this Lease set forth above, or (b) Tenant is in material
default beyond any applicable cure period under this Lease at the time of the
purported Option exercise. Each Extended Term shall be upon all of the terms and
conditions hereof, except that the monthly Base Rent for such Extended Term
shall be determined in accordance with Paragraph 33.2. Upon commencement of each
Extended Term, all references herein to the "term" or "Term" of this Lease shall
be deemed to include such Extended Term.
33.2. Extended Term Rent.
Within thirty (30) days after Landlord's receipt of Tenant's notice of
exercise of an Option, Landlord shall deliver to Tenant a proposal setting forth
the monthly Base Rent for the upcoming Extended Term, which proposal shall be
based upon the fair market rental for the premises. Such fair market rental
value shall not include the value of improvements to the premises performed by
Tenant at Tenant's expense. For the purposes of the preceding sentence, if
Tenant receives reimbursement from Landlord for the cost of any improvements
pursuant to the provisions of Paragraph 34 below, such improvements shall not be
deemed to be made at Tenant's expense. If Tenant within ten (10) business days
after receipt of such proposal agrees to such proposal, the amount of monthly
Base Rent set forth in such proposal shall be binding on Landlord and Tenant.
Should Tenant object in writing to
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Landlord's proposal within ten (10) business days after receipt thereof, or fail
to respond within such period (which failure shall be deemed an objection), then
during the ten (10) business day period following Tenant's objection to
Landlord's proposal, Landlord and Tenant shall negotiate in good faith for the
purpose of reaching an agreement regarding the amount of the monthly Base Rent
during the upcoming Extended Term. In the event the parties fail to agree in a
written instrument signed by both parties upon the amount of the Base Rent for
the upcoming Extended Term within such ten (10) business day period, the monthly
Base Rent for the upcoming Extended Term shall be determined by appraisal in the
manner hereafter set forth; provided, however, that in no event shall the amount
of the monthly Base Rent for the upcoming Extended Term be less than the monthly
Base Rent payable hereunder for the last full month of the term of this Lease
(including any then current Extended Term) immediately preceding commencement of
the upcoming Extended Term. For purposes of the preceding sentence, the amount
of monthly Base Rent for the last month of the Lease term shall not be reduced
to reflect any abatement of rent which may then be in effect.
In the event it becomes necessary under this Paragraph 33.2 to determine
the fair market monthly Base Rent of the premises by appraisal, Landlord and
Tenant each shall appoint an experienced real estate appraiser who shall be a
member of the American Institute of Real Estate Appraisers ("AIREA"), and such
appraisers shall each determine the fair market monthly Base Rent for the
premises in its existing condition in accordance with the provisions below. The
appraisers shall, within twenty (20) business days after their appointment,
complete their appraisals and submit their appraisal reports to Landlord and
Tenant. If the fair market monthly Base Rent of the premises established in the
two (2) appraisals varies by five percent (5%) or more of the higher rental,
said appraisers, within ten (10) days after submission of the last appraisal,
shall appoint a third appraiser who shall be a member of the AIREA. Such third
appraiser shall, within twenty (20) business days after his appointment,
determine by appraisal the fair market monthly Base Rent of the premises, and
submit his appraisal report to Landlord and Tenant. The fair market monthly Base
Rent determined by the third appraiser for the premises shall be controlling,
unless it is less than that set forth in the lower appraisal previously
obtained, in which case the rental set forth in said lower appraisal shall be
controlling, or unless it is greater than that set forth in the higher appraisal
previously obtained, in which case the rental set forth in said higher appraisal
previously obtained shall be controlling. If either Landlord or Tenant fails to
appoint an appraiser, or if an appraiser appointed by either of them fails,
after his appointment, to submit his appraisal within the required period in
accordance with the foregoing, the appraisal submitted by the appraiser properly
appointed and timely submitting his appraisal shall be controlling. If the two
appraisers appointed by Landlord and Tenant are unable to agree upon a third
appraiser within the required period in accordance with the foregoing,
application shall be made within twenty (20) days thereafter by either Landlord
or Tenant to the AIREA, which shall appoint a member of said institute willing
to serve as appraiser. The cost of all appraisals under this subparagraph shall
be borne equally by Landlord and Tenant.
34. CONSTRUCTION OF TENANT IMPROVEMENTS.
34.1. Definitions.
(a) The term "Tenant Improvements" shall mean those improvements
that Tenant desires to construct in the Building pursuant to plans and
specifications developed therefor in accordance with Paragraph 34.2(a).
(b) The term "Tenant Improvement Costs" shall mean all sums (1) paid
to contractors for labor and materials furnished in connection with construction
of the Tenant Improvements pursuant to Paragraph 34.2 below; (2) all costs,
expenses, payments, fees, and charges whatsoever paid or incurred by Tenant to
or at the direction of any city, county, or other governmental authority or
agency which are required to be paid by Tenant in order to obtain all necessary
governmental permits, licenses, inspections and approvals relating to the
construction of the Tenant Improvements and the use and occupancy of the
premises, including without limitation all in lieu fees and utility fees; (3)
engineering and architectural fees for services required in connection with the
design and construction of the Tenant
/s/ illegible /s/ MAB
- ------------- -------
Landlord 29 Tenant
<PAGE>
Improvements; and (4) premiums, if any, for course of construction insurance and
for payment and completion bonds relating only to construction of the Tenant
Improvements.
(c) The term "Tenant's Improvement Allowance" shall mean the maximum
amount Landlord is required to spend toward the payment of Tenant Improvement
Costs, which amount is Four Hundred Twelve Thousand Five Hundred Dollars
($412,500).
(d) The term "substantially complete" shall mean all improvements
required by the Approved Plans (as defined in Paragraph 34.2(a) below) have been
installed, subject to any required repair and replacement items set forth on the
"punchlist" prepared by Landlord and Tenant pursuant to Paragraph 34.3 below.
34.2. Procedure and Time Schedules.
(a) Approval of Plans. At such time during the initial five (5)
-----------------
year term of this Lease that Tenant elects to perform improvements or
modifications to the premises, Tenant shall prepare and deliver to Landlord for
its approval preliminary plans and specifications of the Tenant Improvements.
Landlord's approval shall not be unreasonably withheld and Landlord shall grant
or withhold such approval within ten (10) days following Landlord's receipt of
such preliminary plans and specifications. Within sixty (60) days after
Landlord's approval, Tenant shall prepare final plans, specifications and
working drawings for the Tenant Improvements that are consistent with and are
logical evolutions of the preliminary plans and specifications approved by
Landlord. As soon as the final plans, specifications and working drawings are
completed, Tenant shall deliver the same to Landlord for its approval, which
shall not be unreasonably withheld. Landlord shall grant or withhold its
approval within ten (10) days of Landlord's receipt of the final plans,
specifications and working drawings. In all events, the parties shall use their
best efforts to reach agreement so that such plans may be submitted for
governmental approval as soon as reasonably practicable. Landlord and Tenant
shall indicate their approval thereof by initialing and dating the same.
Landlord's approval of such plans and specifications shall not constitute any
representation or warranty by Landlord regarding the sufficiency or adequacy of
such plans and specifications for any purpose, and Tenant hereby waives any
claims against Landlord which are based upon or arise in connection with
Landlord's approval of such plans and specifications. Tenant shall submit such
final plans, specifications and working drawings to all appropriate governmental
agencies for approval. Tenant will notify Landlord of any changes required by
any governmental agencies, and all such changes shall be subject to Landlord's
reasonable approval, which approval shall be granted or withheld with ten (10)
days of Landlord's receipt of such changes. The final plans, specifications and
working drawings as approved, and all change orders specifically permitted
pursuant to Paragraph 34.2(c) below, shall be referred to herein as the
"Approved Plans."
(b) Contractors. The Tenant Improvements shall be constructed by
-----------
Tenant and its general contractor, which shall be subject to Landlord's
reasonable approval.
(c) Changes To Approved Plans for Tenant Improvements. Following
-------------------------------------------------
final approval by Landlord and Tenant of the Approved Plans, Tenant shall have
the right to modify the Approved Plans subject to the condition that any
modification shall be subject to Landlord's prior written approval, such
approval not to be unreasonably withheld or conditioned. Landlord shall advise
Tenant of its approval or disapproval of such modifications within seven (7)
days of Landlord's receipt of revised plans and specifications setting forth
such modifications.
(d) Commencement and Completion of the Tenant Improvements. As soon
------------------------------------------------------
as (1) the Approved Plans have been developed as provided above, and (2) all
necessary governmental approvals have been obtained, then Tenant shall
thereafter commence construction of such improvements and shall diligently
prosecute such construction to completion. Such improvements shall be
constructed by Tenant in accordance with the Approved Plans, and in compliance
with all applicable regulations, ordinances, building codes, and statutes of
lawful governmental authority. The provisions of Paragraphs 9 and 10 above shall
be applicable to Tenant's construction of the Tenant Improvements.
/s/ illegible /s/ MAB
- ------------- -------
Landlord 30 Tenant
<PAGE>
(e) Payment of Cost of Tenant Improvements. Landlord shall
--------------------------------------
reimburse Tenant all or a portion of the Tenant Improvement Costs up to an
amount equal to Tenant's Improvement Allowance. Tenant shall pay the entire
amount of the Tenant Improvement Costs in excess of the Tenant's Improvement
Allowance. Landlord shall not be obligated to disburse to Tenant any portion of
the Tenant's Improvement Allowance until: (i) Tenant has received and delivered
to Landlord evidence of a satisfactory final inspection of the Tenant
Improvements from governmental entities with applicable jurisdiction, and (ii)
Landlord has received and approved reasonably detailed supporting documentation
evidencing Tenant's expenditure of at least One Hundred Thousand Dollars
($100,000) toward the payment of the Tenant Improvement Costs for which Tenant
seeks reimbursement from Landlord. Landlord's approval of such evidence shall
not be unreasonably withheld and Landlord shall use reasonable efforts to grant
or withhold such approval within ten (10) days of Landlord's receipt of such
documentation. Notwithstanding any provisions of this Lease to the contrary,
Landlord's maximum required contribution toward the payment of Tenant
Improvement Costs shall be Four Hundred Twelve Thousand Five Hundred Dollars
($412,500).
(f) Timing of Construction. Landlord acknowledges and agrees that
----------------------
Tenant shall be entitled to request Landlord's consent to Tenant's construction
of Tenant Improvements and Landlord's payment of the cost thereof, up to a
maximum aggregate amount equal to the Tenant's Improvement Allowance, at any
time during the initial five (5) year term of this Lease. Such construction may
be performed by Tenant in one or more phases, provided that Landlord shall have
no obligation to disburse any portion of the Tenant's Improvement Allowance
until completion and final inspection of each such phase.
34.3. Delivery of Possession.
When the Tenant Improvements (or separate phases thereof) are substantially
completed, Landlord and Tenant shall together walk through and inspect the
Tenant Improvements so completed (which inspection shall include the testing of
any utility facilities, lighting, HVAC equipment, and other service equipment)
using their best efforts to discover all incomplete or defective construction.
After such inspection has been completed, a list of "punchlist" items shall be
prepared which the parties agree are to be corrected by Tenant. Tenant shall use
due diligence to complete and/or repair such "punchlist" items within thirty
(30) days.
35. PARKING LOT LIGHTING
Landlord and Tenant have agreed that certain improvements and/or
modifications should be made to the parking lot lighting installed in the
premises. Landlord shall consult with Tenant to obtain Tenant's recommendations
regarding such improvements and/or modifications and shall advise Tenant of
Landlord's planned modifications to the parking lot lighting on or about the
date which is thirty (30) days following the full execution of this Lease,
provided Tenant has its recommendations in a reasonably timely fashion. Such
planned improvements and/or modifications shall be subject to the reasonable
approval of both Landlord and Tenant, and shall be performed by Landlord at its
sole cost. The parties acknowledge that such improvements and/or modifications
are not intended to fully replace the existing parking lot lighting
improvements, but rather to supplement such improvements to the extent
reasonably necessary to provide parking lot lighting for the premises which Is
consistent with other good quality office buildings in the vicinity of the
premises.
/s/ illegible /s/ MAB
- ------------- -------
Landlord 31 Tenant
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date first above specified. Delivery of this Lease to Landlord, duly executed by
Tenant, constitutes an offer by Tenant to lease the premises as herein set
forth, and under no circumstances shall such delivery be deemed to create an
option or reservation to lease the premises for the benefit of Tenant. This
Lease shall only become effective and binding upon execution of this Lease by
Landlord and delivery of a signed copy to Tenant.
LANDLORD:
San Tomas Investment Company,
a California limited partnership
By: /s/ Thomas W. Ford
------------------------------------
Thomas W. Ford, General Partner
By: /s/ Anthony P. Meier
-------------------------------------
Anthony P. Meier, General Partner
TENANT:
Corsair Communications, a Delaware
corporation
By: /s/ Mary Ann Byrnes
------------------------------------
Its: President
-----------------------------------
/s/ illegible /s/ MAB
- ------------- -------
Landlord 32 Tenant
<PAGE>
EXHIBIT A
ALL THAT certain real property situate in the City of Palo Alto, County of Santa
Clara, State of California described as follows:
COMMENCING at the Northeasterly corner of Lot 5 of Tract #4781 entitled
"Stanford Industrial Park" as filed in the Office of the Recorder of Santa Clara
County on November 13, 1969 in Book 261 of maps at Pages 40 and 41. Said
Northeasterly corner lying on the Westerly line of Hillview Avenue (80 feet in
width); thence from said point of commencement along said Westerly line of
Hillview Avenue North 15 degrees 27'55" West 720.00 feet to the TRUE POINT OF
BEGINNING of the Parcel to be described; thence from said TRUE POINT OF
BEGINNING and leaving said Westerly line of Hillview Avenue South 72 degrees
32'05" West 685.00 feet to a point on the Easterly line of Parcel C as said
Parcel is shown upon that certain parcel map filed in the Officer of the
Recorder of Santa Clara County on May 22, 1969 in Book 254 of Parcel Maps at
Page 1; thence along said Easterly line of Parcel C North 15 degrees 27'55" West
360.37 feet; thence leaving said Easterly line North 74 degrees 32'05" East
685.00 feet to a point on the aforementioned Westerly line of Hillview Avenue;
thence along said Westerly line South 15 degrees 27'55" East 360.37 feet to the
TRUE POINT OF BEGINNING.
CONTAINING 5.667 Acres of land more or less
EXCEPTING therefrom an easement in favor of the Purissima Hills County Water
District for water line purposes 5.00 feet in width being the Easterly 5.00 feet
of the above described parcel and being more full described in Volume 7952 of
Official Records of Santa Clara County at Page 197.
/s/ illegible /s/ MAB
- ------------- -------
Landlord EXHIBIT A Tenant
<PAGE>
EXHIBIT B
PICTURE
/s/ illegible /s/ MAB
- ------------- -------
Landlord EXHIBIT B Tenant
<PAGE>
EXHIBIT 10.46
CORSAIR COMMUNICATIONS, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
______________________
March 7, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Stock............................................. 1
1.1 Sale and Issuance of Series D Preferred Stock..................... 1
1.2 Closing........................................................... 1
2. Representations and Warranties of the Company.......................... 1
2.1 Organization, Good Standing and Qualification..................... 1
2.2 Capitalization and Voting Rights.................................. 2
2.3 Subsidiaries...................................................... 2
2.4 Authorization..................................................... 3
2.5 Valid Issuance of Preferred and Common Stock...................... 3
2.6 Governmental Consents............................................. 3
2.7 Litigation........................................................ 3
2.8 Compliance with Other Instruments................................. 4
2.9 Agreements; Action................................................ 4
2.10 Related-Party Transactions........................................ 5
2.11 Permits........................................................... 5
2.12 Disclosure........................................................ 5
2.13 Minute Books...................................................... 5
2.14 Labor Agreements and Actions...................................... 5
2.15 Registration Rights............................................... 6
2.16 Returns and Complaints............................................ 6
2.17 Offering.......................................................... 6
2.18 Title to Property and Assets; Leases.............................. 6
2.19 Financial Statements.............................................. 6
2.20 Changes........................................................... 7
2.21 Patents and Trademarks............................................ 8
2.22 Manufacturing and Marketing Rights................................ 9
2.23 Proprietary Information and Inventions Agreements................. 9
2.24 Tax Returns, Payments, and Elections.............................. 9
2.25 Insurance......................................................... 10
2.26 Environmental and Safety Laws..................................... 10
2.27 Section 83(b) Elections........................................... 10
3. Representations and Warranties of the Investor......................... 10
3.1 Authorization..................................................... 10
3.2 Purchase Entirely for Own Account................................. 10
3.3 Disclosure of Information......................................... 10
3.4 Investment Experience............................................. 11
3.5 Accredited Investor............................................... 11
3.6 Restricted Securities............................................. 11
3.7 Further Limitations on Disposition................................ 11
3.8 Legends........................................................... 12
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
4. California Commissioner of Corporations................................ 12
4.1 Corporate Securities Law.......................................... 12
5. Conditions of Investor's Obligations at Closing........................ 12
5.1 Representations and Warranties.................................... 12
5.2 Performance....................................................... 13
5.3 Compliance Certificate............................................ 13
5.4 Qualifications.................................................... 13
5.5 Proceedings and Documents......................................... 13
5.6 Opinion of Company Counsel........................................ 13
5.7 Investors' Rights Agreement....................................... 13
5.8 Stock Certificates................................................ 13
6. Conditions of the Company's Obligations at Closing..................... 13
6.1 Representations and Warranties.................................... 13
6.2 Payment of Purchase Price......................................... 14
6.3 Qualifications.................................................... 14
7. Miscellaneous.......................................................... 14
7.1 Survival of Warranties............................................ 14
7.2 Successors and Assigns............................................ 14
7.3 Governing Law..................................................... 14
7.4 Counterparts...................................................... 14
7.5 Titles and Subtitles.............................................. 14
7.6 Notices........................................................... 14
7.7 Finder's Fee...................................................... 15
7.8 Expenses.......................................................... 15
7.9 Amendments and Waivers............................................ 15
7.10 Severability...................................................... 15
7.11 Aggregation of Stock.............................................. 15
7.12 Entire Agreement.................................................. 15
</TABLE>
SCHEDULE A - Schedule of Investors
EXHIBIT A - Certificate of Incorporation
EXHIBIT B - Amendment No. 1 to the Amended and Restated Investors'
Rights Agreement dated October 30, 1996
SCHEDULE OF EXCEPTIONS
(ii)
<PAGE>
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made
as of the March 7, 1997, by and between Corsair Communications, Inc., a Delaware
corporation (the "Company"), and the investors listed on Schedule A hereto, each
----------
of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Issuance of Series D Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) the Amended and Restated
Certificate of Incorporation in the form attached hereto as Exhibit A.
---------
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally, to purchase at the Closing and the Company agrees to
sell and issue to each Investor at the Closing, that number of shares of the
Company's Series D Preferred Stock set forth opposite each Investor's name on
Schedule A hereto for the purchase price set forth thereon. Such purchase price
- ----------
shall be payable by Investor by delivery to Company by Investor of a check in
the amount of the purchase price set forth opposite such Investor's name on
Schedule A payable to the Company's order or by wire transfer of funds in such
- ----------
amount to the Company's designated bank account.
1.2 Closing. The purchase and sale of the Series D Preferred Stock
-------
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1200, San Diego, California at 11:00 A.M., on March 7, 1997, or at
such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series D Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to each
Investor a certificate representing the Series D Preferred Stock which such
Investor is purchasing against delivery to the Company by such Investor of the
purchase price in the form as set forth above in Section 1.1(b).
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions attached hereto, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its
<PAGE>
business as now conducted. The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
--------------------------------
Company consists, or will consist prior to the Closing, of:
(i) Preferred Stock. 14,548,963 shares of Preferred Stock (the
"Preferred Stock"), of which 8,120,000 shares have been designated Series A
Preferred Stock all of which are issued and outstanding, 2,228,963 shares of
which have been designated Series B Preferred Stock of which 1,992,104 shares
are issued and outstanding, 3,800,000 shares of which have been designated
Series C Preferred Stock of which 3,637,272 shares are issued and outstanding,
and 400,000 shares of which have been designated Series D Preferred Stock up to
all of which will be sold pursuant to this Agreement. The rights, privileges and
preferences of the Series D Preferred Stock will be as stated in the Company's
Amended and Restated Certificate of Incorporation attached hereto as Exhibit A.
---------
(ii) Common Stock. 20,000,000 shares of common stock ("Common
------------
Stock"), 1,642,176 of which are currently issued and outstanding.
(iii) Except for (A) the conversion privileges of the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock and the Series D Preferred Stock to be issued under this Agreement, (B)
outstanding warrants to purchase 236,859 shares of Series B Preferred Stock, (C)
the rights provided in Section 2.4 of the Amended and Restated Investors' Rights
Agreement dated October 30, 1996, as amended pursuant to Amendment No. 1 thereto
of even date herewith by and among the Company and certain investors (the
"Investors' Rights Agreement"), and (C) the rights provided in the Directed
Share Agreement dated October 30, 1996 by and among the Company and certain
investors (the "Directed Share Agreement"), there are not outstanding any
options, warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock; provided that the Company has reserved 3,500,000 shares for
issuance to employees, consultants or directors of the Company pursuant to
equity incentive agreements approved by the Board of Directors. The Company is
not a party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
2.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
-2-
<PAGE>
2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, Amendment No. 1 to the Investors'
Rights Agreement dated October 30, 1996 and any other agreement to which the
Company is a party, the execution and delivery of which is contemplated hereby
(the "Ancillary Agreements"), the performance of all obligations of the Company
hereunder and thereunder and the authorization, issuance (or reservation for
issuance) and delivery of the Series D Preferred Stock being sold hereunder and
the Common Stock issuable upon conversion of the Series D Preferred Stock has
been taken or will be taken prior to the Closing, and this Agreement, Amendment
No. 1 to the Investors' Rights Agreement dated October 30, 1996 and any
Ancillary Agreements constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series D
--------------------------------------------
Preferred Stock which is being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and, based in part upon the representations of the Investors in
this Agreement, will be issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion of the Series
D Preferred Stock purchased under this Agreement has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Amended and Restated Certificate of Incorporation, shall be duly and validly
issued, fully paid and nonassessable, and issued in compliance with all
applicable securities laws, as presently in effect, of the United States and
each of the states whose securities laws govern the issuance of any of the
Series D Preferred Stock hereunder.
2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, which filing will be effected within 15 days of the
sale of the Series D Preferred Stock hereunder.
2.7 Litigation. There is no action, suit, proceeding or
----------
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, Amendment No. 1 to the Investors'
Rights Agreement dated October 30, 1996 or any Ancillary Agreements, or the
right of the Company to enter into any of them, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
-3-
<PAGE>
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for the foregoing. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default of any provisions of its Amended and Restated Certificate
of Incorporation or Bylaws or of any instrument, judgment, order, writ, decree
or contract to which it is a party or by which it is bound or, to its knowledge,
of any provision of federal or state statute, rule or regulation applicable to
the Company. The execution, delivery and performance of this Agreement,
Amendment No. 1 to the Investors' Rights Agreement dated October 30, 1996 or any
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization, or approval applicable to the Company, its business or operations
or any of its assets or properties.
2.9 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby and by
Amendment No. 1 to the Investors' Rights Agreement dated October 30, 1996 and
any Ancillary Agreements, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.
(b) The Company is not a party to any contract, agreement,
lease, commitment or proposed transaction, written or oral, absolute or
contingent, other than (i) contracts for the purchase of supplies and services
that were entered into in the ordinary course of business and that do not
involve more than $100,000, and do not extend for more than one (1) year beyond
the date hereof, (ii) sales contracts entered into in the ordinary course of
business, and (iii) contracts terminable at will by the Company on no more than
thirty (30) days notice without cost or liability to the Company and that do not
involve any employment or consulting arrangement and are not material to the
conduct of the Company's business. For the purpose of this paragraph, employment
and consulting contracts and contracts with labor unions, and license agreements
and any other agreements relating to the acquisition or disposition of the
Company's technology, shall not be considered to be contracts entered into in
the ordinary course of business.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $100,000 or, in the case of
indebtedness and/or liabilities
-4-
<PAGE>
individually less than $100,000, in excess of $300,000 in the aggregate, (iii)
made any loans or advances to any person, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
2.10 Related-Party Transactions. No employee, officer, or director of
--------------------------
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any material contract
with the Company.
2.11 Permits. The Company has all franchises, permits, licenses, and
-------
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.12 Disclosure. The Company has fully provided each Investor with
----------
all the information which such Investor has requested for deciding whether to
purchase the Series D Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, Amendment No. 1 to the Investors' Rights Agreement dated
October 30, 1996 and any Ancillary Agreements, nor any other statements,
certificates or documents made or delivered in connection herewith or therewith,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein not misleading.
2.13 Minute Books. The minute books of the Company provided to the
------------
Investors contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
-5-
<PAGE>
2.14 Labor Agreements and Actions. The Company is not bound by or
----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, prospects or business of the Company (as such business is
presently conducted and as it is proposed to be conducted), nor is the Company
aware of any labor organization activity involving its employees. The Company
is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.15 Registration Rights. Except as provided in the Investors' Rights
-------------------
Agreement, the Company is not obligated to register under the Securities Act of
1933 ("Securities Act") any of its presently outstanding securities or any of
its securities that may subsequently be issued.
2.16 Returns and Complaints. The Company has received no customer
----------------------
complaints concerning alleged defects in the design of its products that, if
true, would materially adversely affect the operations, financial condition or
prospects of the Company.
2.17 Offering. Subject in part to the truth and accuracy of each
--------
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series D Preferred Stock as contemplated by this Agreement is
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.18 Title to Property and Assets; Leases. Except (a) as reflected in
------------------------------------
the Financial Statements (defined in Section 2.19), (b) for liens for current
taxes not yet delinquent, (c) for liens imposed by law and incurred in the
ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (d) for liens in respect of
pledges or deposits under workers' compensation laws or similar legislation, or
(e) for minor defects in title, none of which, individually or in the aggregate
materially interferes with the use of such property, the Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances. With respect to the property and assets it leases, the Company is
in compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances, subject to clauses
(a)-(e) above.
-6-
<PAGE>
2.19 Financial Statements. The Company has delivered to each
--------------------
Investor its unaudited financial statements (balance sheet and profit and loss
statement including notes thereto) as at and for the year ended December 31,
1996 (the "Financial Statements"). The Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other, except
that the Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments. Except as set forth in the Financial Statements, the Company has
no material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to December 31, 1996 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate, are not material to the financial condition, operating results
or prospects of the Company. Except as disclosed in the Financial Statements,
the Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.20 Changes. To the best of the Company's knowledge, since December
-------
31, 1996, there has not been:
(a) Any change in the assets, liabilities, financial condition,
operating results or prospects of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) Any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) Any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(e) Any material change to a material contract or arrangement by
which the Company or any of its assets is bound or subject;
-7-
<PAGE>
(f) Any material change in any compensation arrangement or
agreement with any employee, officer, director, or stockholder;
(g) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(h) Any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(i) Receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
(j) Any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(k) Any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) Any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(m) Any other event or condition of any character that might
materially and adversely affect the business, properties, prospects or financial
condition of the Company (as such business is presently conducted and as it is
proposed to be conducted); or
(n) Any agreement or commitment by the Company to do any of the
things described in this Section 2.20.
2.21 Patents and Trademarks. To the best of its knowledge (but
----------------------
without having conducted any special investigation or patent search) the Company
owns or possesses sufficient legal rights to all patents, trademarks,
servicemarks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes necessary for its business as now conducted and
as proposed to be conducted without any conflict with or infringement of the
rights of others. The Schedule of Exceptions contains a complete list of
patents and pending patent applications of the Company. Except for agreements
with its own employees or consultants, substantially in the form referenced in
Section 2.23 below, there are no outstanding options, licenses, or agreements of
any kind relating to the foregoing, nor is the Company bound by or a party to
any options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and
-8-
<PAGE>
processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets or other proprietary rights of any
other person or entity nor is the Company aware of any basis therefor. The
Company is not aware that any of it employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of such employee's best efforts to
promote the interests of the Company or that would conflict with the Company's
business as proposed to be conducted. Neither the execution nor delivery of
this Agreement, nor the carrying on of the Company's business by the employees
of the Company, nor the conduct of the Company's business as proposed, will, to
the best of the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
2.22 Manufacturing and Marketing Rights. The Company has not granted
----------------------------------
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person, and is not bound by any agreement that affects the
Company's exclusive right to develop, manufacture, assemble, distribute, market,
or sell its products.
2.23 Proprietary Information and Inventions Agreements. Each employee
-------------------------------------------------
and officer of the Company has executed a Proprietary Information and Inventions
Agreement substantially in the form or forms that have been delivered to special
counsel for the Investors.
2.24 Tax Returns, Payments, and Elections. The Company has filed all
------------------------------------
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The provision for
taxes of the Company as shown in the Financial Statements is adequate for taxes
due or accrued as of the date thereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended ("Code"), to be treated as an S
corporation or a collapsible corporation pursuant to Section 341(f) of Section
1362(a) of the Code, nor has it made any other elections pursuant to the Code
(other than elections which relate solely to methods of accounting, depreciation
or amortization) which would have a material effect on the business, properties,
prospects or financial condition of the Company. The Company has never had any
tax deficiency proposed or assessed against it and has not executed any waiver
of any statute of limitations on the assessment or collection of any tax or
governmental charge. None of the Company's federal income tax returns and none
of its state income or franchise tax or sales or use tax returns has ever been
audited by governmental authorities. Since the date of the Financial
Statements, the Company has made adequate provisions on its books of account for
all taxes, assessments and governmental charges with respect to its business,
properties and operations for such
-9-
<PAGE>
period. The Company has withheld or collected from each payment made to each of
its employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositaries.
2.25 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability insurance in amounts customary for companies similarly
situated.
2.26 Environmental and Safety Laws. To the best of its knowledge, the
-----------------------------
Company is not in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law, or regulation.
2.27 Section 83(b) Elections. To the best of the Company's knowledge,
-----------------------
all individuals who have purchased shares of the Company's Common Stock have
timely filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
3. Representations and Warranties of the Investor. Each Investor hereby
----------------------------------------------
represents and warrants that:
3.1 Authorization. This Agreement constitutes its valid and legally
-------------
binding obligation, enforceable in accordance with its terms, except as may be
limited by (i) applicable bankruptcy, insolvency, reorganization and moratorium
laws and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series D Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has
full power and authority to enter into this Agreement.
-10-
<PAGE>
3.3 Disclosure of Information. It believes it has received all the
-------------------------
information it considers necessary or appropriate for deciding whether to
purchase the Series D Preferred Stock. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series D Preferred
Stock. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.4 Investment Experience. It is an investor in securities of
---------------------
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series D Preferred Stock.
3.5 Accredited Investor. It is an "accredited investor" within the
-------------------
meaning of SEC Rule 501 of Regulation D, as presently in effect. If other than
an individual, Investor also represents either (a) it has not been organized for
the purpose of acquiring the Series D Preferred Stock or (b) if it has been
organized for the purpose of acquiring the Series D Preferred Stock, that all
the equity owners of such entity are accredited investors.
3.6 Restricted Securities. It understands that the shares of Series
---------------------
D Preferred Stock it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act, only in certain limited circumstances. In this
connection, each Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series D Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3.7, provided and to the extent such section is then applicable,
the Investors' Rights Agreement, and any applicable Ancillary Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel,
-11-
<PAGE>
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Act. It is agreed that the Company will
not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, or to
an affiliate (as such term is defined in SEC Rule 405) of such partnership, if
the transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
-------
Series D Preferred Stock (and the Common Stock issuable upon conversion thereof)
may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by the laws of the State of Delaware or
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the Corporations Code of California.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. Conditions of Investor's Obligations at Closing. The obligations of
-----------------------------------------------
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
-12-
<PAGE>
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The President of the Company shall
----------------------
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since
December 31, 1996.
5.4 Qualifications. The Commissioner of Corporations of the State of
--------------
California shall have issued a permit qualifying the offer and sale of the
Series D Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification.
5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 Opinion of Company Counsel. Each Investor shall have received
--------------------------
from Brobeck, Phleger & Harrison, counsel for the Company, an opinion, dated as
of the Closing, in form and substance satisfactory to special counsel to the
Investors.
5.7 Investors' Rights Agreement. The Company, the holders of a
---------------------------
majority of the Registrable Securities (as defined in that certain Investors'
Rights Agreement dated October 30, 1996) currently outstanding and each Investor
shall have entered into Amendment No. 1 to the Investors' Rights Agreement dated
October 30, 1996, in the form attached hereto as Exhibit B.
---------
5.8 Stock Certificates. The Company shall have executed and
------------------
delivered to each Investor the stock certificates representing the number of
shares of the Company purchased by each Investor pursuant to this Agreement.
6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing
-13-
<PAGE>
with the same effect as though such representations and warranties had been made
on and as of the Closing.
6.2 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
purchase price specified in Section 1.2.
6.3 Qualifications. The Commissioner of Corporations of the State of
--------------
California shall have issued a permit qualifying the offer and sale to the
Investor of the Series D Preferred Stock and the Common Stock issuable upon the
conversion thereof or such offer and sale shall be exempt from such
qualification.
7. Miscellaneous.
-------------
7.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Series D Preferred Stock sold hereunder or any
Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon (a) personal delivery to the party to be notified, (b)
upon telefacsimile transmission to the party to be notified at the telefacsimile
number indicated for such party on the signature page hereof, if any, or (c)
upon deposit with an overnight courier service or the United States Post Office,
by registered or certified mail, postage prepaid
-14-
<PAGE>
and addressed to the party to be notified at the address(es) indicated for such
party on the signature page hereof, or at such other address as such party may
designate by ten (10) days' advance written notice to the other parties.
7.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finder's fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected, each
--------
party hereto shall pay all costs and expenses (including legal expenses) that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Amended and Restated Certificate of
Incorporation, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the Series
D Preferred Stock issued pursuant hereto. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company; provided, however, that no condition set
forth in Section 5 hereof may be waived with respect to any Investor who does
not consent thereto.
7.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Aggregation of Stock. All shares of the Series D Preferred Stock
--------------------
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
7.12 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties and no party shall be
liable or
-15-
<PAGE>
bound to any other party in any manner by any warranties, representations, or
covenants except as specifically set forth herein or therein.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORSAIR COMMUNICATIONS, INC., a
Delaware corporation
By: /s/ Marry Ann Byrnes
----------------------------------------
Mary Ann Byrnes, President
Address: 3408 Hillview Avenue
Palo Alto, CA 94304
INVESTORS:
SUMITOMO CORPORATION
By: /s/ Toshiaki Matsuo
----------------------------------------
Title: Attorney-in-Fact
-------------------------------------
Address: 345 Park Avenue
New York, NY 10154
SUMITOMO CORPORATION OF AMERICA
By: /s/ Toshiaki Matsuo
----------------------------------------
Title: Senior Vice President
-------------------------------------
Address: 345 Park Avenue
New York, NY 10154
[SIGNATURE PAGE TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
---------------------
<TABLE>
<CAPTION>
Cash Purchase No. of
Name Price Shares
- --------------------------------- ------------- -------
<S> <C> <C>
Sumitomo Corporation $1,500,000.00 200,000
Sumitomo Corporation of America $1,500,000.00 200,000
CLOSING TOTALS: $3,000,000.00 400,000
</TABLE>
Schedule A-1
<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------------
A-1
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
Corsair Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Corsair Communications, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 5, 1994 and was amended
pursuant to a Certificate of Amendment of Certificate of Incorporation of the
corporation filed with the Secretary of State of the State of Delaware on
January 25, 1995. An amended and restated Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on October 26, 1995
and was amended pursuant to a Certificate of Amendment of Certificate of
Incorporation of the corporation filed with the Secretary of State of the State
of Delaware on December 18, 1995. An amended and restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
October 30, 1996.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders, the
stockholders of the corporation having approved the Amended and Restated
Certificate of Incorporation by the written consent of the holders of at least a
majority of the outstanding shares in accordance with Section 228 thereof, and
written notice having been given in accordance with the requirements of such
Section. The Amended and Restated Certificate of Incorporation restates,
integrates and amends the provisions of the Certificate of Incorporation of this
corporation.
3. The Certificate of Incorporation of the corporation is hereby amended
and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Corsair Communications, Inc.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 15 East North Street, City of Dover, County of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
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ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
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of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
Thirty-Four Million Five Hundred Forty-Eight Thousand Nine Hundred Sixty Three
(34,548,963) shares. Twenty Million (20,000,000) shares shall be Common Stock,
$.001 par value per share, and Fourteen Million Five Hundred Forty-Eight
Thousand Nine Hundred Sixty Three (14,548,963) shares shall be Preferred Stock,
$.001 par value per share, of which Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock, Two Million Two Hundred
Twenty-Eight Thousand Nine Hundred Sixty Three (2,228,963) shares shall be
Series B Preferred Stock, Three Million Eight Hundred Thousand (3,800,000)
shares shall be Series C Preferred Stock, and Four Hundred Thousand (400,000)
shares shall be Series D Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
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preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. Dividend Provisions.
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a. The holders of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this corporation) on the Common Stock of this
corporation, at the rate of $0.10 per share of Series A Preferred Stock per
annum, $0.22 per share of Series B Preferred Stock per annum, $0.275 per share
of Series C Preferred Stock per annum, and $0.375 per share of Series D
Preferred Stock per annum (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations) payable when, as and
if declared by the Board of Directors. Such dividends shall not be cumulative.
No cash dividend shall be declared or paid with respect to the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock unless at the same time a like proportionate cash dividend for
the same dividend period, ratably in proportion to the respective annual
dividend rates set forth above, is declared and paid with respect to the Series
A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock.
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b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock were the holders of the number of shares of Common Stock of
this corporation into which their respective shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of this corporation entitled to receive such distribution.
2. Liquidation Preference.
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a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series C
Preferred Stock and Series D Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Series A Preferred Stock, Series B Preferred Stock or Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $5.50 for each outstanding share of Series C Preferred Stock and $7.50
for each outstanding share of Series D Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series C Issue
Price" and "Original Series D Issue Price," respectively), and (ii) an amount
equal to declared but unpaid dividends on such shares of Series C Preferred
Stock and Series D Preferred Stock as applicable. If upon the occurrence of such
event, the assets and funds thus distributed among the holders of Series C
Preferred Stock and Series D Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then, the
entire assets and funds of the corporation legally available for distribution
shall be distributed ratably among the holders of Series C Preferred Stock and
Series D Preferred Stock in proportion to the aggregate liquidation preferences
of the respective series, and ratably among the holders of the Series C
Preferred Stock and Series D Preferred Stock in proportion to the amount of such
stock owned by each such holder.
b. After the distribution described in subsection (a) above has
been paid, the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets of this corporation to the holders of Common Stock by reason of
their ownership thereof, an amount per share equal to the sum of (i) $2.00 for
each outstanding share of Series A Preferred Stock (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series A Issue
Price"), (ii) $4.43 for each outstanding share of Series B Preferred Stock
(subject to appropriate adjustments for stock splits, stock dividends,
combinations or other
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recapitalizations and hereafter referred to as the "Original Series B Issue
Price"), and (iii) an amount equal to declared but unpaid dividends on such
shares of Series A Preferred Stock or Series B Preferred Stock as applicable.
If upon the occurrence of such event, and after the distribution described in
subsection (a) above has been paid, the assets and funds thus distributed among
the holders of Series A Preferred Stock and the Series B Preferred Stock shall
be insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, the entire assets and funds of the corporation
legally available for distribution shall be distributed ratably among the
holders of Series A Preferred Stock and Series B Preferred Stock in proportion
to the aggregate liquidation preferences of the respective series, and ratably
among the holders of each series in proportion to the amount of such stock owned
by each such holder.
c. After the distributions described in subsections (a) and (b)
above have been paid, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock).
d. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement, the issuance of Series B Preferred Stock
pursuant to the Series B Preferred Stock Purchase Agreement, the issuance of
Series C Preferred Stock pursuant to the Series C Preferred Stock Purchase
Agreement and the issuance of Series D Preferred Stock pursuant to the Series D
Preferred Stock Purchase Agreement), shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2.
3. Conversion. The holders of the Series A Preferred Stock, Series
----------
B Preferred Stock and Series C Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
a. Right to Convert.
----------------
(i) Subject to subsection (c), each share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of this
corporation or any transfer agent for the particular series of Preferred Stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing (A) the Original Series A Issue Price for each share of
Series A Preferred Stock, (B) the Original Series B Issue Price for each share
of Series B Preferred Stock, (C) the Original Series C Issue
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Price for each share of Series C Preferred Stock and (D) the Original Series D
Issue Price for each share of Series D Preferred Stock, plus all declared but
unpaid dividends thereon for each share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, by the
Conversion Price at the time in effect for such share. The initial Conversion
Price per share for shares of Series A Preferred Stock shall be the Original
Series A Issue Price, the initial Conversion Price per share for shares of
Series B Preferred Stock shall be the Original Series B Issue Price, the initial
Conversion Price per share for shares of Series C Preferred Stock shall be the
Original Series C Issue Price and the initial Conversion Price per share for
shares of Series D Preferred Stock shall be the Original Series D Issue Price;
provided, however, that the Conversion Price for the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
shall be subject to adjustment as set forth in subsection 3(c).
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $15,000,000 in the aggregate or (B) the date upon which
the corporation obtains the written consent of the holders of a majority of the
then outstanding shares of Series A Preferred Stock and Series B Preferred Stock
voting together as a single class on an as converted basis.
(iii) Each share of Series C Preferred Stock and Series D
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than $10.00 per share (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) and $15,000,000 in the aggregate or (B) the date upon which
the corporation obtains the written consent of the holders of a majority of the
then outstanding shares of Series C Preferred Stock and Series D Preferred Stock
voting together as a single class on an as converted basis.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
particular series of Preferred Stock, and shall give written notice by mail,
postage prepaid, to this corporation at its principal corporate office, of the
election to convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued.
This
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<PAGE>
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and/or Series D Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and/or Series D
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act, the conversion may, at the
option of any holder tendering Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and/or Series D Preferred Stock for conversion,
be conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred
Stock shall not be deemed to have converted such Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred
Stock until immediately prior to the closing of such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Prices of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be subject to
adjustment from time to time as follows:
(i) A. If the corporation shall issue any Additional
Stock (as defined below) without consideration or for a consideration per share
less than the Conversion Price for the Series A Preferred Stock, the Conversion
Price for the Series B Preferred Stock, the Conversion Price for the Series C
Preferred Stock or the Conversion Price for the Series D Preferred Stock in
effect immediately prior to the issuance of such Additional Stock, the
Conversion Price for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock, as the case may be, in
effect immediately prior to each such issuance shall forthwith (except as
otherwise provided in this clause (i)) be adjusted to a price equal to the
quotient obtained by dividing the total computed under clause (x) below by the
total computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock sold pursuant to
the applicable agreements pursuant to which such shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D
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<PAGE>
Preferred Stock, as the case may be, are first issued (the "Stock
Purchase Agreements"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the dates of the applicable Stock Purchase Agreements (the
"Purchase Date") other than shares of Common Stock issued or issuable
with respect to the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock sold pursuant to
the applicable Stock Purchase Agreements divided by the applicable
Conversion Price for such shares in effect at the applicable Purchase
Date (or such higher or lower Conversion Price for such series as
results from the application of subsections 3(c)(iii) and (iv) and
assuming that this Certificate was in effect as of the applicable
Purchase Date) plus
(2) the number of shares of Additional
Stock issued since the applicable Purchase Date (increased or
decreased to the extent that the number of such shares of Additional
Stock shall have been increased or decreased as the result of the
application of subsections 3(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections (E)(3)
and (E)(4), no adjustment of such Conversion Price pursuant to this subsection
3(c)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
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<PAGE>
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on
or after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subsections 3(c)(i)(C) and (c)(i)(D)), if any, received by
the corporation upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subsections 3(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the applicable Conversion Price of
the Series A Preferred Stock, Series B Preferred Stock Series C
Preferred
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<PAGE>
Stock and Series D Preferred Stock, as applicable, and to the extent
in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such
options or rights or the conversion or exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the applicable Conversion Price of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock, as applicable, to the extent in any way
affected by or computed using such options, rights or securities or
options or rights related to such securities, shall be recomputed to
reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities which remain in effect)
actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 3(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 3(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by this corporation before, on or after the applicable Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 3(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly or
pursuant to a stock option plan or agreement or restricted stock plan
or agreement approved by the Board of Directors of this corporation,
D. shares of Common Stock issued or issuable (I) in
a public offering before or in connection with which all outstanding
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
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Preferred Stock and Series D Preferred Stock will be converted to
Common Stock or (II) upon exercise of warrants or rights granted to
underwriters in connection with such a public offering,
E. shares of Series B Preferred Stock issued or
issuable to Comdisco, Inc. pursuant to Warrants dated August 31, 1995,
July 31, 1996, and August 5, 1996, or
F. shares of Series B Preferred Stock issued or
issuable to MMC/GATX PARTNERSHIP NO. 1 pursuant to a Warrant dated
July 31, 1996.
(iii) In the event the corporation should at any time or
from time to time after the applicable Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the applicable Conversion Price of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock then in
effect shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding
at any time after the applicable Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the applicable Conversion Price for the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
then in effect shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the
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<PAGE>
number of shares of Common Stock of the corporation into which their shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the corporation entitled to
receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision
or a combination provided for elsewhere in this Section 3) provision shall be
made so that the holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock,
respectively, the number of shares of stock or other securities or property of
the Company or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 3 with respect to the rights of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect and
the number of shares issuable upon conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock)
shall be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock against
impairment.
g. No Fractional Shares and Certificate as to Adjustments.
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(i) No fractional shares shall be issued upon conversion
of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock, and the number of shares of Common Stock to
be issued shall be rounded up to the nearest whole share. The number of shares
of Common Stock issuable upon such conversion shall be determined on the basis
of the total number of shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock the holder is at
the time converting into Common Stock.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock pursuant
to this Section 3,
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this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock at least
20 days prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock, this corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
shall be deemed
-12-
<PAGE>
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of this corporation.
4. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the Bylaws of
this corporation, and shall be entitled to vote, together as a single class with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be seven (7). Notwithstanding 4(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Common Stock, voting together as a single class on an as
converted basis, shall be entitled to elect three (3) directors of the
corporation. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of the Series A
Preferred Stock then outstanding shall constitute a quorum of the Series A
Preferred Stock for the election of directors to be elected solely by the
holders of Series A Preferred Stock. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Common Stock then outstanding, on
an as converted basis, shall constitute a quorum of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Common Stock for the election of directors to be elected solely by the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Common Stock, voting together as a
single class on an as converted basis. A vacancy in any directorship elected by
the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock; and a vacancy in any directorship elected
by the holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Common Stock voting together shall
be filled only by the vote of the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common
Stock voting together as provided above.
-13-
<PAGE>
5. Protective Provisions.
---------------------
a. Preferred Stock. So long as shares of Series A Preferred
---------------
Stock, Series B Preferred Stock, Series C Preferred Stock and/or Series D
Preferred Stock are outstanding, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, voting together as a single class on an as converted basis:
i) sell, convey, or otherwise dispose of or encumber all
or substantially all of its property or business or merge into or consolidate
with any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
ii) alter or change the rights, preferences or privileges
of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock;
iii) increase the authorized number of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Common Stock;
iv) create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock with
respect to voting, dividends, conversion rights or upon liquidation, or (ii)
having rights similar to any of the rights of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
under this Section 5;
v) pay any dividend to the holders of Common Stock; or
vi) change the authorized number of directors from seven
(7).
b. Series C Preferred Stock. So long as shares of Series C
------------------------
Preferred Stock are outstanding, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of a majority of the then outstanding shares of Series C Preferred Stock
alter or change the rights, preferences or privileges of the shares of Series C
Preferred Stock so as to adversely affect the shares or the holders thereof.
-14-
<PAGE>
c. Series D Preferred Stock. So long as shares of Series D
------------------------
Preferred Stock are outstanding, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of a majority of the then outstanding shares of Series D Preferred Stock
alter or change the rights, preferences or privileges of the shares of Series D
Preferred Stock so as to adversely affect the shares or the holders thereof.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders 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 Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which 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. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such
-15-
<PAGE>
agents or other persons, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 145 of the Delaware General Corporation Law, subject only to limits
created by applicable Delaware law (statutory or non-statutory), with respect to
actions for breach of duty to the Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The corporation shall have a perpetual existence.
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the Bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-16-
<PAGE>
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been signed under the seal of this corporation as of this 3rd day of March,
1997.
CORSAIR COMMUNICATIONS, INC.
By: ________________________________________
Mary Ann Byrnes, President
ATTEST:
___________________________________
Martin Silver, Secretary
<PAGE>
EXHIBIT B
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED INVESTORS'
------------------------------------------------------
RIGHTS AGREEMENT DATED OCTOBER 30, 1996
---------------------------------------
B-1
<PAGE>
CORSAIR COMMUNICATIONS, INC.
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT DATED OCTOBER 30, 1996
This Amendment No. 1 ("Amendment") to the Amended and Restated
Investors' Rights Agreement dated October 30, 1996 (the "Agreement") is made as
of this 7th day of March, 1997 by and among Corsair Communications, Inc., a
Delaware corporation (the "Company"), each of the individuals and entities
listed as Existing Investors on the signature page to the Agreement, (the
"Existing Investors") and each of the individuals and entities listed as New
Investors on the signature page to this Amendment (the "New Investors").
Capitalized terms used herein which are not defined herein shall have the
definition ascribed to them in the Agreement.
RECITALS
--------
The Company desires to sell and issue to the New Investors and the New
Investors desire to purchase from the Company, shares of the Company's Series D
Preferred Stock pursuant to that certain Series D Preferred Stock Purchase
Agreement of even date herewith (the "Series D Agreement").
The Existing Investors desire for the New Investors to invest in the
Company and, as a condition thereof and to induce such investment, the Existing
Investors and the Company are willing to enter into this Amendment to permit the
New Investors to become a party to the Agreement.
In consideration of the foregoing and the promises and covenants contained
herein and other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. ADDITIONAL PARTIES TO THE AGREEMENT.
-----------------------------------
The New Investors hereby enter into and become parties to the
Agreement. The signature page to the Agreement is amended to include the New
Investors.
2. AMENDMENTS TO AGREEMENT.
-----------------------
2.1 The New Investors and the Existing Investors are collectively
referred to as "Investors" for the purposes of the Agreement.
2.2 Section 1.1(c) of the Agreement is amended in its entirety to
read as follows:
<PAGE>
"(c) The term "Registrable Securities" means (1) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock
and (2) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of, such Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock (or the Common
Stock issued upon conversion thereof), excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his
rights under this Section 1 are not assigned;
2.3 Section 2.4 of the Agreement is amended in its entirety to read
as follows:
"2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to
future sales by the Company of its Shares (as hereinafter defined). For
purposes of this Section 2.4, a Major Investor shall mean (a) any Investor
who holds at least (i) 10% of the original investment such Investor made in
the Company pursuant to that certain Series A Preferred Stock Purchase
Agreement dated December 10, 1994 (the "Series A Agreement"), (ii) 10% of
the original investment such Investor made in the Company pursuant to that
certain Series B Preferred Stock Purchase Agreement dated October 31, 1995
(the "Series B Agreement"), (iii) 10% of the original investment such
Investor made in the Company pursuant to that certain Series C Preferred
Stock Purchase Agreement dated October 30, 1996 or (iv) 10% of the original
investment such Investor makes in the Company pursuant to the Series D
Agreement and (b) any person who acquired or will acquire at least (i) 10%
of the Series A Preferred Stock (or the common stock issued upon conversion
thereof) issued pursuant to the Series A Agreement, (ii) 10% of the Series
B Preferred Stock (or Common Stock issued upon conversion thereof) issued
pursuant to the Series B Agreement, (iii) 10% of the Series C Preferred
Stock (or the common stock issued upon conversion thereof) issued pursuant
to the Series C Agreement or (iv) 10% of the Series D Preferred Stock (or
the common stock issued upon conversion thereof) issued pursuant to the
Series D Agreement. For purposes of this Section 2.4, an Investor includes
any general partners and affiliates of an Investor. An Investor shall be
entitled to apportion the right of first offer hereby granted it among
itself and its partners and affiliates in such proportions as it deems
appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock
-2-
<PAGE>
("Shares"), the Company shall first make an offering of such Shares to each
Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to
offer such Shares, (ii) the number of such Shares to be offered, and (iii)
the price and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, each
Major Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which
equals the proportion that the number of shares of common stock issued and
held, or issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock
then held, by such Major Investor bears to the total number of shares of
common stock of the Company then outstanding (assuming full conversion and
exercise of all convertible or exercisable securities). The Company shall
promptly, in writing, inform each Major Investor which purchases all the
shares available to it ("Fully-Exercising Investor") of any other Major
Investor's failure to do likewise. During the ten-day period commencing
after receipt of such information is given, each Fully-Exercising Investor
shall be entitled to obtain that portion of the Shares not subscribed for
by the Major Investors which is equal to the proportion that the number of
shares of common stock issued and held, or issuable upon conversion of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and/or Series D Preferred Stock then held by such Fully-Exercising
Investor bears to the total number of shares of common stock issued and
held, or issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock
then held, by all Fully-Exercising Investors who wish to purchase some of
the unsubscribed shares.
(c) If all Shares that Investors are entitled to obtain pursuant
to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 60-day period
following the expiration of the period provided in subsection 2.4(b)
hereof, offer the remaining unsubscribed portion of such Shares to any
person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the
Company does not enter into an agreement for the sale of the Shares within
such period, or if such agreement is not consummated within 60 days of the
execution thereof, the right provided hereunder shall be deemed to be
revived and such Shares shall not be offered unless first reoffered to the
Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable: (i) to the issuance or sale of common stock (or options
therefor) to employees, consultants and directors, directly or pursuant to
a stock option plan
-3-
<PAGE>
or agreement or restricted stock plan or agreement approved by the Board of
Directors of this Company, provided each employee executes an agreement
containing the provisions set forth in Section 2.5(b) hereof, (ii) to or
after consummation of a bona fide, firmly underwritten public offering of
shares of common stock, registered under the Act pursuant to a registration
statement on Form S-1, at an offering price of at least $10.00 per share
(appropriately adjusted for any stock split, dividend, combination or other
recapitalization) and $15,000,000 in the aggregate, (iii) to the issuance
of securities pursuant to the conversion or exercise of convertible or
exercisable securities, (iv) to the issuance of securities in connection
with a bona fide business acquisition of or by the Company, whether by
merger, consolidation, sale of assets, sale or exchange of stock or
otherwise or (v) to the issuance of stock, warrants or other securities or
rights to persons or entities with which the Company has business
relationships, provided such issuances are for other than primarily equity
financing purposes.
3. WAIVER AND CONSENT.
------------------
Each Existing Investor, pursuant to any rights such Existing Investor
may have under the Agreement, hereby, on behalf of himself and the other
Investors under the Agreement, (a) waives all rights under, and any notice
required by, Section 2.4 of the Agreement relating to any rights to purchase or
rights of first offer with respect to the sale of the shares of Series D
Preferred Stock, (b) consents to adding the New Investors as parties to the
Agreement, and (c) consents to the registration rights hereby provided the New
Investors, which consent is given pursuant to Section 1.14 of the Agreement.
4. EFFECT OF AMENDMENT.
-------------------
Except as amended and set forth above, the Agreement shall continue in full
force and effect.
5. COUNTERPARTS.
------------
This Amendment may be executed in any number of counterparts, each which
will be deemed an original, and all of which together shall constitute one
instrument.
6. SEVERABILITY.
------------
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from this
Amendment and the balance of the Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
-4-
<PAGE>
7. ENTIRE AGREEMENT.
----------------
This Amendment, together with the Agreement, constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
8. GOVERNING LAW.
-------------
This Amendment shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE>
This Amendment is hereby executed as of the date first above written.
CORSAIR COMMUNICATIONS, INC., a Delaware
corporation
By:_______________________________________________
Mary Ann Byrnes, President
Address: 3408 Hillview Avenue
Palo Alto, California 94304
EXISTING INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VII, L.P.
By:_______________________________________________
Title:____________________________________________
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By:_________________________________________
General Partner
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SEVIN ROSEN BAYLESS MANAGEMENT COMPANY
By:_______________________________________________
Title:____________________________________________
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
NORWEST EQUITY PARTNERS IV, a
Minnesota Limited Partnership
By: Itasca Partners
Its: General Partner
By:_________________________________________
Title: Partner
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
NORWEST EQUITY PARTNERS, V, a Minnesota Limited
Liability Partnership
By: Itasca Partners V, L.L.P.
Its: General Partner
By:_________________________________________
Title: Partner
Address: 245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management Partners, L.P.
Its:______________________________________________
By:_________________________________________
Title:______________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM CAPITAL PARTNERS, L.P.
By:_______________________________________________
Title:____________________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
NEEDHAM EMERGING GROWTH PARTNERS
By:_______________________________________________
Title:____________________________________________
Address: 445 Park Avenue, Third Floor
New York, NY 10022
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its: General Partner
By:_________________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL INVESTORS '95 L.P.
By:_______________________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
ACCEL KEIRETSU L.P.
By: Accel Partners & Co. Inc.
Its: General Partner
By:_________________________________________
Title:______________________________________
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ELLMORE C. PATTERSON PARTNERS
By:_______________________________________________
General Partner
Address: c/o Accel Partners
One Palmer Square
Princeton, NJ 08542
Attn: G. Carter Sednaoui
TECHNOLOGY CROSSOVER VENTURES, L.P.
By:_______________________________________________
Title:____________________________________________
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Richard Kimball
101 Eisenhower Parkway
Roseland, NJ 07068
Attn: Robert Bensky
TECHNOLOGY CROSSOVER VENTURES, C.V.
By:_______________________________________________
Title:____________________________________________
Address: 575 High Street, Suite 400
Palo Alto, CA 94301
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
Its: General Partner
By:_________________________________________
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
INTEGRAL CAPITAL PARTNERS INTERNATIONAL II, C.V.
By: Integral Capital Management II, L.P.
Its: Investment General Partner
By:_________________________________________
General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
KPCB INFORMATION SCIENCES ZAIBATSU FUND II, L.P.
By:_______________________________________________
Title:____________________________________________
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
DAVID H. RING CHARITABLE REMAINDER UNITRUST UTA
Dated 5/20/96
By:_______________________________________________
David H. Ring, Trustee
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
UST PRIVATE EQUITY INVESTORS FUND, INC.
By:_______________________________________________
Title:____________________________________________
Address: 114 West 47th Street
New York, NY 10036-1532
ORCHID AND CO., Nominee for
T. Rowe Price Threshold Fund III, L.P.
By: T. ROWE PRICE THRESHOLD FUND ASSOCIATES,
INC.,
General Partner
By:_________________________________________
Title:______________________________________
Address: 100 East Pratt Street
Baltimore, MD 21202
COLUMBIA CAPITAL INVESTMENTS, LLC
By:_______________________________________________
Title:____________________________________________
Address: 201 N. Union Street, Suite 300
Alexandria, VA 22314
SPINNAKER FUND
By:_______________________________________________
Title:____________________________________________
Address: 22 Gatehouse Road
P. O. Box 110236
Stamford, CT 06911-0236
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ANDBACH VENTURES VI, L.P.
By:_______________________________________________
Title:____________________________________________
Address: 803 N. Church Street
Rockford, IL 61103
TRAILHEAD VENTURES, L.P.
By:_______________________________________________
Title:____________________________________________
Address: 5949 Sherry Lane, Suite 1450
Dallas, TX 75225
SOUNDVIEW PARTNERS
By:_______________________________________________
Title:____________________________________________
Address: Two Embarcadero Center
Suite 1655
San Francisco, CA 94111
HAMBRECHT & QUIST CALIFORNIA, a California
corporation
By:_______________________________________________
Title:____________________________________________
Address: One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
__________________________________________________
EUGENE EIDENBERG
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
__________________________________________________
CHRISTOPHER SHEELINE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
__________________________________________________
RAKESH SOOD
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
__________________________________________________
JAMES ZANZE
Address: c/o Hambrecht & Quist California
One Bush Street
San Francisco, CA 94144
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
COMDISCO, INC.
By:_______________________________________________
Title:____________________________________________
Address: 6111 North River Road
Rosemont, IL 60018
UMB BANK, N.A., as Trustee for Brobeck, Phleger &
Harrison Retirement Savings Trust F/B/O John A.
Denniston
By:_______________________________________________
Title:____________________________________________
Address: UMB Bank, N.A.
P. O. Box 419692
Kansas City, MO 64141-6692
__________________________________________________
MICHAEL S. KAGNOFF
Address: 8121 Camino Del Sol
La Jolla, CA 92307
__________________________________________________
KEVIN J. McQUILLAN
Address: 345 Cervantes Road
Portola Valley, CA 94028
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
__________________________________________________
JENNIFER GILL ROBERTS
Address: 550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
__________________________________________________
STEVEN P. BIRD
Address: c/o Comdisco, Inc.
3000 Sand Hill Road
Bldg. 1, Suite 290
Menlo Park, CA 94025
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
KPCB VII FOUNDERS FUND
By:_______________________________________________
Title:____________________________________________
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
TRW, INC.
By:_______________________________________________
Title:____________________________________________
Address: 1 Federal System Park Dr., FP2-3287
Fairfax, VA 22033-4411
Attn: Roland Robertson
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
__________________________________________________
DAVID H. RING
Address: 4140 23rd Street
San Francisco, CA 94114
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
NEW INVESTORS:
SUMITOMO CORPORATION
By:_______________________________________________
Title:____________________________________________
Address:
SUMITOMO CORPORATION OF AMERICA
By:_______________________________________________
Title:____________________________________________
Address: 345 Park Avenue
New York, NY 10154
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE OF EXCEPTIONS
----------------------
The following matters are exceptions to the representations and warranties
of Corsair Communications, Inc., a Delaware corporation (the "Company") as set
forth in Section 2 of the Series D Preferred Stock Purchase Agreement (the
"Agreement"). The section numbers in this Schedule of Exceptions correspond to
the section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would
otherwise be appropriate. Where the terms of a contract or other disclosure
item have been summarized or described in this Schedule of Exceptions, such
summary or description does not purport to be a complete statement of the
material terms of such contract or other item. Any terms defined in the
Agreement shall have the same meaning when used in this Schedule of Exceptions
as when used in the Agreement unless the context otherwise requires.
<PAGE>
EXHIBIT 10.47
-------------
FORM OF
MASTER PURCHASE AND LICENSING AGREEMENT
DATED XXXXXXXXXXX
BETWEEN XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
AND
CORSAIR COMMUNICATIONS, INC.
This Agreement (this "Agreement") is dated as of this ___ day of
______________ between
______________________________________________________________, having an office
at ______________________________________________________ ("Customer"), and
Corsair Communications, Inc., a Delaware corporation, having an office at 3408
Hillview Avenue, Palo Alto, California 94304.
PRELIMINARY STATEMENT
A. Corsair currently manufactures and markets the PhonePrint(TM) Network
Access Control System (the "System"), as defined in Schedule 1, attached hereto,
which incorporates hardware and software proprietary to Corsair and certain
third parties set forth in Schedule 5, attached hereto.
B. Customer desires to acquire the System to mitigate cellular phone
fraud in its _______ Market (as defined below).
C. Corsair is committed to developing and delivering enhancements and
improvements to the System.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, and intending to be legally bound hereby, Customer and
Corsair hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms as used in this Agreement shall have the meanings as
defined in this Article with respect to each such term.
1.1 Affiliate. A person, association, partnership, corporation or joint-
---------
stock company, trust or other business entity however organized ("Entity") is an
affiliate of that person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Entity. Control shall be defined as
<PAGE>
(i) ownership of a majority of the voting power of all classes of voting stock
or (ii) ownership of a majority of the beneficial interests in income and
capital of an entity other than a corporation.
1.2 Cell Site Equipment. "Cell Site Equipment" shall mean network
-------------------
interfaces jointly selected by Corsair and Customer which shall be V.35
Interfaces, RS-232 Interfaces or Ethernet Interfaces.
1.3 Centralized Routers. "Centralized Routers" shall mean all routers
-------------------
required to consolidate cell site traffic from RFU(s) for transport to SCC(s).
1.4 Credit Amount. "Credit Amount" shall mean an amount equal to the sum
-------------
of all Installation Credits, which amount shall, at Customer's election, be
credited against Customer's purchase of any RFUs, SCCs, or any other products or
services that Corsair provides pursuant to this Agreement, and which amount is
not and shall not become due and payable to Corsair.
1.5 Customer Interface Server. "Customer Interface Server" shall mean the
-------------------------
hardware platform that hosts the Customer interface software, containing the
hardware specifications set forth by Corsair on or prior to May 31, 1996.
1.6 Installation Credit. "Installation Credit" shall mean with respect to
-------------------
each RFU included in the Initial Order, the product of (i) $10 and (ii) the
number of days following _____________ that Corsair completes its pre-site and
installation responsibilities set forth in the Delivery Schedule and the site
commissioning process set forth in Schedule 6 with respect to such RFU.
1.7 Delivery Date. "Delivery Date" shall mean with respect to each RFU,
-------------
the date Corsair first provides such RFU to a common carrier responsible for
delivery of such RFU to Customer.
1.8 Delivery Schedule. "Delivery Schedule" shall mean the Pre-Site and
-----------------
Installation Responsibilities Timetable attached hereto as Schedule 2.
1.9 Description. "Description" shall mean the description of the
-----------
operation of the System set forth on Schedule 1.
1.10 Effective Date. "Effective Date" shall mean ______________.
--------------
1.11 Fingerprint Data. "Fingerprint Data" means the signal data processed
----------------
by the System that results in specific parameters which the System uses to
describe a radio telephone.
1.12 Licensed Software. "Licensed Software" shall mean the software set
-----------------
forth on Schedule 5 of this Agreement.
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<PAGE>
1.13 Market. "Market" shall mean, (i) for each of the areas within the
------
United States identified as a "Market" in the attached Schedule 12 and (ii) for
each additional area within the United States that Corsair and Customer may,
from time to time, agree in writing to add to attached Schedule __, the
aggregate of all MSAs and RSAs specified in the attached Schedule __ for such
Market.
1.14 _____________ Market. "_______________ Market" shall mean the Market
for which Customer is entitled to purchase Corsair's Products and services
pursuant to this Agreement.
1.15 Market Purchase Agreement. "Market Purchase Agreement" shall mean a
-------------------------
Master Purchase and Licensing Agreement in substantially the form of this
Agreement between Corsair and Customer or any Affiliate with respect to a
specific Market set forth on Schedule 12.
1.16 MSA. "MSA" shall mean metropolitan statistical area (as such term is
---
defined by the United States Federal Communications Commission).
1.17 New Feature Release. "New Feature Release" shall mean the portion of
-------------------
a New Software Release which when installed in the System provides features or
functionality not made available by Corsair prior to the date of such release.
1.18 New Software Release. "New Software Release" shall mean any software
--------------------
made generally available by Corsair to its Customers following the Effective
Date which when working together with Corsair RFUs and the SCC is designed to
cause the System to operate in accordance with the Description.
1.19 Performance Goals. "Performance Goals" shall mean the goals with
-----------------
respect to overall System performance identified on Schedule 1 as "Performance
Goals".
1.20 Performance Release. "Performance Release" shall mean the portion of
-------------------
a New Software Release which is designed to improve the performance of existing
features of the System.
1.21 Phase I GUI. "Phase I GUI" shall have the meaning set forth in
-----------
Schedule 9.
1.22 RFU. "RFU" shall mean a radio frequency unit designed to be
---
compatible with a __________ switch, as described in Schedule 1, containing the
hardware set forth on Schedule 3.
1.25 Roaming Market. "Roaming Market" shall mean each MSA and RSA in which
--------------
any RFUs have been installed.
1.26 Roaming Services. "Roaming Services" shall mean the then current
----------------
services offered by Corsair to its customers in order to establish, maintain and
administer
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<PAGE>
the System's roaming functionality between Corsair customers that subscribe for
such services.
1.27 RSA. "RSA" shall mean rural service area (as such term is defined by
---
the United States Federal Communications Commission).
1.28 SCC. "SCC" shall mean a system control center, as described in
---
Schedule 1, containing the hardware set forth on Schedule 4.
1.29 Support Agreement. "Support Agreement" means the Comprehensive
-----------------
Service and Support Agreement attached hereto as Schedule 7.
ARTICLE II
ORDERS; PAYMENT TERMS
2.1 Initial Order. Customer hereby agrees to acquire and Corsair agrees
-------------
to provide to Customer for use in Customer's __________ Market, for the amounts
described and on the terms set forth in Section 2.3 below, the System, which
shall initially include ____________ (__) RFUs, an SCC, a Customer Interface
Server and a license to use the Licensed Software in accordance with the terms
of Article VI of this Agreement (the "Initial Order").
2.2 Supplemental Orders. Customer may, at any time during the term of
-------------------
this Agreement, place orders with Corsair for additional RFUs and for any other
hardware, software, maintenance, consultant, and training services which Corsair
generally makes available to its customers ("Supplemental Orders") for use in
Customer's _________ Market. Customer shall pay to Corsair the amounts set
forth in Section 2.3, in accordance with the payment terms set forth therein,
for such products and services; provided however, that if the prices for such
products and services are not referenced in Section 2.3 or elsewhere in this
Agreement then Customer shall pay to Corsair, on the payment terms generally
made available by Corsair to its customers for such products and services,
Corsair's then current rates, charges or fees, subject to discounts, where
applicable, for the products and services ordered. All Supplemental Orders
shall be governed exclusively by the terms of this Agreement.
2.3 Terms of Payment on Supplemental Orders. In consideration of the
---------------------------------------
performance by Corsair of its obligations under this Agreement, and subject to
the terms and conditions of this Agreement, Customer agrees to pay to Corsair
the following amounts with respect to the Initial Order and each Supplemental
Order:
(a) In consideration of each RFU, Customer shall pay a purchase price
of $20,000 (provided, however, that for so long as Customer or its Affiliates
maintain Market Purchase Agreements covering at least two (2) separate Markets,
and have purchased a combined total of at least one hundred and fifty (150) RFUs
from Corsair
-4-
<PAGE>
pursuant to such Market Purchase Agreements, the price of each additional RFU
shall be reduced to $17,500), payable as follows: one hundred percent (100%)
invoiced upon the Delivery Date of such RFU. All invoices shall be due and
payable net thirty (30) days.
(b) In consideration of each SCC, Customer shall pay a purchase price
of not to exceed $77,500, with the exact price determined based upon the number
of RFUs the SCC is designed to support, payable as follows: one hundred percent
(100%) invoiced following the completion by Corsair of the commissioning process
set forth in Schedule 10 attached hereto. All invoices shall be due and payable
net thirty (30) days.
(c) In consideration of each Customer Interface Server, Customer
shall pay a purchase price of $15,000 as follows: one hundred percent (100%)
invoiced upon the Delivery Date of such Customer Interface Server.
(d) In consideration of the services to be provided by Corsair
pursuant to the terms of Article VII of this Agreement, on the Effective Date
and on each anniversary of the Effective Date during the term of this Agreement
(collectively, the "Payment Dates"), Customer shall pay to Corsair, upon receipt
of an invoice from Corsair, the product of (i) $1250 and (ii) the aggregate
number of RFUs that shall have been purchased pursuant to Sections 2.1 and 2.2
of this Agreement on or prior to such Payment Date. In addition, in respect of
each RFU purchased pursuant to Sections 2.1 and 2.2 of this Agreement other than
on a Payment Date, on the Delivery Date with respect to such RFU, Customer shall
pay to Corsair, upon receipt of an invoice from Corsair, the product of (i)
$1250 and (ii) the number of days prior to the next Payment Date divided by
(iii) three hundred and sixty-five (365). All invoices shall be due and payable
net thirty (30) days.
(e) In consideration of the license granted by Corsair to Customer in
Section 6.3 of this Agreement, on each Payment Date Customer shall be obligated
to pay to Corsair, upon the receipt of an invoice from Corsair, the sum of (i)
the product of (A) $2500 and (B) the aggregate number of RFUs that have been
purchased pursuant to Sections 2.1 and 2.2 of this Agreement on or within the
two (2) year period immediately preceding the applicable Payment Date and (ii)
the product of (A) $1750 and (B) the aggregate number of RFUs that have been
purchased pursuant to Sections 2.1 and 2.2 of this Agreement more than two (2)
years preceding the applicable Payment Date. In addition, in respect of each RFU
purchased pursuant to Sections 2.1 and 2.2 of this Agreement other than on a
Payment Date, Customer shall be obligated to pay to Corsair on the Delivery Date
with respect to such RFU, upon receipt of an invoice from Corsair, the product
of (i) $2500 and (ii) the number of days prior to the next Payment Date divided
by (iii) three hundred and sixty-five (365). All invoices shall be payable net
thirty (30) days. Notwithstanding the foregoing, in no event shall the license
fees payable to Corsair pursuant to this Section 2.3(e) exceed $400,000 per
annum during any year of this Agreement.
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<PAGE>
2.4 Covenants of Customer. Customer covenants to Corsair as follows:
---------------------
(a) Customer covenants (i) not to act as a distributor of any RFUs
and SCCs obtained from Corsair pursuant to this Agreement and (ii) to use the
SCCs and RFUs obtained from Corsair solely in its ____________ Market.
Notwithstanding anything else set forth herein: (A) Customer, upon providing
notice to Corsair, at its sole cost and expense, may move any RFUs and SCCs
obtained from Corsair pursuant to this Agreement to any other Market with
respect to which Customer or any Affiliate has entered into a Market Purchase
Agreement with Corsair, provided that all terms and conditions set forth in this
Agreement (except with regard to Corsair's commitment pursuant to the Support
Agreement which shall be governed by the Market Purchase Agreement applicable to
the Market to which any equipment is moved) shall continue to apply to such RFUs
and SCCs and Customer agrees to continue to pay to Corsair with respect to such
RFUs and SCCs, the amounts set forth under Article II of this Agreement with
respect to such RFUs and SCCs; and (B) nothing set forth in this Agreement shall
be interpreted to restrict Customers ability to resell any RFUs and SCCs
purchased from Corsair to any third party; provided, however, that Customer may
only sell RFU(s) and SCC(s) to third parties that Corsair has approved in
writing, which approval may be withheld in Corsair's sole discretion, and that
have entered into a nondisclosure agreement with Corsair. The obligations of
Corsair set forth in Article VII, to the extent then in effect, shall terminate
with respect to each RFU and SCC immediately prior to the sale by Customer of
such RFU and SCC. Corsair agrees to offer its maintenance and support services,
on terms no more onerous then Corsair provides such services to similarly
situated customers, to any third party whose purchase of Customer's RFUs and
SCCs has been approved by Corsair in writing.
(c) Customer shall cooperate with Corsair in assembling its
subscriber information, consisting of contact numbers and frequently dialed
digits. Corsair will provide assistance to Customer in determining appropriate
subscriber information for proper validation.
2.5 Covenants of Corsair. Corsair covenants to Customer that upon the
--------------------
expiration or other termination of this Agreement, Customer shall be entitled to
a perpetual license to the Licensed Software provided that Customer remits to
Corsair within thirty (30) days following such expiration or termination a
license fee equal to $13,750 per RFU less any amounts previously paid to Corsair
under this Agreement with respect to such RFU. If Customer elects to buy a
perpetual license as to some, but not all, of the Licensed Software, it shall
notify Corsair within the thirty (30) day period of the number of and
designation of those RFUs for which it is acquiring the license. The perpetual
license shall be subject to substantially similar terms and conditions as govern
the ownership, use and transfer of the Licensed Software under this Agreement.
If Customer fails to remit the license fee to Corsair within thirty (30) days,
it shall not be automatically entitled to a perpetual license.
-6-
<PAGE>
2.6 Price Protection. If the prices, rates, charges or fees for RFUs,
----------------
SCCs and Licensed Software that Corsair provides to any customer, as adjusted to
reflect equivalent volume purchases, and like versions, models and components
are less than the prices, rates, charges or fees for such items set forth in
Section 2.3 above, Customer shall have the benefit of the lesser price with
respect to all orders of RFUs and SCCs placed at or after the date that the
lesser price is made available to the other customer and to all payments of fees
in respect of the Licensed Software made on or after the date that the lesser
price is made available to the other customer. If at any time the prices,
rates, charges or fees for the System support and maintenance that Corsair
provides to any other customer are less than the prices, rates, charges or fees
for similar services in a market of similar size and configuration for System
support and maintenance set forth in this Agreement, Customer shall have the
benefit of the lesser price with respect to all payments of fees in respect of
System support and maintenance made on or after the date that the lesser price
is made available to the other customer.
ARTICLE III
PACKAGING
All Systems shall be shipped in standard commercial packaging unless
otherwise requested by Customer. The cost of any special packaging shall be the
responsibility of Customer.
ARTICLE IV
RFU HARDWARE
4.1 Delivery of RFU Hardware. Corsair will use its best efforts to cause
------------------------
RFUs to be delivered at Corsair's facilities to a common carrier responsible for
the delivery of such RFUs to Customer at the designated Customer warehouse
facility, in accordance with the Delivery Schedule. Within five (5) working
days after notification by Corsair of expected ship dates, Customer will provide
Corsair a designated Customer warehouse facility where RFUs are to be shipped.
4.2 Delays in Delivery. The Delivery Schedule reflects Corsair's estimate
------------------
of the time required to deliver and install RFUs, and is made in accordance with
Customer's desires. Each party's ability to comply with the estimated completion
dates set forth in the Delivery Schedule is subject to the other party's having
completed their responsibilities in a timely manner. Corsair and Customer each
agree to use its best efforts to complete their various responsibilities as set
forth on the Delivery Schedule in a timely manner, barring delays which the
parties could not reasonably foresee at the time of establishment of the
Delivery Schedule. Neither party assumes any liability for damages,
consequential or otherwise, resulting from failure to meet the Delivery
Schedule.
-7-
<PAGE>
4.3 Risk of Loss and Title. Corsair shall pay all costs of shipping RFUs
----------------------
and shall obtain and maintain, at its sole expense, cargo and riggers insurance
to cover the value of RFU's being shipped to Customer. Risk of loss with
respect to each RFU to be delivered to Customer under the terms of this
Agreement shall pass from Corsair to Customer upon delivery of such RFU at
Customer's designated warehouse facility. Thereafter, Corsair will not be
responsible for any loss or damage to the RFU unless caused by the negligent or
willful acts or omissions of Corsair agents, representatives or employees.
Title to each RFU will pass from Corsair to Customer upon the later to occur of
the (i) Performance Payment Date or (ii) Delivery Date. In the event that a
shipment of RFUs is damaged or lost, Corsair will use its best efforts to
schedule the prompt delivery of replacement units.
4.4 RFU Limited Warranty. Corsair warrants that each RFU will, upon
--------------------
delivery and for a period of two (2) years following installation, be free from
defects in material or workmanship and, when utilized in conjunction with the
SCC and the Licensed Software, will operate substantially in accordance with the
Description. Customer shall notify Corsair of any defect, and Corsair shall
determine whether it will repair the RFU at Customer's premises, or require
return of the RFU to a location specified by Corsair at Corsair's expense. THE
FOREGOING WARRANTY IS THE ONLY WARRANTY CORSAIR HAS GIVEN CUSTOMER WITH RESPECT
TO EACH RFU AND IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. This warranty is contingent upon Customer's
proper use of the RFU and does not cover any RFU that has been altered, modified
or disassembled by Customer or any person other than Corsair and Corsair's
employees, representatives and agents, or which has been subjected to unusual
physical or electrical stress or from which the original identification marks
have been removed or altered. This warranty is nontransferable, except upon an
assignment of the entire Agreement in accordance with the provisions of Section
12.5.
4.5 RFU Warranty Response Time. Corsair will either repair or replace any
--------------------------
defective RFU covered by the warranty in Section 4.4 above within five calendar
days of the date that Customer notifies Corsair of a defect, unless the defect
falls within the description of a "Category Level 1" or "Category Level 2"
problem as defined in Schedule 7, in which case the defect shall be corrected
within the time frames associated with those categories of problems. If Corsair
fails to correct a defective RFU covered by warranty within the applicable time
frame, it shall either remit to Customer, or increase Customer's Credit Amount
by, the sum of $100 per day for each day beyond the applicable time frame that
the defect remains uncorrected.
ARTICLE V
SYSTEM CONTROL CENTER
5.1 Operation of SCC. The SCC(s) shall reside at Corsair's facilities and
----------------
Corsair shall operate and monitor the SCC(s), free of charge (including fees to
conduct
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<PAGE>
roaming services) until the date Corsair first makes the SCC available for
delivery to Customer, and thereafter Corsair shall operate the SCC(s) at
Corsair's then current rate for such services, which is currently $65,000 per
annum per SCC (excluding fees to conduct Roaming Services), until the SCC(s) are
moved to Customer's facility. Corsair shall generate daily summary reports,
daily termination reports and weekly, monthly and quarterly summary reports and
system utilization reports, all of which reports shall be provided
electronically to Customer for so long as the SCC(s) are located at Corsair's
facilities. In addition, upon receiving seven (7) days prior written notice from
Customer, assuming the SCC(s) are located at Corsair's facilities, Corsair shall
generate additional reports as reasonably requested by Customer. During the term
of this Agreement, for so long as Customer is willing to utilize a frame relay
provider selected by Corsair, Customer may subscribe for Corsair's Roaming
Services for $______ per month. Notwithstanding the foregoing, it shall be the
sole responsibility of Customer, and not Corsair, to establish agreements with
other subscribers to Corsair's Roaming Services with respect to establishing and
maintaining the System's roaming functionality, and Corsair has not made any
representation or warranty to Customer, whether express or implied, with regard
to any of its customers willingness to participate in roaming relationships.
5.2 Delivery of SCC. Prior to the expiration of this Agreement, or if
---------------
terminated earlier (except pursuant to Section 11.4 hereof), within one hundred
and twenty (120) days after such termination, Corsair shall, upon receipt of
Customer's written request (which request shall not be provided prior to
November 30, 1996), cause the SCC(s) to be moved to and installed in a facility
designated by Customer. Within thirty (30) days after sending a request to
Corsair with regard to moving the SCC(s) to Customer's facilities, Customer
shall provide Corsair a designated Customer facility where the SCC(s) are to be
shipped and installed. Corsair will use back up SCC(s) during the period of
time Customer's SCC(s) are being physically moved to Customer's facility and
will use commercially reasonable efforts to minimize the time during which the
performance of the System will be impacted by the move contemplated in this
Section 5.2.
5.3 Risk of Loss and Title. Corsair shall pay all costs of shipping each
----------------------
SCC and shall maintain, at its sole expense, cargo and riggers insurance to
cover the value of each SCC being shipped to Customer. Risk of loss with respect
to the delivery of each SCC to a designated Customer facility shall pass from
Corsair to Customer upon delivery of the SCC to Customer at the designated
Customer facility. Thereafter, Corsair will not be responsible for any loss or
damage to the SCC unless caused solely by the negligent or willful acts or
omissions of Corsair agents, representatives or employees. Title to each SCC
shall pass from Corsair to Customer on the later to occur of (i) the Performance
Payment Date or (ii) the completion by Corsair of the commissioning process set
forth in Schedule 10 attached hereto, provided however, that Corsair shall bear
all risk of loss with respect to the SCC during the time that the SCC is
operated by Corsair at Corsair's facilities.
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<PAGE>
5.4 Subsequent Operation of SCC. After delivery of the SCC(s) to a
---------------------------
designated Customer facility and the completion of the installation of the
SCC(s) at such facility, Customer shall have the sole responsibility for
operating and monitoring the SCC(s); provided, however, Corsair, at its sole
-------- -------
expense, shall be entitled to remotely access Customer's SCC and RFU databases.
The delivery of the SCC(s) to Customer shall not affect any obligation of
Corsair set forth elsewhere in this Agreement to maintain or support the SCC(s).
5.5 SCC Limited Warranty. Corsair warrants that the SCC will, for a
--------------------
period of two (2) years following the installation of the first RFU pursuant to
this Agreement, be free from defects in materials or workmanship and, when
utilized in conjunction with the RFUs and the Licensed Software, will operate
substantially in accordance with the Description. In the event of a defect,
Corsair shall determine whether it will repair or replace the SCC at Customer's
premises, or if necessary to effect said repairs require return of the SCC to a
location specified by Corsair at Corsair's expense. THE FOREGOING WARRANTY IS
THE ONLY WARRANTY CORSAIR HAS GIVEN CUSTOMER WITH RESPECT TO THE SCC AND IS IN
LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
This warranty is contingent upon Customer's proper use of the SCC and does not
cover the SCC if it has been altered, modified or disassembled by Customer or
any person other than Corsair and Corsair's employees, representatives and
agents, or if it has been subjected by Customer to physical or electrical
stress. This warranty is nontransferable, except upon an assignment of the
entire Agreement in accordance with the provisions of Section 12.5.
5.5.1 SCC Warranty Response Time. Corsair will either repair or replace
--------------------------
any defective SCC covered by the warranty in Section 5.5 above within five
calendar days of the date that Customer notifies Corsair of a defect, unless the
defect falls within the description of a "Category Level 1" or "Category Level
2" problem as defined in Schedule 7, in which case the defect shall be corrected
within the time frames associated with those categories of problems. If Corsair
fails to correct a defective SCC covered by warranty within the applicable time
frame, it shall either remit to Customer, or increase Customer's Credit Amount
by, the sum of $100 per day for each day beyond the applicable time frame that
the defect remains uncorrected.
5.6 Communications. Corsair shall be responsible, at its sole cost and
--------------
expense for providing all Cell Site Equipment with respect to each RFU for which
Customer has paid to Corsair a purchase price of $20,000. With respect to each
RFU for which Customer has paid $17,500 or less, Customer shall pay Corsair for
all Cell Site Equipment (not to exceed a maximum of $750) per cell site).
Customer shall be responsible, at its sole cost and expense, for providing all
(i) Centralized Routers and (ii) frame relay capacity (except that for any
period of time Customer is paying the amounts set forth in Section 5.1 for
Roaming Services, all frame relay charges shall be provided as part of the
charge for such service) necessary for establishing and maintaining
communication between SCCs and RFUs. Customer, likewise, shall be responsible,
at
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<PAGE>
Customer's sole expense, for all other communications charges, including,
without limitation, (i) causing the communication from the RFUs to any routers
physically located in its market to be accomplished using a TCP/IP connection
and (ii) all costs incurred in conducting fingerprint exchanges between Customer
and its roaming partners (except to the extent Customer is then paying the
amounts set forth in Section 5.1 for Roaming Services). Except as otherwise set
forth in this Agreement, Corsair shall not be responsible for any expenses
associated with operating the System.
ARTICLE VI
LICENSED SOFTWARE
6.1 Licensed Software. Corsair will install the Licensed Software in the
-----------------
System. Corsair represents and warrants that it has the authority to license or
sublicense to Customer all Licensed Software.
6.2 Ownership of the Licensed Software. Corsair and its licensors retain
----------------------------------
all title, copyright, patent rights, trade secret rights and all other
intellectual property and ownership rights to the Licensed Software.
6.3 Grant of License. Corsair grants to Customer a nonexclusive, non-
----------------
transferable (except upon an assignment of the entire Agreement in accordance
with Section 12.5), license to use the Licensed Software solely as incorporated
in the System purchased by Customer pursuant to this Agreement for its own
internal use during the term of this Agreement; provided, however, that Customer
-------- -------
shall have no right to sell, license, grant, or convey any rights under the
Licensed Software to any person, except that Customer may employ third parties
to operate the Licensed Software on Customer's behalf to the extent such third
parties (i) have been approved by Corsair in writing, which approval shall not
be unreasonably withheld, and (ii) have entered into a nondisclosure agreement
with Corsair. Customer may not copy, reverse compile, reverse engineer,
translate, port, modify, disclose, publish, merge or create derivative works of
the Licensed Software or use it in any manner not expressly authorized by this
Agreement.
6.4 Limited Software Warranty. Corsair warrants that the Licensed
-------------------------
Software in the version and level that is current on the Effective Date and any
New Software Releases obtained by Customer shall, during the term of this
Agreement, when working together with Corsair RFUs and the SCC, operate the
System purchased pursuant to this Agreement substantially in accordance with the
Description. The Licensed Software is complex and may contain minor
nonconformities, defects or errors. Corsair does not warrant that the Licensed
Software will be error free or uninterrupted, or that all nonconformities can or
will be corrected. Corsair does warranty such nonconformities, defects and
errors will not negatively impact the System's overall performance.
-11-
<PAGE>
Customer must notify Corsair within the warranty period of any warranty
claim and Corsair shall correct, patch or replace the Licensed Software at no
additional cost to Customer.
The limited warranty is void if any nonconformity has resulted from
accident, abuse, misuse, misapplication, or modification by someone other than a
Corsair employee, representative or agent. This limited warranty is
nontransferable, except upon an assignment of the entire Agreement in accordance
with the provisions of Section 12.5.
THE EXPRESS WARRANTY IN THIS SECTION 6.4 IS A LIMITED SOFTWARE WARRANTY AND
IT IS THE ONLY WARRANTY MADE BY CORSAIR WITH RESPECT TO THE LICENSED SOFTWARE.
CORSAIR MAKES AND CUSTOMER RECEIVES NO OTHER WARRANTY, WHETHER EXPRESS OR
IMPLIED, AND ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR
PURPOSE ARE EXPRESSLY EXCLUDED.
6.4.1 Licensed Software Warranty Response Time. Corsair will either
----------------------------------------
repair or replace any defective Licensed Software covered by the warranty in
Section 6.4 above within five calendar days of the date that Customer notifies
Corsair of a defect, unless the defect falls within the description of a
"Category Level 1" or "Category Level 2" problem as defined in Schedule 7, in
which case the defect shall be corrected within the time frames associated with
those categories of problems. If Corsair fails to correct defective Licensed
Software covered by warranty within the applicable time frame, it shall either
remit to Customer, or increase Customer's Credit Amount by, the sum of $100 per
day for each day beyond the applicable time frame that the defect remains
uncorrected.
6.5 Restrictions. The Licensed Software is unpublished, and shall at all
------------
times remain the Proprietary Information (as defined in Section 8.1 below) of
Corsair and shall be treated as such by Customer whether or not such information
contains any "Confidential" or "Proprietary" markings. Customer represents and
warrants that neither Customer nor its employees, representatives or agents have
acquired or shall attempt to acquire, any proprietary interest in, or other
right to, the Licensed Software other than as expressly granted herein.
Customer will not reverse assemble, decompile, reverse engineer or otherwise
attempt to derive the source code from any Licensed Software.
6.6 New Software Releases. All New Software Releases made generally
---------------------
available by Corsair to its customers (whether or not at a cost to them) up to
and including Release 3.0 as such New Software Releases are described in
Schedule 9 hereof, shall be provided free of charge to Customer for use during
the term of this Agreement. Thereafter, Corsair shall make available to
Customer all New Software Releases made generally available by Corsair to its
customers for Corsair's then published price for such New Software Releases.
All New Software Releases shall be provided to Customer subject to the same
terms and conditions which govern the ownership, use and transfer of the
Licensed Software under this Agreement.
-12-
<PAGE>
ARTICLE VII
SYSTEM SUPPORT AND MAINTENANCE
Corsair shall provide Customer during the term of this Agreement, with the
services described in Sections 1 and 2 of the Support Agreement. In entering
into this Agreement the parties agree to be bound by the terms and conditions
contained in the Support Agreement. The payment for such services shall be as
described in Sections 2.2(b) and 2.4(d) hereof.
ARTICLE VIII
PROPRIETARY INFORMATION
8.1 Proprietary Information. Each party acknowledges that in connection
-----------------------
with the performance of this Agreement such party may learn information of the
other party that is the property of such other party and confidential to it
("Proprietary Information"). Such Proprietary Information includes, but is not
limited to engineering and technical data, production data, test data and test
results, subscriber information, MIN/ESN information, fingerprint data, vendor
information, cell site locations, building plans, site acquisition and
development plans. Accordingly, each party covenants to the other party that:
(a) Such party will maintain all Proprietary Information of the other
party in confidence with the same level of protection and care that party
normally affords its own proprietary information, but in no event less than
reasonable care;
(b) Such party will not use or disclose, and will not permit its
employees, agents, representatives or independent contractors to use or
disclose, any of the Proprietary Information of the other party without the
express written consent of the other party;
(c) Such party will require all persons, including its employees,
agents, representatives or independent contractors, who have had access to such
information to enter into an agreement to keep confidential and not to use any
such information;
(d) Such party will not use any Proprietary Information of the other
party in any way except as allowed herein; and
8.2 Permitted Uses. Notwithstanding the provisions of Section 8.1 hereof,
--------------
neither party's use or disclosure of the Proprietary Information of the other
party will be deemed to breach Section 8.1 if and to the extent the Proprietary
Information in question:
-13-
<PAGE>
(a) is now or hereafter becomes available to the public without a
breach of Section 8.1 hereof;
(b) is received by the receiving party without restrictions on its
use or further disclosure by a third party (excluding MIN/ESN combinations and
Fingerprint Data received by Corsair or Customer); or
(c) is required to be disclosed pursuant to applicable law,
regulation or court order, but only to the extent and for the purpose of such
required disclosure after providing the other party with advance written notice
of such disclosure and an opportunity to seek to limit or restrict such
disclosure or to obtain appropriate protective/secrecy orders.
8.3 Return of Proprietary Information. The recipient of Proprietary
---------------------------------
Information will promptly return to the disclosing party, or certify to the
disclosing party, that the recipient has destroyed all documents, electronic
media and other items received from the disclosing party which contain
Proprietary Information, including any copies thereof made by the recipient, its
agents or employees, at such times as the recipient no longer needs the
Proprietary Information for purposes of exercising its rights or performing its
duties under this Agreement and any license grant covering such information has
expired or has been terminated. For purposes of this Agreement, all MIN/ESN
combinations received by Corsair shall be deemed to be the Proprietary
Information of Customer and all Fingerprint Data shall be deemed to be the
Proprietary Information of Corsair.
8.4 Other Agreements. The terms of this Article VIII shall supersede all
----------------
prior letters of intent, agreements, covenants, arrangements, communications,
representations, or warranties, whether oral or written, by any officer,
employee, or representative of either party relating to the confidentiality of
information exchanged by the parties in connection with the performance of this
Agreement.
ARTICLE IX
PATENT INDEMNITY
Corsair shall defend and hold Customer harmless or settle any claim or suit
brought against Customer arising from or based an allegation that the System
acquired pursuant to this Agreement or any component thereof, when used within
the scope of this Agreement infringes a United States patent, copyright,
license, trade secret or other intellectual property or proprietary right. If
Corsair is notified in writing within fourteen (14) days of receipt of written
notice of a claim by Customer and given information, assistance reasonably
requested by Corsair and the sole authority (after first consulting with
Customer) to defend or settle, Corsair shall pay all damages and costs of
settlement incurred by Customer in connection with such claim or suit. If the
System acquired pursuant to this Agreement is held or determined by Corsair to
infringe, Corsair shall at
-14-
<PAGE>
its option: (a) obtain for Customer the right to continue using the System or
(b) replace it with a comparable non-infringing System or (c) modify the System
so it is non-infringing or (d) accept return of the System and reimburse
Customer for the price of the System as contained in this Agreement, less
depreciation of the System based on a System life of five (5) years. The
foregoing obligation of Corsair shall not apply with respect to alleged
infringement (i) resulting from Customer's alteration or modification of the
System or (ii) to the extent the System is modified by Corsair to comply with
specifications provided by Customer (to the extent alleged infringement relates
to such modification). The foregoing states the entire responsibility of
Corsair to Customer for patent infringement.
ARTICLE X
CHANGES
If, after the Effective Date, Corsair determines, in its sole discretion,
to make any changes to the System, Corsair shall notify Customer by copy of a
written document identifying said changes and shall provide written
documentation of such changes to Customer. Corsair agrees not to make any
changes to the System that shall (i) cause the System to fail to perform in
accordance with the Description, (ii) cause Customer to incur increased costs to
operate the System or (iii) result in an adverse impact upon the warranties
accruing to Customer pursuant to this Agreement.
ARTICLE XI
TERM, TERMINATION AND SURVIVAL
11.1 Term. This Agreement shall commence on the Effective Date and expire
----
on the date three (3) years following the Effective Date.
11.2 Termination. Either Corsair or Customer may terminate this Agreement
-----------
if the other party breaches any of its obligations stated in this Agreement and
fails to cure such breach within sixty (60) days after receipt of written notice
from the nonbreaching party. The right to termination hereunder shall be in
addition to, and not as a substitute for, any other remedies available to the
parties in law or equity. In the event that this Agreement is terminated as a
result of a material breach of Corsair, Customer shall be entitled on the date
of termination to a rebate of a pro rata portion of the fees paid to Corsair on
the most recent anniversary of the Effective Date pursuant to Sections 2.3(d)
and 2.3(e) equal to (i) the number of days prior to the next anniversary of the
Effective Date divided by (ii) three hundred and sixty-five (365).
11.3 Mutual Termination. Notwithstanding anything to the contrary
------------------
contained in this Agreement, the parties may terminate this Agreement at any
time by mutual written agreement.
-15-
<PAGE>
11.4 Survival. Sections 2.3, 2.4, 2.5, 4.3, 4.4, 4.5, 5.2, 5.3, 5.5,
--------
5.5.1, 5.6, 6.2, 6.3, 6.4, 6.4.1, 6.5, 11.4, 12.3 and 12.12 and Article VIII and
Article IX shall survive the expiration or any prior termination of this
Agreement.
11.5 Suspension. Customer may at any time and from time to time if
----------
Customer determines in its sole discretion that the System is harming or
threatening to harm its cellular network, turn off and suspend use of the
System, or require Corsair to do so.
ARTICLE XII
GENERAL
12.1 Amendment. This Agreement may not be amended except by a writing
---------
signed by authorized representatives of both parties.
12.2 Excusable Delays. Neither party shall be liable for any delay or
----------------
failure in its performance of any of the acts required by this Agreement when
such delay or failure arises beyond the reasonable control of such party,
including, without limitation, acts of God or public enemies, labor disputes,
material or component shortages, supplier failures, embargoes, rationing, acts
of local, state or national governments or public agencies, utility or
communication failures or delays, fire, flood, epidemics, riots and strikes.
The time for performance of any act delayed by such causes shall be postponed
for a period equal to the delay; provided, however, that the party so affected
-------- -------
shall use its best efforts to provide notice to the other party of such delay
within ten (10) days after becoming aware of such delay. The party so affected,
however, shall use its best effort to avoid or remove such causes of
nonperformance and to complete performance of the act delayed, whenever such
causes are removed.
12.3 Limitation of Liability. IN NO EVENT WILL EITHER PARTY BE LIABLE TO
-----------------------
THE OTHER FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES
(INCLUDING, WITHOUT LIMITATION, ANY DAMAGES ARISING FROM THE LOSS OF BUSINESS,
DATA, PROFITS OR GOODWILL) INCURRED OR SUFFERED BY THE OTHER PARTY WITH RESPECT
TO THE PERFORMANCE OF THIS AGREEMENT AND THE SUPPORT AGREEMENT, THE
INSTALLATION, USE, OPERATION, DEFECT OR FAILURE OF THE SYSTEM, OR FOR ANY OTHER
REASON, EVEN IF APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES. IN NO EVENT WILL
CORSAIR BE LIABLE TO CUSTOMER FOR ANY AMOUNTS IN EXCESS OF THE AGGREGATE AMOUNT
PAID BY CUSTOMER TO CORSAIR PURSUANT TO THIS AGREEMENT. Customer understands
that Corsair is not responsible and will have no liability for hardware,
software or other items or any services provided by any persons other than
Corsair or its authorized agents or representatives.
12.4 Publicity. Neither party will use the other party's name in any
---------
advertising or promotional media without that party's prior written consent on a
case-by-case basis which consent shall not be unreasonably withheld. Either
party will be permitted,
-16-
<PAGE>
however, to discuss the general scope of its work with the other and to disclose
the existence of a contract between the parties to any third party. Customer
and Corsair agree to use their respective best efforts to issue within two (2)
business days of the Effective Date a press release in the form mutually agreed
to by the parties.
12.5 Successors and Assigns. Neither party may assign this Agreement to
----------------------
any third party without the prior written consent of the other party, which
consent will not be unreasonably withheld; except that either party may assign
this Agreement to an Affiliate, an acquiror of all of its assets, business or
stock or to a successor by merger or consolidation.
12.6 Applicable Law. This Agreement will be governed by the laws of the
--------------
State of ________, without regard to principles of conflict of laws.
12.7 Severability. If any provision of this Agreement shall be finally
------------
determined to be unlawful, then such provision shall be deemed to be severed
from this Agreement and every other provision of this Agreement will remain in
full force and effect.
12.8 Waiver. No waiver of any term, provision, or condition of this
------
Agreement, whether by conduct or otherwise, in any one or more instances, will
be deemed to be, or will constitute, a waiver of any other provision hereof,
whether or not similar, nor will such waiver constitute a continuing waiver. No
waiver will be binding unless evidenced by a written instrument executed by the
party making the waiver.
12.9 No Third Parties. Neither this Agreement nor any provisions set
----------------
forth herein is intended to, or shall, create any rights in or confer any
benefits upon any person other than the parties hereto.
12.10 Incorporation by Reference; Precedence. The schedules to this
--------------------------------------
Agreement constitute integral parts of this Agreement and are hereby
incorporated into this Agreement by this reference. In the event of any
conflict or inconsistency between the language of this Agreement and the
language of any schedule to this Agreement, the language of this Agreement shall
be controlling. All capitalized terms used in the schedules to this Agreement,
but not defined therein, shall have the same meaning when used in such schedules
as when used in this Agreement.
12.11 Notices. Unless otherwise expressly provided herein, all notices,
-------
requests and other communications hereunder shall be in writing sent to the
address/fax number set forth below (provided that any party may at any time
change its address for notice or other such information by giving written notice
thereof in accordance with this section), and shall be deemed to have been duly
given upon the earliest of (a) hand delivery, (b) the first business day after
sending by reputable overnight delivery service for next-day delivery, (c) the
time of successful facsimile transmission (or in the event the time of receipt
of the fax in the city where the fax is received is not during regular business
hours on a business day, then at the customary hour for the opening of business
on the next business day) or (d) the date actually received by the other party:
-17-
<PAGE>
If to Customer, to: _______________________________________
_______________________________________
_______________________________________
_______________________________________
Attention: ____________________________
Fax No.: ____________________________
Copy to: Legal Department
Attention: ____________________________
Fax No.: ____________________________
If to Corsair, to: Corsair Communications, Inc.
3408 Hillview Avenue
Palo Alto, California 94304
Attention: Chief Financial Officer
Fax No.: (415) 493-3588
Copy to: Brobeck, Phleger & Harrison LLP
550 West "C" Street
Suite 1300
San Diego, California 92101
Attention: John A. Denniston, Esq.
Fax No.: (619) 234-3848
12.12 Dispute Resolution. If the parties should have a material dispute
------------------
arising out of or relating to this Agreement or the parties' respective rights
and duties hereunder, then the parties will resolve such dispute in the
following manner:
(a) Either party may at any time deliver to the other a written
dispute notice setting forth a brief description of the issue for which
such notice initiates the dispute resolution mechanism contemplated by this
Section 12.12.
(b) During the forty-five (45) day period following the delivery of
the notice described in Section 12.12(a) above, appropriate representatives
of both parties will meet and seek to resolve the disputed issue through
negotiation.
(c) If representatives of the parties are unable to resolve the
disputed issue through negotiation, then within thirty (30) days after the
period described in Section 12.12(b) above, the parties will refer the
issue
-18-
<PAGE>
(to the exclusion of a court of law) to final and binding arbitration in
______________________ in accordance with the then existing rules (the
"Rules") of the American Arbitration Association ("AAA"), and judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof; provided, however, that the law applicable to any
controversy shall be the law of the State of ________, regardless of
principles of conflicts of laws. In any arbitration pursuant to this
Agreement, the award or decision shall be rendered by a majority of the
members of a Board of Arbitration consisting of three (3) members, one of
whom shall be appointed by each party and the third of whom shall be the
chairman of the panel and be appointed by mutual agreement of said two
party-appointed arbitrators. In the event of failure of said two
arbitrators to agree within sixty (60) days after the commencement of the
arbitration proceeding upon the appointment of the third arbitrator, the
third arbitrator shall be appointed by the AAA in accordance with the
Rules. In the event that either party shall fail to appoint an arbitrator
within thirty (30) days after the commencement of the arbitration
proceedings, such arbitrator and the third arbitrator shall be appointed by
the AAA in accordance with the Rules.
(d) Notwithstanding the foregoing, the request by either party for
preliminary or permanent injunctive relief, whether prohibitive or
mandatory, shall not be subject to arbitration and may be adjudicated only
by the _________________ Superior Court or the appropriate U.S. District
Court in ________.
12.13 Attorneys Fees. The prevailing party in any action to enforce this
--------------
Agreement shall be entitled to recover reasonable costs and expenses including,
without limitation, attorneys' fees.
12.14 Equitable Relief. The parties recognize and agree that monetary
----------------
damages are an inadequate remedy for the unauthorized copying or use of the
Licensed Software or disclosure of Confidential Information, and further
recognize that such actions by either party would result in irreparable harm to
the other party. Therefore, in the event of such actions or upon a threat of
such actions by either party, the other party may seek injunctive, preliminary
injunctive or other equitable relief in addition to such other and further
relief as may be proper.
12.15 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same single instrument.
12.16 Status. The parties will carry out their respective duties and
------
obligations hereunder as independent contractors. Nothing contained in this
Agreement shall be deemed to create any association, partnership, joint venture,
or relationship of principal and agent or master and servant between the
parties.
-19-
<PAGE>
12.17 Complete Agreement. This Agreement sets forth the entire
------------------
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior letters of intent, agreements, covenants, arrangements,
communications, representations, or warranties, whether oral or written, by any
officer, employee, or representative of either party relating thereto.
12.18 Facilities. Customer will provide Corsair personnel space and other
----------
facilities and equipment as needed for the installation of the System.
12.19 Permits and Licenses. Customer will obtain any and all permits,
--------------------
licenses and certificates required for the installation of the System at any
Customer cell site by any regulatory agency or any other entity for the
installation and use of the System, including any of its components.
12.20 Taxes. All taxes designated, levied or based on the prices, rates,
-----
charges or fees or on this Agreement or the purchases provided hereunder, paid
or payable by Corsair shall be added to an invoice and paid or reimbursed by
Customer. Both parties agree to comply with all federal, state and local laws
as they pertain to each party and shall make no claim on the other party for
such taxes except as provided in the immediately preceding sentence.
12.21 Insurance. Corsair shall procure and maintain the following types
---------
of insurance and coverage during the term of this Agreement:
<TABLE>
<CAPTION>
TYPE OF INSURANCE MINIMUM AMOUNT
<S> <C>
(a) Workman's compensation As required by
and all occupational California law
disease
(b) Employer's liability $100,000 per occurrence
including all occupational
diseases when not so
covered under workmen's
compensation above
(c) General liability $1,000,000 per occurrence
including product and annual aggregate
and completed operation,
bodily injury and property
damage combined
(d) Automobile liability $1,000,000 per occurrence
(comprehensive), bodily
injury and property
damage combined
</TABLE>
-20-
<PAGE>
<TABLE>
<S> <C>
(e) Umbrella liability $1,000,000 per occurrence
and annual aggregate
</TABLE>
Corsair agrees to obtain insurance naming Customer as an additional insured and
to promptly furnish to Customer certificates of the foregoing insurance.
Corsair shall notify Customer in writing at least thirty (30) calendar days
prior to cancellation of, or a material change in any of the above policies.
All persons furnished by Corsair shall be considered solely its employees or
agents.
12.22 Source Code Escrow. The parties agree that the source code for the
------------------
Licensed Software developed or owned by Corsair and documentation therefor in
the current version then used by Customer, if not already in Customer's
possession, shall be promptly delivered by the Escrow Agent (as defined below)
to Customer within thirty (30) days of Customer's written request (i) upon any
commencement of a bankruptcy proceeding by or against Corsair, unless Corsair
elects to continue to perform all of its obligations under this Agreement, or
(ii) if not delivered under (i) above, upon the rejection of this Agreement by
or on behalf of Corsair or its trustee or in the event Corsair (or its
successors) ceases doing business. Corsair shall concurrently herewith
designate an escrow agent ("Escrow Agent") and at its sole cost, promptly
deposit with the Escrow Agent a copy of the source code for such software, and
maintain the source code thereafter in current version as in use by Customer,
with all documentation. Corsair shall provide Customer with the name and
address of the Escrow Agent, and a copy of its escrow agreement, within ten (10)
days of the Effective Date or any subsequent appointment of a replacement Escrow
Agent. The escrow agreement shall include provisions substantially consistent
with this Section 12.22.
12.23 Nonexclusivity. It is expressly understood and agreed that this
--------------
Agreement does not grant to Corsair any exclusive privileges or rights to
contract with Customer and that Customer may contract with other vendors,
manufactures and suppliers for the procurement of comparable products and
services.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
"CUSTOMER"
___________________________________________
By:________________________________________
Name:______________________________________
Title:_____________________________________
"CORSAIR"
CORSAIR COMMUNICATIONS, INC.
By:________________________________________
Name:______________________________________
Title:_____________________________________
[SIGNATURE PAGE TO AGREEMENT]
<PAGE>
SCHEDULE 1
----------
PHONEPRINT(TM)
SYSTEM DESCRIPTION
AND
PERFORMANCE GOALS
System Description
- ------------------
The System integrates into a cellular operator's existing cellular
infrastructure and operates in parallel with traditional cellular call
processing. Administration, alarm reporting and maintenance of these cell site
units is provided by a central unit allowing carriers to control and monitor the
operation of the System from a single point.
The System is made up of two basic components.
The RADIO FREQUENCY UNIT ("RFU") is installed at the cell site in the carrier's
market. It monitors the reverse control channel and extracts unique fingerprint
data from each mobile emitter within coverage of the cell site. Specific
emitter characteristics ("Fingerprints") are compared to a Fingerprint database
against which valid or fraudulent cellular use determinations are made. The
System attempts to terminate all calls as being fraudulent via a simulated hang-
up sequence from the RFU injected back into the network via a simulated hang-up
sequence from the RFU.
The SYSTEM CONTROL CENTER ("SCC") is currently operated by the Operations Group
located at Corsair Communications in Palo Alto, California. It contains a
database of valid and fraudulent cellular users for the Customer's market. The
SCC is networked to each of the RFUs in the Customer's market.
The SCC receives Fingerprint data daily from the RFUs in the market and uses
this Fingerprint data to update the SCC master database for all mobile emitters
in the market. From the updated master database, specific Fingerprint data is
transferred to all the RFUs daily, allowing market-wide coverage of fraud
detection for cellular users who move throughout the area of RFU deployments.
The modular architecture of the System allows the Customer to begin controlling
fraud in a few cell sites and expand coverage over one or more cellular
geographic areas.
The System allows TDMA digital telephones, when operating in analog mode, to be
validated, fingerprinted and terminated.
System Capabilities
- -------------------
The System includes the following capabilities and/or specifications:
1-1
<PAGE>
A. Database storage capacity for each SCC is up to two million MIN/ESN
combinations (with associated fingerprints).
B. Each RFU has a sustained termination rate of .75 calls per second.
C. Each RFU can process 2.5 Reverse Control Channel Events per second per
sector.
D. Expected 98% system availability (excludes downtime resulting from factors
outside of Corsair's sole control, including, but not limited to,
Customer's failure to follow escalation procedures and make cell sites
accessible to Corsair and transportation to cell site for parts and
technicians).
E. A single SCC can be configured to support up to 200 RFUs. The SCC
purchased as part of the Initial Order is configured to be capable of
supporting 75 RFUs.
Performance Goals
- -----------------
Corsair has established the following performance goals for the System which are
measured based upon the test set forth in Schedule 7, attached hereto:
A. greater than 90% termination of clone and roaming clone calls.
B. less than .75% termination of good customer calls.
System Capacity
- ---------------
The System has the following capacity and functionality:
A. System Control Center
---------------------
The current SC hardware configuration holds two million MINs in the master
fingerprint library. This capacity can easily be expanded with the
addition of more disk space.
B. Radio Frequency Unit
--------------------
The current RFU has disk space to store the fingerprints for one million
MINs. With MIN caching and real-time fingerprint sharing, the RFU can
effectively service a market of several million MINs.
C. MIN Caching and Real-time Fingerprint Sharing
---------------------------------------------
The RFU will hold fingerprints for the first million MINs observed by all
PhonePrint RFUs in the deployment. The date of the most recent intercept
(registration, call origination or page response) is maintained for each
MIN at
1-2
<PAGE>
each RFU. When the database reaches one million MINs, each RFU begins to
use caching. This allows the RFU to prune the home MINs with the longest
time since the last intercept and roamer MINS after a configurable amount
of time from the onboard database. Each RFU deletes different MINs based
on the MINs observed at that site.
With PhonePrint release 2.3, the system can request fingerprints in real
time from the SCC. Thus, if an RFU detects a call or registration from a
MIN it does not have on file, the RFU requests that fingerprint from the
SCC. This applies to both home subscribers and roamers. When the caching
feature has previously pruned away a MIN, the RFU simply requests that MIN
from the SCC the next time it observes the MIN (most of the time, the RFU
will request the MIN upon observing a registration, since these occur much
more frequently than call originations). The request and receipt of the
fingerprint both occur prior to the voice channel assignment, so the call
can be torn down if a fingerprint mismatch warrants. The RFU will add
newly requested MINs to the onboard database with the current date.
Because the SCC master database is configures to hold fingerprints for all
MINs in the market, it always has the most current fingerprint available
for any RFU requesting it.
1-3
<PAGE>
SCHEDULE 2
----------
PRE-SITE AND INSTALLATION RESPONSIBILITIES TIMETABLE
The following tables set forth the responsibilities (and an estimated
timetable for completing such responsibilities) of both parties to the Agreement
during the installation and commissioning of the RFU's included in Customer's
Initial Order which have not already been deemed accepted.
Corsair Responsibilities:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ESTIMATED
COMPLETION
ACTIVITY DATE
- --------------------------------------------------------------------------------
<S> <C>
Identify field supervisor
- --------------------------------------------------------------------------------
Perform joint pre-site surveys
- --------------------------------------------------------------------------------
Ship PhonePrint(TM) units to customer warehouse
- --------------------------------------------------------------------------------
Connect PhonePrint(TM) system interfaces to cell site equipment
- --------------------------------------------------------------------------------
Connect PhonePrint(TM) system to Telco line
- --------------------------------------------------------------------------------
Commission PhonePrint(TM) systems
- --------------------------------------------------------------------------------
Identify Installation Kit
- --------------------------------------------------------------------------------
Site Test and Verification
- --------------------------------------------------------------------------------
</TABLE>
Customer Responsibilities:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ESTIMATED
COMPLETION
ACTIVITY DATE
- --------------------------------------------------------------------------------
<S> <C>
Identify installation coordinator (TBD supervisor)
- --------------------------------------------------------------------------------
Identify PhonePrint(TM) installation sites
- --------------------------------------------------------------------------------
Schedule pre-site surveys
- --------------------------------------------------------------------------------
Provide cell site technician information for each cell site (name,
phone #, pager #, etc.)
- --------------------------------------------------------------------------------
Provide cell site field manager information for each cell site
- --------------------------------------------------------------------------------
</TABLE>
2-1
<PAGE>
PRE-SITE AND INSTALLATION RESPONSIBILITY TIMETABLE (CONTINUED)
Customer Responsibilities:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Provide Corsair information for each cell site (Location of
cell site, security issues)
- --------------------------------------------------------------------------------
Provide specific site information ((Alpha), (Beta), and (Gamma)
setup channels, color codes)
- --------------------------------------------------------------------------------
DC power installation
- --------------------------------------------------------------------------------
Delivery of PhonePrint(TM) units to cell sites
- --------------------------------------------------------------------------------
</TABLE>
Joint Responsibilities:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ESTIMATED
COMPLETION
ACTIVITY DATE
- --------------------------------------------------------------------------------
<S> <C>
Perform joint pre-site surveys
- --------------------------------------------------------------------------------
Schedule access times for PhonePrint(TM) connection and
commissioning for all site
- --------------------------------------------------------------------------------
Install antenna cable directional coupler(s) (performed during site
installation or commissioning)
- --------------------------------------------------------------------------------
Define Network Requirements Implementation Plan
- --------------------------------------------------------------------------------
</TABLE>
2-2
<PAGE>
SCHEDULE 3
----------
RFU HARDWARE SPECIFICATIONS
Each RFU consists of the following sections:
. Processor/Receiver Chassis capable of processing and fingerprinting
all calls processed by base station, and capable of terminating all
calls determined to be fraudulent; and capable of interfacing and
receiving all calls processed on a three sector Ericsson base station.
. Call Teardown Chassis capable of terminating calls determined to be
fraudulent.
. All necessary hardware for a complete RFU system installation,
including fastening hardware and cabling.
3-1
<PAGE>
SCHEDULE 4
----------
SYSTEM CONTROL CENTER SPECIFICATIONS
<TABLE>
<CAPTION>
Quantity Item
-------- ----
<S> <C> <C>
. 1 SunSPARCstation 20
. 1 64MB Memory Expansion
. 1 32 MB Memory Expansion
. 1 Internal 1.44-MByte Floppy Disk Drive
. 1 SunCD 2Plus Internal CD-ROM Drive
. 1 Solaris 1.X Single System License
. 2 SBus Fast SCSI-2/Buffered Ethernet
. 2 2.1 Gbyte 7200 RPM Fast/Wide SCSI 2 Disk-UniPack with
50 to 68 Pin SCSI Cable
. 4 2.1 Gbyte 7200 RPM Fast/Wide SCSI 2 Disk-UniPack with
68 to 68 Pin SCSI Cable
. 1 20 Gbyte 4mm Tape Auto-Loader Desktop Storage Module
</TABLE>
4-1
<PAGE>
SCHEDULE 5
----------
LICENSED SOFTWARE
The System is delivered with the following licensed software installed as
follows:
SCC Software
. GNU public-domain tools: ghostscript and groff
. Solaris 1 (also called SunOS 4.1.4)
. MIT X-Windows Server (XIIr5)
. Sybase 4.92
. OSF's Motif 1.2
. All additional software, if any, including certain proprietary
software of Corsair, necessary to cause the System to function in
accordance with the description.
RFU Software
. Venix 1.1 (Novell UnixWare 1.1.3)
. Maxpeed Corporation's driver for multiport serial card 55-8 Plus, Rev.
A
. All additional software, if any, including certain proprietary
software of Corsair, necessary to cause the System to function in
accordance with the description.
5-1
<PAGE>
SCHEDULE 6
----------
SITE COMMISSIONING PROCESS
During the site commissioning process the System shall be tested to assure
the following:
. System powers up
. Standard operating system boot status is correct
. Software menus and displays come up using a test VGA monitor
. System self test process runs
. Phone intercepts are detected and data that is displayed by the System
is consistent and correct
. System can terminate calls
In addition, during the site commissioning process Corsair shall configure
the system cell name, number, type, channel #, terminator on/off and color code.
6-1
<PAGE>
SCHEDULE 7
----------
COMPREHENSIVE SERVICE AND SUPPORT AGREEMENT
This Comprehensive Service and Support Agreement ("Agreement") is
entered into _________________ between Corsair Communications, Inc., a Delaware
corporation with its principal place of business located at 3408 Hillview
Avenue, Palo Alto, California 94304 ("Corsair") and
________________________________________________ with an office located at
_______________________________________________________ ("Customer").
PRELIMINARY STATEMENT
12.21 Pursuant to a Master Purchase and Licensing Agreement of even date
herewith (the "Purchase Agreement") Customer has previously purchased equipment
Corsair manufactures and markets for use in mitigating radio telephone fraud.
12.22 Both parties to this Agreement desire to have the equipment purchased by
Customer from Corsair perform effectively and efficiently.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, and intending to be legally bound hereby, Customer and
Corsair hereby agree as follows:
1. COVERAGE
--------
1.1 Corsair will provide Support Services (as further described below) for
the hardware and software (as set forth on Schedule A and collectively referred
to herein as the "Product") pursuant to the following terms and conditions.
1.2 Subject to the terms hereof, Corsair will provide Support Services to
Customer and this Agreement shall remain in effect until the expiration or
earlier termination of the Purchase Agreement.
2. SUPPORT SERVICES
----------------
2.1 Support Services include the following:
a. (i) Response to Customer calls from the 1(800)9CORSAIR toll free
number. Customer presses "1" to reach the Corsair Operations
Group's Technical Assistance Center.
7-1
<PAGE>
(ii) Technical Assistance Center Representatives shall answer the
phones from 6:30 a.m. to 5:00 p.m. Pacific Time, Monday through
Friday, excluding holidays.
(iii) A voice messaging system that supports urgent messages by
paging on-call Support Specialists shall be available 24 hours a
day, 7 days a week.
(iv) Response to initial Customer calls shall be within 15 minutes of
call receipt.
(v) Commitment to start evaluation of system level problems that can
be resolved at Corsair via network or remote access shall be
within 2 hours.
Corsair shall use its best efforts to identify, verify and resolve
errors in the Product. Corsair's system for managing and resolving reported
problems is further described on Schedule B and the parties agree to comply with
the requirements set forth therein.
b. Cell site installation and maintenance support services, consisting of
call logging, technical management and escalation, remote diagnosis, parts
exchange and repair, field change orders ("FCOs"), and general help desk support
in maintaining cell site Radio Frequency Units ("RFUs") and the System Control
Center ("SCC").
(i) Corsair shall use its best efforts to provide on-site support
for problems on a next-day basis for RFUs and on a same-day response basis for
SCCs and shall provide regular maintenance (as described in Schedule E) to
ensure that the Product, when working under normal conditions, performs
according to the Product description published by Corsair.
(ii) Corsair shall perform on-site cell site maintenance for the
Product, including, but not limited to, cleaning the Product, performing the
maintenance set forth on Schedule E attached hereto, replacing failed sub-
assemblies, installing FCOs, performing operating checks and other tasks
described in Corsair's Field Service Manual.
(iii) Corsair shall use its best efforts to deliver and install Field
Replaceable Units ("FRUs") for RFUs on-site within twenty-four (24) hours of the
receipt of a request from Customer for emergency exchange FRUs.
(iv) Corsair shall provide Customer at no charge with updates to
documentation that Corsair makes generally available to its customers within two
weeks of the general release of such documentation.
(v) Customer shall not be responsible for Corsair's time and
expenses (excluding the cost of replacement parts and upgrades), to resolve a
problem during an
7-2
<PAGE>
on-site visit, except if the problem is one that is otherwise not covered by
Corsair, as set forth in Section 2.2 below; all replacement parts shall be
furnished to Customer on an exchange basis and all replaced parts shall become
the property of Corsair. All replacement parts shall be supplied by Corsair
free of additional charge prior to the second anniversary of the date of this
Agreement and thereafter, unless Customer subscribes for Corsair's extended
parts protection plan, the cost of which shall not exceed $275 per RFU/per
annum, Customer shall pay Corsair's published price for such parts. All
replacement parts shall be subject to the warranty, if any, applicable to the
part that was replaced, and to the extent permitted by the manufacturer, Corsair
shall assign to Customer any manufacturer's warranties for the replacement
parts.
c. Training conducted at Customer's facilities.
(i) Corsair shall provide Customer with up to four (4) eight (8) hour
training courses during each one (1) year period during the term of this
Agreement free of charge (except for travel and lodging costs for Customer's
employees or Corsair's trainers). Additional training courses shall be made
available to Customer at Corsair's then current rates for such courses.
Schedule C contains a list of training courses currently available from Corsair,
including the duration and current cost for each. Corsair shall provide, in an
ongoing basis, updates to this information.
d. All Product descriptions published by Corsair that Corsair generally
makes available to its Customers shall be provided free of charges to Customer.
e. Corsair will provide, at no cost to Customer, new release support when
upgrading any components of the SCC.
2.2 Corsair shall have no obligation to support any:
a. Product that is altered, damaged, modified, repaired or transported by
Customer or any third party without the prior written approval of Corsair, or
any portion of the Product incorporated with or into other software;
b. Software incorporated in the Product that is not the then current
release, or one of the two immediately previous releases.
c. Product problems caused by negligence, abuse or misapplication, use of
Product other than as specified in documentation provided by Corsair to Customer
or other causes beyond the control of Corsair.
2.3 Corsair reserves the right to make a reasonable inspection of any RFU
or SCC to determine its condition prior to resuming Support Services when the
RFU or SCC has not been under a support commitment from Corsair during the
previous thirty (30) days. Customer shall pay Corsair's then current reasonable
inspection charges (which are currently $95 per hour). Corsair shall provide
Customer with a written estimate (at Corsair's then current rate for labor
(which is currently $95 per hour), parts
7-3
<PAGE>
and expenses) of any repairs necessary to place the Product in good operating
condition. Customer shall authorize Corsair to conduct such repairs prior to
Corsair agreeing to provide any Support Services on such Product.
2.4 Corsair shall provide Customer with one copy of new versions and
updates of software products developed by Corsair for Customer to evaluate and
test prior to system wide deployment together with any new or updated
documentation that Corsair, in its discretion, makes generally available to its
customers with respect to such software. Corsair is currently targeting two (2)
software releases per year during the term of this Agreement.
2.5 Upon Customer's written request, Corsair may provide other services
not set forth herein that Corsair makes generally available to its other
customers. For billing purposes, the time required to perform any such services
shall be rounded to the nearest one-half (1/2) hour.
3. CUSTOMER'S OBLIGATIONS
----------------------
3.1 Customer shall use its best efforts to cooperate with Corsair in all
reasonable aspects of the Support Services provided hereunder. Customer shall
ensure that the Product is installed in a location meeting the environmental
conditions set forth in Schedule D.
a. Customer shall provide Corsair with five (5) days written notice
prior to moving the Product, provided, however, that Customer covenants not to
-------- -------
request Corsair to move any more than three (3) RFUs in any consecutive seven
(7) day period. Upon Customer's request, Corsair shall deinstall the Product
and reinstall it at the new location at Corsair's rates for field engineering
services (which are currently $95 per hour) plus all of Corsair's reasonable
cost and expenses required to complete the project (including, but not limited
to cost for any materials or equipment rentals). Customer shall be responsible
for all shipping arrangements and expenses required to move the Product. If
Customer does not purchase Corsair's deinstallation and reinstallation services,
Corsair shall be entitled to inspect and, if necessary, repair the Product after
it is moved and prior to resuming Support Services. The charges for such
inspection shall be in accordance with Corsair's rates for field engineering
services plus Corsair's reasonable expenses.
3.2 Customer shall, as soon as practical, upon becoming aware of such,
notify Corsair of all Product failures and all complaints and shall provide
Corsair with all necessary information, as reasonably requested by Corsair, and
reasonable assistance necessary for Corsair to comply with its obligations
hereunder, including, but not limited to providing cell site access, security
protection in cases where Customer would routinely provide security protection
for its own personnel, and cell site technician support when problems in other
equipment utilized by Customer may be impacting Product performance or
operation. The provision of security by Customer in any instance shall not be
interpreted as a guarantee by Customer of any Corsair employees personal safety.
7-4
<PAGE>
3.3 Customer shall return to Corsair all failed or replaced parts within
fifteen (15) business days of receipt by Customer of replacement parts or
upgrades. Customer shall either (i) ship the failed or replaced parts to
Corsair in the container in which the replacements or upgrades were received and
shall be responsible for all shipping and insurance charges to return the parts
or (ii) return the failed or replaced parts to a Corsair representative
performing on-site Support Services. If Customer does not return the failed
parts within thirty (30) days of receipt by Customer or replacement parts or
upgrades, unless there is a good faith dispute involving such parts, Customer
shall pay for the parts at Corsair's then current list price.
3.4 Each of Corsair and Customer shall designate an employee as the key
contact person to coordinate all support services provided hereunder.
4. TERMINATION
-----------
4.1 This Agreement and all Support Services may be terminated by either
party at such time as Customer is no longer required to make payment for the
services provided hereunder pursuant to the Purchase Agreement.
4.2 The provisions of Sections 6 and 7 shall survive any termination under
this Agreement.
5. FEES AND PAYMENT
----------------
5.1 Initial Coverage: Customer hereby agrees to purchase and Corsair
----------------
hereby agrees to provide to Customer the Support Services set forth in this
Agreement for all of the RFUs and SCCs purchased by Customer pursuant to the
Purchase Agreement. The payment for such Support Services shall be as described
in Sections 2.2 and 2.4 of the Purchase Agreement. Customer shall pay or
reimburse Corsair for all taxes designated, levied or based on the prices,
rates, charges or fees for services provided under this Agreement, except for
Corsair's income taxes.
5.2 Additional RFUs: Customer may, at any time after the Effective Date,
---------------
request that Corsair provide Support Services for additional RFUs. Corsair
shall not be bound to provide such Support Services unless, within thirty (30)
days immediately prior to the date upon which Customer has requested that such
Support Services commence, such RFUs were under either a support commitment or
warranty from Corsair. In the event that Corsair agrees to provide Support
Services with respect to any additional RFUs ("Additional RFUs") the terms and
conditions of this Agreement shall govern the provision of Support Services for
such Additional RFUs.
6. LIMITATION OF LIABILITY
-----------------------
The parties agree that their respective liability under this Agreement
shall be limited in accordance with the terms of Section 12.3 of the Purchase
Agreement.
7-5
<PAGE>
7. DISCLAIMER OF WARRANTIES
------------------------
THIS AGREEMENT CONSTITUTES A SERVICE CONTRACT AND NOT A SEPARATE PRODUCT
WARRANTY. THE PRODUCT AND ALL MATERIALS RELATED TO THE PRODUCT ARE SUBJECT
EXCLUSIVELY TO THE WARRANTIES SET FORTH IN THE PURCHASE AGREEMENT. CORSAIR
MAKES NO ADDITIONAL WARRANTIES OF ANY KIND REGARDING THE SERVICES OR ANY PARTS
PROVIDED HEREUNDER, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. FURTHER, CORSAIR DOES NOT
HEREIN WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS REGARDING THE USE, OR THE
RESULTS OF THE USE OF THE PRODUCT IN TERMS OF CORRECTNESS, ACCURACY,
RELIABILITY, OR OTHERWISE. Customer understands that Corsair is not responsible
and will have no liability for hardware, software, or other items or any
services provided by any persons other than Corsair.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
7-6
<PAGE>
SCHEDULE A
----------
HARDWARE AND LICENSED SOFTWARE
HARDWARE
Each RFU consists of the following sections:
. Processor/Receiver Chassis capable of processing and fingerprinting
all calls processed by base station, and capable of terminating all
calls determined to be fraudulent; and capable of interfacing and
receiving all calls processed on a three sector Ericsson base station.
. Call Teardown Chassis capable of terminating calls determined to be
fraudulent.
. All necessary hardware for a complete RFU system installation,
including fastening hardware and cabling.
LICENSED SOFTWARE
The System is delivered with the following licensed software installed as
follows:
SCC Software
. GNU public-domain tools: ghostscript and groff
. Solaris 1 (also called SunOS 4.1.4)
. MIT X-Windows Server (XIIr5)
. Sybase 4.92
. OSF's Motif 1.2
. All additional software, if any, including certain proprietary
software of Corsair, necessary to cause the System to function in
accordance with the description.
RFU Software
. Venix 1.1 (Novell UnixWare 1.1.3)
A-1
<PAGE>
. Maxpeed Corporation's driver for multiport serial card 55-8 Plus, Rev.
A
. All additional software, if any, including certain proprietary
software of Corsair, necessary to cause the System to function in
accordance with the description.
SYSTEM CONTROL CENTER
Quantity Item
-------- ----
. 1 SunSPARCstation 20
. 1 64MB Memory Expansion
. 1 32 MB Memory Expansion
. 1 Internal 1.44-MByte Floppy Disk Drive
. 1 SunCD 2Plus Internal CD-ROM Drive
. 1 Solaris 1.X Single System License
. 2 SBus Fast SCSI-2/Buffered Ethernet
. 2 2.1 Gbyte 7200 RPM Fast/Wide SCSI 2 Disk-UniPack with
50 to 68 Pin SCSI Cable
. 4 2.1 Gbyte 7200 RPM Fast/Wide SCSI 2 Disk-UniPack with
68 to 68 Pin SCSI Cable
. 1 20 Gbyte 4mm Tape Auto-Loader Desktop Storage Module
A-2
<PAGE>
SCHEDULE B
----------
PROBLEM CATEGORY DEFINITIONS AND RESPONSE REQUIREMENTS
1.0 CALL HANDLING AND ESCALATION PROCEDURES
- --------------------------------------------
1.1 The following sections describe a problem reporting mechanism through which
Customer will report problems in the Product to Corsair.
1.2 To assist Customer in resolving problems, Corsair shall provide directly to
Customer information on known problems, symptoms/solutions,
bugs/fixes/patches and internal/external technical tips as they are
developed and released by Corsair engineering and/or Corsair Operations
Group.
1.3 If Corsair and Customer service representatives determine that a problem is
not solvable or disagree on the severity of the problem, then they will
escalate the problem to their appropriate managers. Both organizations
will work to identify the actions required to resolve said problems(s).
2.0 PROBLEM REPORTING
- ----------------------
2.1 Customer will assign a category level to each problem that it reports to
Corsair.
2.2 "Category Level 1" problems prevent installation of the Product, cause the
Product or operating system to fail completely (i.e., to be rendered
useless and unresponsive), result in irretrievable corruption or loss of
data, or cause personal injury. There is no known work-around or solution
to the problem, or a known solution cannot be quickly implemented.
2.2.1 Corsair will use its best efforts to respond to Customer within
fifteen (15) minutes following receipt of the call.
2.2.2 Corsair shall work with Customer to drive the Category to level 2,
effect a repair, or issue a mandatory Engineering Change Order
("ECO"), so that some usefulness of the system is regained. Corsair
shall use its commercially reasonable efforts to isolate, diagnose
and effect a work-around or repair. Corsair will assign an
individual to have responsibility for resolving this problem.
2.2.3 Permanent corrections will be incorporated into the next major or
minor software release of the Product.
2.2.4 When the Category has been changed to level 2, the guidelines for
resolving level 2 problems will be followed.
B-1
<PAGE>
2.2.5 Corsair will either work around or repair, or drive to Category
Level 2, all Category Level 1 problems within 24 hours of the time
that Customer reports the problem to Corsair. If Corsair fails to do
so within this allotted time, it shall either remit to Customer, or
increase Customer's Credit Amount by, the sum of $10 per each
additional day per RFU affected by the problem.
2.3 "Category Level 2" problems prevent the use of a documented critical
function of the Product, preventing the Product from accomplishing the task
for which it was designed.
2.3.1 Corsair will respond to Customer within fifteen (15) minutes
following receipt of the call.
2.3.2 Corsair shall work with Customer to drive the Category to level 3,
effect a repair, or issue an ECO. Corsair shall use best efforts to
isolate, diagnose and effect a work-around. Corsair will assign an
individual to have responsibility to resolve this problem.
2.3.3 Permanent corrections will be incorporated in the next major or
minor software release of the Product.
2.3.4 Corsair will either work around or repair, or drive to Category
Level 3, all Category Level 2 problems within 48 hours of the time
that Customer reports the problem to Corsair (or in the case of
problems driven from Level 1 to Level 2, within 48 hours of the time
that the problem becomes a Category Level 2 problem). If Corsair
fails to do so within this allotted time, it shall either remit to
Customer, or increase Customer's Credit Amount by, the sum of $10
per day each additional day per RFU affected by the problem.
2.4 "Category Level 3" problems prevent the use of a documented function of the
Product, which is not critical to the ability of the Product to complete
the task for which it was designed. There is no known work-around or
solution to the problem.
2.4.1 Corsair will use its best efforts to respond to Customer within
fifteen (15) minutes following receipt of the call.
2.4.2 Corsair will work with Customer to verify and isolate a Category
Level 3 problem. A work-around may be provided by Corsair if
requested by Customer and known to Corsair, Corsair will use
commercially reasonable efforts to isolate, diagnose and effect a
work-around.
2.4.3 Permanent correction of the defect will be incorporated in to the
next major or minor software release of the Product.
B-2
<PAGE>
2.4.4 Corsair will either work around or repair, all Category Level 3
problems within five days of the time that Customer reports the
problem to Corsair (or in the case of problems driven from Category
Level 2 to Category Level 3, within five days of the time that the
problem becomes a Category Level 3 problem). If Corsair fails to do
so within this allotted time,, it shall either remit to Customer, or
increase Customer's Credit Amount by, the sum of $10 per each
additional day per RFU affected by the Problem.
2.5 The sum of all payments or credits to Customer pursuant to Sections 2.2.5,
2.3.4 and 2.4.4, shall not exceed, on an annual basis, the total amount
billed to Customer pursuant to Sections 2.2(d) and 2.4(c) of the Agreement.
3.0 RECORDS
- ------------
Corsair will maintain a record of, and provide monthly status reports with
respect to, all submitted problem reports and will keep track of the
Corsair and Customer actions taken toward problem resolution.
B-3
<PAGE>
SCHEDULE C
----------
CORSAIR TRAINING COURSES
MAINTENANCE TRAINING COURSES 8 HRS, 6 STUDENTS
The key objectives of this course are to train the students to:
. recognize the difference between normal and degraded operation of an RFU
. recognize unit faults
. relate system faults to major subassemblies
. remove and replace each major subassembly
Cost: $600 plus materials and travel and lodging expenses for one (1) Corsair
trainer.
INSTALLATION TRAINING COURSES 8 HRS, 6 STUDENTS
The key objectives of this course are to train the students to:
. receive and unpack equipment
. inspect equipment
. locate external connection points
. position and fasten components and connect power and signal cables
. perform site commissioning to ensure that the RFU is installed and
integrated into the cell site
Cost: $600 plus materials and travel and lodging expenses for one (1) Corsair
trainer.
FRAUD OPERATIONS TRAINING COURSE 8 HRS, 6 STUDENTS
The key objectives of this course are to train the students to:
. use fraud analysis subsystem
. use report generation subsystem
. use PhonePrint system configuration and optimization
. view RFU fraud detection activity
. use custom interface
Cost: $600 plus materials and travel and lodging expenses for one (1) Corsair
trainer.
SCC OPERATION TRAINING COURSE 8 HRS, 6 STUDENTS
The key objectives of this course are to train the students to:
. have working knowledge of PhonePrint system and SCC operation
. perform system maintenance: backups, troubleshooting, start and stop
system
. perform system administration and directory and file structures
Cost: $600 plus materials and travel and lodging expenses for one (1) Corsair
trainer.
C-1
<PAGE>
SCHEDULE D
----------
ENVIRONMENTAL CONDITIONS
1) Maximum Humidity 75%
2) Operating Temperature: MAXIMUM: 40 degrees Celsius
MINIMUM: 10 degrees Celsius
D-1
<PAGE>
SCHEDULE E
----------
PRODUCT MAINTENANCE SCHEDULE
RFU MAINTENANCE SCHEDULE
Diagnostic checks are performed on the RFU remotely from the SCC to insure that
the RFU is configured properly and operating within its specified requirements.
RFU preventive maintenance should occur once every 6 months and is limited to
inspection of the unit. Preventive maintenance consists of the following:
. Visual inspection of the RFU cabinet for physical damage
. Inspection and cleaning of the air filter at the rear of each unit
. Checking cables at the rear of the RFU to insure that all connections are
solid and secure
. Checking the operation of the air circulation fans and hard disk drive
within the unit by listening for unusual noises
. Visual inspection of all lights and indicators on the front of the RFU to
insure that they are operating as specified
SCC MAINTENANCE
SCC Maintenance is 24 x 7 support coverage with four (4) hour on-site support
coverage.
E-1
<PAGE>
SCHEDULE 8
----------
FORM OF PRESS RELEASE
INTENTIONALLY OMITTED
8-1
<PAGE>
SCHEDULE 9
----------
NEW SOFTWARE RELEASE SCHEDULE
TO BE PROVIDED BY CUSTOMER
9-1
<PAGE>
SCHEDULE 10
-----------
SCC COMMISSIONING PROCESS
TO BE PROVIDED BY CUSTOMER
10-1
<PAGE>
SCHEDULE 11
-----------
PRICE AND PAYMENT TERMS
This schedule sets forth in a simplified manner the pricing for the Initial
Order and each Supplemental Order purchased by Customer from Corsair.
Notwithstanding the prices set forth on this Schedule, the prices and payment
terms with respect to all Supplemental Orders shall be governed exclusively by
Section 2.3 of this Agreement.
The pricing of Supplemental Orders are as follows:
I. RFUs: Each RFU shall be priced at $20,000; provided, however,
---- -------- -------
that after two Markets have purchased at least an aggregate of 150 RFUs, the
price of each subsequent RFU shall be $17,500.
Payment Terms for RFU(s)
------------------------
(1) One hundred percent (100%) shall be invoiced upon the Delivery
Date of each RFU.
(2) All invoices shall be payable net 30 days.
II. SCC(s): Each SCC shall be priced at not more than $77,500, with the
------
exact price determined based upon the number of RFUs the SCC is designed to
support.
Payment Terms for SCC
---------------------
(1) One hundred percent (100%) shall be invoiced following the
completion by Corsair of the commissioning process set forth in
Schedule 10 hereto.
(2) All invoices shall be payable net 30 days.
III. Customer Interface Server. Each Customer Interface Server shall be
-------------------------
priced at $15,000.
Payment Terms for Customer Interface Server
-------------------------------------------
(1) One hundred percent (100%) shall be invoiced upon the Delivery
Date of each Customer Interface Server.
(2) All invoices shall be payable net 30 days.
IV. Support Services: Customer shall pay to Corsair annually during the
----------------
term of this Agreement, in consideration of the support services set forth in
Article VII of this Agreement, an amount equal to $1250 (or a greater amount
agreed upon by the parties) for each RFU purchased (or a greater amount agreed
upon by the parties) from Corsair.
11-1
<PAGE>
Payment Terms for Support Services
----------------------------------
(1) Annual payment for the following year in advance on each
Effective Date and each anniversary thereof.
(2) Initial pro-rated annual payment upon Delivery Date with respect
to each RFU.
(3) All invoices shall be payable net 30 days.
V. Software License Fees: Customer shall pay to Corsair annually during
---------------------
the term of this Agreement, in consideration of the license granted by Corsair
in Section 6.3 of this Agreement, an amount equal to $2500 for each RFU (or
$1750 for each RFU following the second anniversary of the purchase of such
RFU). Customer's software license fees pursuant to Section 2.3 shall be limited
to $400,000 per annum during each year during the term of this Agreement.
Payment Terms for License Fees
------------------------------
(1) Annual payment for the following year in advance on the Effective
Date and each anniversary of the Effective Date.
(2) Initial pro-rated annual payment upon Delivery Date with respect
to each RFU.
11-2
<PAGE>
SCHEDULE 12
-----------
SCC COMMISSIONING PROCESS
TO BE PROVIDED BY CUSTOMER
12-1
<PAGE>
EXHIBIT 10.48
CORSAIR CONFIDENTIAL DISCLOSURE AGREEMENT
This Agreement is made and entered into as of the Effective Date below by
and between the Parties,
Corsair Communications, Inc., a Delaware corporation having a place of
business at 3408 Hillview Avenue, Palo Alto, California 94304
and
Company identified by name and address below.
A. The Parties intend to disclose to each other Confidential Information
relating to wireless technology, products and business for the purpose of
evaluating entering into a further business relationship between the parties.
B. The Parties define "Confidential Information" as all information which
is disclosed by one of the Parties (Disclosing Party) to the other one of the
Parties (Receiving Party).
Confidential Information includes but is not limited to confidential
and proprietary know-how, formula, processes, software and other works (in any
form), designs, drawings, machines, structures, inventions (whether patentable
or not), finances, customer, marketing, research and development information.
C. The Parties define an "Authorized Person" for a Receiving Party as any
officer, employee or consultant of such Receiving Party (including subsidiaries
thereof) that has a need to receive Confidential Information of the Disclosing
Party in connection with carrying out the purpose of this Agreement.
The Parties agree as follows:
1. Each Party, as a Receiving Party, shall,
1.1 keep the Confidential Information received from the Disclosing
Party in confidence and prevent disclosure of such Confidential Information to
anyone other than an Authorized person
and
<PAGE>
1.2 use the Confidential Information received from the Disclosing
Party only for carrying out the purpose of this Agreement and not use such
confidential Information for other benefits of the Receiving Party.
2. Notwithstanding anything else in this Agreement, a Receiving Party
shall have no obligation under this Agreement with regard to:
2.1 any information in the public domain at the time of disclosure to
the Receiving Party or which thereafter falls into the public domain, unless the
falling into the public domain is caused by the Receiving Party, or
2.2 any information known by the Receiving Party at the time of
disclosure by the Disclosing Party provided such information became known by the
Receiving Party without violation of the rights of the Disclosing Party, or
2.3 any information rightfully disclosed to the Receiving Party by
another person not in violation of the rights of the Disclosing Party, or
2.4 any information independently developed by the Receiving Party
without any reliance on Confidential Information of the Disclosing Party, or
3. Each Party, as a Receiving Party, shall protect the Confidential
Information of the Disclosing Party using a degree of care that is reasonable,
but such degree of care shall not be less than the degree of care used by the
Receiving Party to prevent unauthorized use or disclosure of the Receiving
Party's own information of comparable type and importance.
4. Each Party, as a Receiving Party, shall maintain a written agreement
with each Authorized Person in a form that enables the Receiving Party to
fulfill the Receiving Party's obligations to the Disclosing Party under this
Agreement.
5. Prior to disclosure of Confidential Information from a Disclosing
Party to any Authorized person, a Receiving Party shall notify the Authorized
Person of the obligation to keep all Confidential Information disclosed by the
Disclosing Party in confidence and of the obligation not to disclose such
Confidential Information to any person other than an Authorized Person
designated by the Receiving Party.
6. This Agreement may be terminated at any time by either Party and
termination shall occur thirty (30) days after one Party gives written notice of
termination to the other Party. Unless earlier terminated, this Agreement shall
terminate five (5) years after the Effective Date.
<PAGE>
7. Each Party's obligations as a Receiving Party under this Agreement to
protect Confidential Information shall survive any termination of this Agreement
for a period of five (5) years.
8. Notwithstanding anything else in this Agreement, under this Agreement,
neither Party grants to the other Party any license under, or any releases from
any liabilities arising from, any copyright, patent or other intellectual
property right.
9. All documents, drawings, writings or other media (including all copies
thereof) containing Confidential Information of a Disclosing Party shall be
returned promptly by the Receiving Party to the Disclosing Party upon request
therefor by the Disclosing Party, and before such return, confidential
information of the Receiving Party, if any, shall be removed.
10. This Agreement merges all prior discussions and is the entire
understanding and agreement of the Parties relating to Confidential Information.
Neither Party shall be bound by any additional or other representation,
condition, or promise except as subsequently set forth in a writing signed by
the Party to be bound.
11. Each Party as a Receiving Party may disclose Confidential Information
received from the Disclosing Party to the extent required by any judicial or
governmental request, requirement or order, provided that the Receiving Party
(1) fully contests the requirement to make such disclosure, (2) promptly
notifies the Disclosing Party of such request, requirement or order and the
proceedings and circumstances related thereto, and (3) enables and assists the
Disclosing Party in contesting the requirement to make such disclosure.
12. Each Party shall comply with all applicable U.S. and foreign export
control laws and regulations and shall not export or re-export any technical
data or products except in compliance with the applicable export control laws
and regulations of the U.S. and any foreign country.
[Remainder of This Page Intentionally Left Blank]
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<PAGE>
13. This Agreement shall be construed and the relationship of the Parties
determined in accordance with the laws of the State of California.
Effective Date: ________, 19__
CORSAIR Company:
___________________________ _______________________________
Name: Name:
Title: Title:
Company Address:
-4-
<PAGE>
EXHIBIT 10.49
INDEMNIFICATION AGREEMENT
-------------------------
THIS AGREEMENT is made and entered into this ____ day of ___________, 1997
between Corsair Communications, Inc., a Delaware corporation ("Corporation"),
and ________________________ ("Director").
RECITALS:
A. Director, a member of the Board of Directors of Corporation, performs
a valuable service in such capacity for Corporation; and
B. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and
C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and the members of its Board of Directors with
respect to indemnification of such directors; and
D. In accordance with the authorization as provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board of
Directors by such D & O Insurance, if any, and by statutory and bylaw
indemnification provisions; and
F. In order to induce Director to continue to serve as a member of the
Board of Directors of Corporation, Corporation has determined and agreed to
enter into this contract with Director;
NOW, THEREFORE, in consideration of Director's continued service as a
director after the date hereof, the parties hereto agree as follows:
1. Indemnity of Director. Corporation hereby agrees to hold harmless
---------------------
and indemnify Director to the fullest extent authorized or permitted by the
provisions of the Law, as may be amended from time to time.
<PAGE>
2. Additional Indemnity. Subject only to the exclusions set forth in
--------------------
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Director:
(a) against any and all expenses (including attorneys' fees), witness
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by Director in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Director is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Director is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Director by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
3. Limitations on Additional Indemnity. No indemnity pursuant to Section
-----------------------------------
2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which the Director is indemnified
pursuant to Section 1 hereof or reimbursed pursuant to any D & O Insurance
purchased and maintained by Corporation;
(b) in respect of remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Director for an accounting of profits made from the purchase or
sale by Director of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Director's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(e) on account of Director's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Director or any of Director's affiliates against
Corporation or any officer, director or
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<PAGE>
stockholder of Corporation unless such action, suit or proceeding was authorized
in the specific case by action of the Board of Directors of Corporation;
(g) on account of any action, suit or proceeding to the extent that
Director is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Director have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
4. Contribution. If the indemnification provided in Sections 1 and 2 is
------------
unavailable and may not be paid to Director for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Director (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Director in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Director on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Director on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Director on the other
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines or settlement
amounts. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
5. Continuation of Obligations.
---------------------------
(a) All agreements and obligations of Corporation contained herein
shall continue during the period Director is a director, officer, employee or
agent of Corporation (or is or was serving at the request of Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise) and shall continue
thereafter so long as Director shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Director was serving
Corporation or such other entity in any capacity referred to herein.
-3-
<PAGE>
(b) For six years after the effective time of (i) the acquisition of
the Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation) or (ii) the sale of all or substantially all of the assets of
the Corporation by means of any transaction or series of related transactions,
the Corporation (to the extent the Corporation is not the continuing or
surviving person of such reorganization, merger, consolidation or sale) shall
cause the acquiring, continuing or surviving corporation to (x) indemnify and
hold harmless Director in accordance with Section 1 and 2 hereof and (y) use its
best efforts to provide directors' liability insurance on terms substantially
similar to the terms of the Corporation's then current directors' liability
insurance policy in effect on the dated thereof, or any other arrangement
reasonably satisfactory to Director, in respect of acts or omissions occurring
on or prior to the effective time of the reorganization, merger, consolidation
or sale.
6. Notification and Defense of Claim. Not later than thirty (30) days
---------------------------------
after receipt by Director of notice of the commencement of any action, suit or
proceeding, Director will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Director otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Director
notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from Corporation to Director of its
election so as to assume the defense thereof, Corporation will not be liable to
Director under this Agreement for any legal or other expenses subsequently
incurred by Director in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Director
shall have the right to employ his own counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof shall be at the expense of
Director unless (i) the employment of counsel by Director has been authorized by
Corporation, (ii) Director shall have reasonably concluded that there may be a
conflict of interest between Corporation and Director in the conduct of the
defense of such action or (iii) Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Director's separate counsel shall be at the expense of
Corporation. Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of Corporation or as to which
Director shall have made the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Director under this
Agreement for any amounts paid in settlement of any action or claim effected
without its
-4-
<PAGE>
written consent. Corporation shall be permitted to settle any action except
that it shall not settle any action or claim in any manner which would impose
any penalty, out-of-pocket liability, or limitation on Director without
Director's written consent. Neither Corporation nor Director will unreasonably
withhold its or his consent to any proposed settlement.
7. Advancement and Repayment of Expenses.
-------------------------------------
(a) In the event that Director employs his own counsel pursuant to
Section 6(b)(i) through (iii) above, Corporation shall advance to Director,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Director for such expenses.
(b) Director agrees that Director will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Director in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Director is not entitled, under the provisions of
the Law, the Bylaws, this Agreement or otherwise, to be indemnified by
Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Director if Director (i) commences any action, suit
or proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Director, disclosure of
confidential information in violation of Director's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Director's duty to Corporation or its stockholders.
8. Enforcement.
-----------
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Director to continue as a director of Corporation, and
acknowledges that Director is relying upon this Agreement in continuing in such
capacity.
(b) In the event Director is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Corporation shall reimburse Director for all Director's reasonable
fees and expenses in bringing and pursuing such action.
-5-
<PAGE>
9. Subrogation. In the event of payment under this agreement,
-----------
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
10. Non-Exclusivity of Rights. The rights conferred on Director by this
-------------------------
Agreement shall not be exclusive of any other right which Director may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
11. Survival of Rights. The rights conferred on Director by this
------------------
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of Corporation or such other entity and shall inure to
the benefit of Director's heirs, executors and administrators.
12. Separability. Each of the provisions of this Agreement is a separate
------------
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or the obligation of
the Corporation to indemnify the Director to the full extent provided by the
Bylaws or the Law, and the affected provision shall be construed and enforced so
as to effectuate the parties' intent to the maximum extent possible.
13. Governing Law. This Agreement shall be interpreted and enforced in
-------------
accordance with the internal laws of the State of Delaware.
14. Binding Effect. This Agreement shall be binding upon Director and
--------------
upon Corporation, its successors and assigns, and shall inure to the benefit of
Director, his heirs, personal representatives and assigns and to the benefit of
Corporation, its successors and assigns.
15. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
16. Entire Agreement. This Agreement represents the entire agreement
----------------
between the parties hereto and there are no other agreements, contracts or
understandings between the parties hereto with respect to the subject matter of
this Agreement, except as specifically referred to herein. This Agreement
supersedes any and all agreements regarding indemnification heretofore entered
into by the parties.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
CORPORATION: CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
By:_______________________________
(Signature)
__________________________________
Print Name and Title
DIRECTOR:
__________________________________
(Signature)
__________________________________
Print Name
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE>
EXHIBIT 10.50
INDEMNIFICATION AGREEMENT
-------------------------
THIS AGREEMENT is made and entered into this _______ day of
____________________, 1997 between Corsair Communications, Inc., a Delaware
corporation ("Corporation"), and ____________________ ("Officer").
RECITALS:
A. Officer, an officer (but not currently a member of the Board of
Directors) of Corporation, performs a valuable service in such capacity for
Corporation; and
B. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing, for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and
C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and its officers with respect to indemnification
of officers; and
D. In accordance with the authorization as provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded officers by such D & O
Insurance, if any, and by statutory and bylaw indemnification provisions; and
F. In order to induce Officer to continue to serve as an officer of
Corporation, Corporation has determined and agreed to enter into this contract
with Officer;
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
1. Indemnity of Officer. Corporation hereby agrees to hold harmless and
--------------------
indemnify Officer to the fullest extent authorized or permitted by the
provisions of the Law, as it may be amended from time to time.
2. Additional Indemnity. Subject only to the exclusions set forth in
--------------------
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Officer:
<PAGE>
(a) against any and all legal expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Officer in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Officer is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Officer is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Officer by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
3. Limitations on Additional Indemnity. No indemnity pursuant to Section
-----------------------------------
2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which Officer is indemnified
pursuant to Section 1 hereof or reimbursed pursuant to any D & O Insurance
purchased and maintained by Corporation;
(b) in respect of remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Officer for an accounting of profits made from the purchase or
sale by Officer of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Officer's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest, or to constitute willful
misconduct;
(e) on account of Officer's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Officer or any of Officer's affiliates against Corporation
or any officer, director or stockholder of Corporation unless such action, suit
or proceeding was authorized in the specific case by action of the Board of
Directors of Corporation;
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<PAGE>
(g) on account of any action, suit or proceeding to the extent that
Officer is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Officer have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
4. Contribution. If the indemnification provided in Sections 1 and 2 is
------------
unavailable and may not be paid to Officer for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Officer (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Officer in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Officer on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Officer on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Officer on the other
hand shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent the circumstances resulting in such expenses, judgments, fines or
settlement amounts. Corporation agrees that it would not be just and equitable
if contribution pursuant to this Section 4 were determined by pro rata
allocation or any other method of allocation which does not take account of the
foregoing equitable considerations.
5. Continuation of Obligations.
---------------------------
(a) All agreements and obligations of Corporation contained herein
shall continue during the period Officer is a director, officer, employee or
agent of Corporation (or is or was serving at the request of Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise) and shall continue
thereafter so long as Officer shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Officer was serving
Corporation or such other entity in any capacity referred to herein.
(b) For six years after the effective time of (i) the acquisition of
the Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation) or (ii) the sale of all or substantially all of the assets of
the Corporation by means of any
-3-
<PAGE>
transaction or series of related transactions, the Corporation (to the extent
the Corporation is not the continuing or surviving person of such
reorganization, merger, consolidation or sale) shall cause the acquiring,
continuing or surviving corporation to (x) indemnify and hold harmless Officer
in accordance with Section 1 and 2 hereof and (y) use its best efforts to
provide officers' liability insurance on terms substantially similar to the
terms of the Corporation's then current officers' liability insurance policy in
effect on the dated thereof, or any other arrangement reasonably satisfactory to
Officer, in respect of acts or omissions occurring on or prior to the effective
time of the reorganization, merger, consolidation or sale.
6. Notification and Defense of Claim. Not later than thirty (30) days
---------------------------------
after receipt by Officer of notice of the commencement of any action, suit or
proceeding, Officer will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Officer otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Officer notifies
Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Officer. After notice from Corporation to Officer of its
election so as to assume the defense thereof, Corporation will not be liable to
Officer under this Agreement for any legal or other expenses subsequently
incurred by Officer in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Officer shall have the
right to employ his or her own counsel in such action, suit or proceeding but
the fees and expenses of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Officer unless
(i) the employment of counsel by Officer has been authorized by Corporation,
(ii) Officer shall have reasonably concluded that there may be a conflict of
interest between Corporation and Officer in the conduct of the defense of such
action or (iii) Corporation shall not in fact have employed counsel to assume
the defense of such action, in each of which cases the fees and expenses of
Officer's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of Corporation or as to which Officer shall have made
the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Officer under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. Corporation shall be permitted to settle any
action except that it shall not settle any action or claim in any manner which
would impose any penalty, out-of-pocket liability, or limitation on Officer
without Officer's written consent. Neither
-4-
<PAGE>
Corporation nor Officer will unreasonably withhold its or his or her consent to
any proposed settlement.
7. Advancement and Repayment of Expenses.
-------------------------------------
(a) In the event that Officer employs his or her own counsel pursuant
to Section 6(b)(i) through (iii) above, Corporation shall advance to Officer,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Officer for such expenses.
(b) Officer agrees that Officer will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Officer in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Officer is not entitled, under the provisions of the
Law, the Bylaws, this Agreement or otherwise, to be indemnified by Corporation
for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Officer if Officer (i) commences any action, suit or
proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Officer, disclosure of
confidential information in violation of Officer's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Officer's duty to Corporation or its stockholders.
8. Enforcement.
-----------
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Officer to continue as an officer of Corporation, and
acknowledges that Officer is relying upon this Agreement in continuing in such
capacity.
(b) In the event Officer is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, Corporation shall reimburse Officer for all of Officer's reasonable fees
and expenses in bringing and pursuing such action.
9. Subrogation. In the event of payment under this agreement,
-----------
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
-5-
<PAGE>
10. Non-Exclusivity of Rights. The rights conferred on Officer by this
-------------------------
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding office.
11. Survival of Rights. The rights conferred on Officer by this Agreement
------------------
shall continue after Officer has ceased to be a director, officer, employee or
other agent of Corporation or such other entity and shall inure to the benefit
of Officer's heirs, executors and administrators.
12. Separability. Each of the provisions of this Agreement is a separate
------------
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or the obligation of
Corporation to indemnify Officer to the full extent provided by the Bylaws or
the Law, and the affected provision shall be construed and enforced so as to
effectuate the parties' intent to the maximum extent possible.
13. Governing Law. This Agreement shall be interpreted and enforced in
-------------
accordance with the internal laws of the State of Delaware.
14. Binding Effect. This Agreement shall be binding upon Officer and upon
--------------
Corporation, its successors and assigns, and shall inure to the benefit of
Officer, his or her heirs, personal representatives and assigns and to the
benefit of Corporation, its successors and assigns.
15. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
CORPORATION: CORSAIR COMMUNICATIONS, INC.,
a Delaware corporation
By:_______________________________
(Signature)
__________________________________
Print Name and Title
OFFICER:
__________________________________
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE>
EXHIBIT 10.51
-------------
CONSENT TO AUTOMATIC CONVERSION
Corsair Communications, Inc.
3408 Hillview Avenue
Palo Alto, California 94304
Attention: Mary Ann Byrnes
Dear Ms. Byrnes:
In consideration of the proposed initial underwritten public offering of
Common Stock of Corsair Communications, Inc., a Delaware corporation (the
"Company"), expected to be consummated on or prior to the end of August 1997
(the "Public Offering"), and, subject to and conditioned upon the execution of
similar letter agreements by (i) holders of a majority of the total number of
outstanding shares of Series A Preferred Stock and Series B Preferred Stock
voting together as a single class as required by Article IV, Part B, Section
3(a)(ii) of the Restated Certificate of Incorporation of the Company, as it may
be amended from time to time (the "Restated Certificate"), and (ii) holders of a
majority of the total number of outstanding shares of Series C Preferred Stock
and Series D Preferred Stock voting together as a single class as required by
Article IV, Part B, Section 3(a)(iii) of the Restated Certificate and subject to
the following sentence, the undersigned hereby consents to and agrees that all
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock of the Company shall be
automatically converted into shares of Common Stock of the Company in accordance
with the terms of the Restated Certificate. The undersigned hereby agrees that
such automatic conversion shall be effective immediately prior to the
consummation of the Public Offering.
Dated: ______________, 1997
Very truly yours,
________________________________________
Name of Stockholder
By:_____________________________________
Name
_____________________________________
Title
<PAGE>
EXHIBIT 10.52
WAIVER OF REGISTRATION RIGHTS
Corsair Communications, Inc.
3408 Hillview Avenue
Palo Alto, CA 94304
Attention: Mary Ann Byrnes
Re: Public Offering of Common Stock of Corsair Communications, Inc.
---------------------------------------------------------------
Dear Ms. Byrnes:
In consideration of the proposed initial underwritten public offering of
Common Stock of Corsair Communications, Inc., a Delaware corporation (the
"Company"), expected to be consummated on or prior to the end of August 1997
(the "Public Offering"), and, subject to and conditioned upon the execution of
similar letter agreements by persons holding at least a majority of the
outstanding number of shares of the Registrable Securities (as defined in the
Amended and Restated Investors' Rights Agreement dated October 30, 1996, as
amended, between the Company and the parties thereto (the "Investors' Rights
Agreement")) the undersigned hereby waives (i) its rights under the Investors'
Rights Agreement to register and sell its Registrable Securities, as defined
above, as part of the Public Offering, (ii) its rights of first offer under the
Investors' Rights Agreement to the shares offered in the Public Offering and all
subsequent offerings of the Company's capital stock, and (iii) the requirement
to notify the undersigned of the Public Offering as set forth in the Investors'
Rights Agreement.
Dated: _____________, 1997 Very truly yours,
____________________________________________
INVESTOR'S NAME AS APPEARS
ON STOCK BOOK
By:_________________________________________
Name
__________________________________________
Title
<PAGE>
EXHIBIT 11.1
CORSAIR COMMUNICATIONS, INC.
STATEMENT OF COMPUTATION OF PRO FORMA PER SHARE AMOUNTS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------
1996 1996 1997
------------ ------- -------
<S> <C> <C> <C>
Net loss........................................ $(12,761) $(2,386) $(3,140)
======== ======= =======
Weighted Average number of common stock
outstanding.................................... 105 52 781
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 1,704 3,277
-------- ------- -------
Shares used in pro forma per share
calculation.................................. 8,870 8,497 10,799
======== ======= =======
Pro forma net loss per share.................... $ (1.44) $ (0.28) $ (0.29)
======== ======= =======
</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 May 27, 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
June 4, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 17,052 9,413
<SECURITIES> 2,452 6,953
<RECEIVABLES> 3,260 7,601
<ALLOWANCES> 404 404
<INVENTORY> 9,298 11,445
<CURRENT-ASSETS> 32,188 35,807
<PP&E> 2,424 2,375
<DEPRECIATION> 1,454 1,770
<TOTAL-ASSETS> 34,911 38,595
<CURRENT-LIABILITIES> 12,506 16,454
<BONDS> 0 0
0 0
9 9
<COMMON> 1 2
<OTHER-SE> 18,001 18,238
<TOTAL-LIABILITY-AND-EQUITY> 34,911 38,595
<SALES> 18,178 8,167
<TOTAL-REVENUES> 19,606 9,096
<CGS> 17,235 7,480
<TOTAL-COSTS> 19,197 8,309
<OTHER-EXPENSES> 12,948 3,921
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 220 3
<INCOME-PRETAX> (12,759) (3,137)
<INCOME-TAX> 2 3
<INCOME-CONTINUING> (12,761) (3,140)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,761) (3,140)
<EPS-PRIMARY> (1.44) (.29)
<EPS-DILUTED> 0.00 0.00
</TABLE>
