Revolving Credit and Security Agreement - Com21 Inc. and Comerica Bank-California

REVOLVING CREDIT AND SECURITY AGREEMENT

DATED AS OF DECEMBER 1, 2000

BY AND BETWEEN COM21, INC.

AND

COMERICA BANK-CALIFORNIA

REVOLVING CREDIT AND SECURITY AGREEMENT

THIS REVOLVING CREDIT AND SECURITY AGREEMENT ('Agreement') is made and delivered this 1st day of December, 2000, by and between Com21, Inc., a Delaware corporation ('Borrower'), and COMMERCIA BANK-CALIFORNIA, a California banking corporation ('Bank').

WHEREAS, Borrower desires to obtain certain credit facilities from the Bank, as herein provided, and,

WHEREAS, Bank is willing to provide such credit facilities to and in favor of Borrower, subject to the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, Borrower and Bank agree as follows:

definitions

Defined Terms

'Chattel Paper,' 'Documents,' 'Fixtures,' 'General Intangibles,' 'Goods,' 'Instruments' and 'Inventory' shall have the respective meanings assigned to them in the UCC on the date of this Agreement.

'Account Debtor' shall mean the party who is obligated on or under any Account.

'Account(s)' shall mean 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(s)' shall mean a borrowing requested by Borrower and made by Bank under the Revolving Credit pursuant to Section 2.1 of this Agreement.

'Affiliate' shall mean, when used with respect to any Person, any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person. For purposes of this definition, ' control' (including, with correlative meanings, the terms 'controlled by' and 'under common control with'), with respect to any Person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

'Affiliate Receivables' shall mean, as of any time of determination, any amounts in respect of loans or advances owning to Borrower from any of its Subsidiaries or Affiliates at such time.

'Agreement' shall mean this Revolving Credit and Security Agreement, as it may be amended from time to time.

'Bank Expenses' shall mean 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 or review, or those incurred in any Insolvency Proceeding), whether or not suit is brought.

'Base Rate' shall mean that annual rate of interest designated by Bank as its base rate, which rate may not be the lowest rate of interest charged by Bank to any of its customers, and which rate is changed by Bank from time to time, plus 25/100 percent (0.25%).

'Borrowing Base' shall mean the sum of: (a) Sixty Five percent (65%) of Borrower's Eligible Accounts after deducting therefrom all payments, adjustments and credits applicable thereto; and, (b) all amounts held in the money market account maintained at Bank, account no. 1890-519398 and pledged to Bank by Borrower as Collateral; and (c) the amount, if any, of the advances against Inventory agreed to be made pursuant to any Inventory Rider, or other rider, amendment, or modification to this Agreement, that may now or hereafter be entered into by Bank and Borrower.

'Cash Flow' shall mean, for any applicable period of determination, the sum of the Net Income (as later defined) of such Person (after deduction for income taxes and other taxes of such Person or its subsidiaries, determined by reference to income or profits of such person or its subsidiaries) for such period, plus, to the extent deducted in the computation of such Net Income, the amount of depreciation and amortization expense and the amount of deferred tax liability of such Person for such period, all as determined in accordance with GAAP.

'Cash Flow Coverage Ratio' shall mean the ratio, as of any applicable period of determination, the numerator of which is Net Income plus depreciation plus amortization plus (or minus) the increase (or decrease) in the deferred tax liability minus dividends and S-Draws, if an S-Corp, at the greater of actual draws or net income times the highest prevailing personal tax rate, and the denominator of which is the current portion of long terms debt plus the current portion of capital lease payments for the same period of determination.

'Collateral' shall mean the property described on Exhibit A attached hereto.

'Collateral Documents' shall mean all security agreements, assignments, stock pledge agreements, mortgages, deeds of trust, guarantees and other collateral documents executed by Borrower, or any other Person(s), and delivered to Bank prior to or as of the date hereof, or from time to time subsequent hereto, in connection with this Agreement, or any of the Loan Documents, or the Indebtedness, to secure the payment and performance of the Indebtedness, as such collateral documents may be amended from time to time, including, without limitation, those Collateral Documents identified in this Agreement.

'Current Assets' shall mean, in respect of a Person and as of any applicable date of determination, all (a) unrestricted cash, marketable securities, or certificates of deposit, (b) non-affiliated accounts receivable, (c) United States government securities, (d) claims against the United States government, and (e) inventories (held for sale in the ordinary course of business) of such Person.

'Current Liabilities' shall mean, in respect of a Person and as of any applicable date of determination, (a) all liabilities of such Person that should be classified as current in accordance with GAAP, including, without limitation, any portion of the principal of the Indebtedness under this Agreement classified as current, plus (b) to the extent not otherwise included, all liabilities of the Borrower to any of its Affiliates (including officers, directors, shareholders, subsidiaries and commonly held companies) whether or not classified as current in accordance with GAAP.

'Current Ratio' shall mean, in respect of a Person and as of any applicable date of determination, Current Assets divided by Current Liabilities.

'Debt' shall mean, as of any applicable date of determination, all items of in indebtedness, obligation or liability of a Person, whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, joint or several, that should be classified as liabilities in accordance with GAAP. In the case of Borrower, the term 'Debt' shall include, without limitation, the Indebtedness.

'Debt-to-Worth Ratio' shall mean, in respect of a Person and as of any applicable date of determination, the ratio of (a) the total Debt of such Person at such time, to (b) the Tangible Effective Net Worth of such Person at such time.

'Default' shall mean any condition or event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

'Eligible Account' shall mean an Account (but shall not include interest and service charges thereon) arising in the ordinary course of Borrower's business which meets each of the following requirements:

it is not owning more than Ninety (90) days after the date of the original invoice or other writing evidencing such Account;

it is not owing by an Account Debtor who has failed to pay twenty-five percent (25%) or more of the aggregate amount of its Accounts owning to Borrower with thirty (30) days after the date of the respective invoices or other writings evidencing such Accounts;

it arises from the sale or lease of good and such goods have been shipped or delivered to the Account Debtor under such Account; or it arises from services rendered and such services have been performed;

it is evidenced by an invoice, dated not later than the date of shipment or performance, rendered to such Account Debtor or some other evidence of billing acceptable to Bank;

it is not evidenced by any note, trade acceptance, draft or other negotiable instrument or by any Chattel Paper, unless such note or other document or instrument previously has been endorsed and delivered by Borrower (or the relevant Subsidiary) to Bank;

it is a valid, legally enforceable obligation of the Account Debtor thereunder, and is not subject to any offset, counterclaim or other defense on the part of such Account Debtor or to any claim on the part of such Account Debtor denying liability thereunder in whole or in part;

it is not subject to any sale of accounts, any rights of offset, assignment, lien or security interest whatsoever other than to Bank;

it is not owning by a Subsidiary or Affiliate of Borrower, nor by an Account Debtor which (i) does not maintain its chief executive office in the United States of America except for Eligible Foreign Accounts; (ii) is not organized under the laws of the United States of America, or any state thereof, or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality or other instrumentality thereof;

it is not an account owing by the United States of America or any state or political subdivision thereof, or by any department, agency, public body corporate or other instrumentality of any of the foregoing, unless all necessary steps are taken to comply with the Federal Assignment of Claims Act of 1940, as amended, or with any comparable state law, if applicable, and all other necessary steps are taken to perfect Bank's security interest in such Account;

it is not owning by an Account Debtor for which Borrower or any of its Subsidiaries has received a notice of (i) the death of the Account Debtor or any partner of the Account debtor, (ii) the dissolution, liquidation, termination of existence, insolvency or business failure of the Account Debtor, (iii) the appointment of a receiver for any part of the property of the Account Debtor, or (iv) an assignment for the benefit of creditors, the filing of a petition in bankruptcy, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against the Account Debtor;

it is not an account billed in advance, payable on delivery, for consigned goods, for guaranteed sales, for unbilled sales, for progress billings, payable at a future date in accordance with its terms, subject to a retainage or holdback by the Account Debtor or insured by a surely company;

it is not owing by any Account Debtor whose obligations Bank, acting in its sole discretion, shall have notified Borrower are not deemed to constitute Eligible Accounts;

that portion of Accounts owned by any single Account Debtor, including Subsidiaries and Affiliates, that do not exceed twenty percent (20%) of all Eligible Accounts; except (1) as approved by Bank in writing and (2) with respect to N/A the eligible portion of the Accounts of such Account Debtor shall be that portion that does not exceed fifty percent (50%) of all Eligible Accounts; and

accounts the collection of which Bank reasonably determines to be doubtful.

An Account which is at any time an Eligible Account, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be an Eligible Account.

'Eligible Foreign Accounts' shall mean Accounts with respect to which the account debtor does not have its principal place of business in the United States and that are: (1) covered by credit insurance in form and amount, and by an insurer satisfactory to Bank less the amount of any deductible(s) which may be or become owning thereon; or (2) supported by one or more letters of credit either advised or negotiated through Bank or in favor of Bank as beneficiary, in an amount and of a tenor, and issued by a financial institution, acceptable to Bank; or (3) that Bank approves on a case-by-case basis.

'Environmental Law(s)' shall mean all laws, codes, ordinances, rules, regulations, orders, decrees and directives issued by any federal, state, local, foreign or other governmental or quasi-governmental authority or body (or any agency, instrumentality or political subdivision thereof) pertaining to the environment or to any hazardous materials or wastes, toxic substances, flammable, explosive or radioactive materials, asbestos, and/or other similar materials.

'Equipment' shall mean all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.

'ERISA' shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor act or code.

'Event of Default' shall mean any of those conditions or events listed in Section 9 of this Agreement.

'GAAP' shall mean generally accepted accounting principles consistently applied.

'Indebtedness' shall mean all loans, advances, indebtedness, obligations and liabilities of Borrower to Bank under this Agreement, together with all other indebtedness, obligations and liabilities whatsoever of Borrower to Bank, whether matured or unmatured, liquidated or unliquidated, director or indirect, absolute or contingent, joint or several, due or to become due, now existing or hereafter arising.

'Intellectual Property' shall mean

any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof that is created by Borrower, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held (collectively, the 'Copyrights');

any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;

any and all design rights which may be available to Borrower now or hereafter existing, created, acquired or held;

all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same (collectively, the 'Patents');

any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks (collectively, the 'Trademarks');

right to the proceeds (excluding attorneys' and other professional and expert fees and expenses) arising from any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue on behalf of and collect such damages for said use or infringement of the intellectual property rights identified above;

all licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights;

all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and

all proceeds and proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.

'Letter of Credit' shall mean a letter of credit or similar undertaking issued by Bank pursuant to Section 2.5.

'Loan Documents' shall mean collectively, this Agreement and any other agreement or instrument executed pursuant to or in connection with the Indebtedness, this Agreement or the other Loan Documents, as such documents may be amended from time to time.

'Loans' shall mean, collectively, the Revolving Credit and any loans which Bank in its sole discretion has made or may hereafter make to Borrower, and 'Loan' shall mean any of them.

'Material Adverse Effect' shall mean a material adverse effect upon the financial or other condition of Borrower or any of its Subsidiaries, or upon Borrower's or any of its Subsidiaries' ability to perform their respective obligations under any of the Loan Documents, or upon the enforceability of this Agreement or any of the other Loan Documents.

'Net Income' shall mean the net income (or loss) of a Person for any applicable period of determination, determined in accordance with GAAP, but excluding, in any event:

Any gains or losses on the sale or other disposition, not in the ordinary course of business, of investments or fixed or capital assets, and any taxes on the excluded gains and any tax deductions or credits on account on any excluded losses; and,

In the case of Borrower, net earnings of any Person in which Borrower has an ownership interest, unless such net earning shall have actually been received by Borrower in the form of cash distributions.

'Net Liquidity Ration' shall mean, for any applicable period of determination, a ratio of the sum of (a) unrestricted cash, plus (b) the Borrowing Base, plus (c) the aggregate outstanding balance owed under the Revolving Credit, to the outstanding principal amount of all Indebtedness.

'Permitted Liens' shall mean:

liens, security interests, mortgages and encumbrances in favor of the Bank;

liens for taxes, assessments or other governmental charges incurred in the ordinary course of business and for which no interest, late charge or penalty is attaching or which is being contested in good faith by appropriate proceedings and, if requested by Bank, bonded in an amount and manner satisfactory to Bank;

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, however, that the lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment;

liens incurred in connection with the extension, renewal, or refinancing of the indebtedness secured by liens of the type described in clauses (a) through (c) above; provided, however, 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;

liens securing capital lease obligations on assets subject to such capital leases;

liens on equipment leased by Borrower pursuant to an operating lease in the ordinary course of business (including proceeds thereof and accessions thereto) incurred solely for the purpose of financing the lease of such equipment (including liens arising from UCC financing statements regarding leases permitted by this Agreement);

liens arising from judgments, decrees, or attachments to the extent and only so long as such judgment, decree, or attachment has not caused or resulted in an Event of Default;

liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

liens consisting of leases or subleases in the ordinary course of Borrower's business not interfering in any material respect with the business of Borrower and any interest or title of a lessor under any lease;

liens, not delinquent, created by statute in connection with worker's compensation, unemployment insurance, social security and similar statutory obligations;

liens of mechanics, materialmen, carriers, warehousemen or other like statutory or common law liens securing obligations incurred in good faith in the ordinary course of business that are not yet due and payable; and

encumbrances consisting of existing or future zoning restrictions, existing recorded rights-of-way, existing recorded casements, existing recorded private restrictions or existing or future public restrictions on the use of real property, none of which materially impairs the use of such property in the operation of the business for which it is used and none of which is violated in any material respect by any existing or proposed structure or land use.

'Person' or 'person' shall mean any individual, corporation, partnership, joint venture, limited liability company, association, trust, unincorporated association, joint stock company, government, municipality, political subdivision or agency, or other entity.

'Quick Assets' shall mean, as of any applicable date of determination, unrestricted cash, certificates of deposit or marketable securities and net accounts receivable arising from the sale of goods and services, and United States Government securities and/or claims against the United States Government of Borrower and its Subsidiaries.

'Quick Ratio' shall mean, as of any applicable date of determination, Quick Assets divided by Current Liabilities.

'Revolving Credit' shall mean a Loan made, or to be made, under the revolving credit loan facility to be advanced to Borrower by the Bank pursuant to Section 2 of this Agreement.

'Revolving Credit Maturity Date' shall mean November 30, 2001.

'Subordinated Debt' shall mean indebtedness of Borrower to third parties which has been subordinated to all Indebtedness pursuant to a subordination agreement in form and content satisfactory to Bank.

'Subsidiary' shall mean any corporation (whether now existing or hereafter organized or acquired) in which more than fifty percent (50%) of the outstanding securities having ordinary voting power for the election of directors, as of any applicable date of determination, shall be owned directly, or indirectly through one or more Subsidiaries, by Borrower

'Tangible Effective Net Worth' shall mean, with respect to any Person and as of any applicable date of determination, Tangible Net Worth plus Subordinated Debt.

'Tangible Net Worth' shall mean, with respect to any Person and as of any applicable date of determination, the excess of (a) the net book value of all assets of such Person (excluding Affiliate Receivables, patent rights, trademarks, trade names, franchises, copyrights, licenses, goodwill, and all other intangible assets of such Person), after all appropriate deductions in accordance with GAAP (including, without limitation, reserves for doubtful receivables, obsolescence, depreciation and amortization), over (b) all Debt of such Person at such time.

'UCC' shall mean the California Uniform Commercial Code.

'Working Capital' shall mean, as of any applicable date of determination, Current Assets less Current Liabilities.

Accounting Terms

Singular and Plural

revolving credit and LETTERS of credit

Revolving Credit Commitment

20,000,000.00

minus

provided

however

Accrual and Payment of Interest and Maturity

January 1, 2001

month

Requests for Advances

each such Request shall set forth the proposed amount and date of such Advance, which date must be a Business Day;

each such Request shall be delivered to Bank by 3:00 p.m. California time on the proposed date of Advance; and

a Request, once delivered to Bank, shall not be revocable by Borrower.

Bank may make Advances under the Revolving Credit upon the telephonic or facsimile request of Borrower, which Borrower shall confirm in writing by delivery to Bank, on or before 11:00 a.m. on the next Business Day following such Advance with a duly executed Request and Borrower shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of reliance on such telephonic or facsimile request.

Disbursement of Advances

Letters of Credit

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 the aggregate outstanding face amount not to exceed (i) the lesser of the Revolving Credit Commitment or the Borrowing Base, whichever is less, minus (ii) the then outstanding principal balance of the Advances, minus (iii) the maximum Foreign Exchange Reserve Percentage of One Million Dollars ($1,000,000); provided that the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) shall not in any case exceed Ten Million and 00/100 Dollars ($10,000,000.00). Each Letter of Credit shall have an expiration date no later than the Revolving Credit Maturity Date. All 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 standard Letter or Credit Application and Agreement.

The obligation of Borrower to immediately reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional and irrevocable, in accordance with the terms of this Agreement and such Letters of Credit under all circumstances whatsoever. Borrower shall indemnify, defend, protect 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.

Overadvances

Fees

Borrower shall pay to Bank a Facility Fee for the period from the date of this Agreement to and including the Revolving Credit Maturity Date equal to three eighths percent (0.375%) per annum (based on a year of 360 days from the actual number of days elapsed) time the average daily excess of the Revolving Credit Commitment over the aggregate unpaid principal balance of the Revolving Credit. Such Facility Fee shall be computed without regard to any Default and shall be paid within ten (10) days.

Bank's customary and out-of-pocket expenses for Bank's audits of Borrower's accounts, for each appraisal of Collateral and financial analysis and examination of Borrower performed from time to time by Bank or its agents and all filing fees; and,

Upon demand from Bank, including, without limitation, upon the date hereof, all Bank Expenses incurred through the date hereof, including reasonable attorney's fees and expenses and, after the date hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as and when they become due.

payments, recoveries and collections

Interest Computations

Bank's Books and Records

Payments on Non-Business Day

Payment Procedures

Default Rate

Receipt of Payments by Bank

creation of security interest

Grant of Security Interest

Delivery of additional Documentation Required

Rights to Inspect

conditions precedent

In addition to any other terms and conditions set forth in this Agreement, the obligation of Bank to make the initial Loan under or pursuant to this Agreement shall be further subject to Bank's receipt of the following, all in form and substance satisfactory to Bank:

the Loan Documents;

evidence of the authorization of the Loan Documents and incumbency of Borrower's officers; and

such additional documents or certificates as may be required by Bank and/or required under the terms of any and every Collateral Document.

Conditions Precedent to Disbursement of All Loans

and Warranties

No Default or Material Adverse Change

representations and warranties

Borrower represents and warrants as follows:

Authority

California

Due Authorization; Noncontravention

Title to Property

Bona Fide Accounts

Merchantable Inventory

Intellectual Property

Name; Location of Chief Executive Office

750 Tasman Drive, Milpitas, California 95035

Solvency

No Material Adverse Change in Financial Statement

Subsidiaries

Taxes

No Defaults

Actions, Suits, Litigation or Proceedings

Compliance with Laws

Consents, Approvals and Filings, Etc

Environmental Representations

To the best of Borrower's knowledge, there are no conditions existing currently which could subject Borrower or any of its Subsidiaries to damages, penalties, injunctive relief or clean-up costs under any applicable Environmental Law(s), or which require, or are likely to require, clean-up, removal, remedial action or other response pursuant to any applicable environmental Law(s) by Borrower or any of its Subsidiaries, and which, in any case, either singularly or in aggregate, could have a Material Adverse Effect upon the business, operations, conditions (financial or otherwise), performance or operations of Borrower or any of its Subsidiaries.

Neither Borrower nor any of its Subsidiaries is subject to any judgment, decree, order or citation related to or arising out of any applicable Environmental Law(s) which either singularly or in the aggregate, could have a Material Adverse Effect upon the business, operations, conditions (financial or otherwise), performance or operations of Borrower or any of its Subsidiaries; and, to the best of Borrower's knowledge, neither Borrower nor any of its subsidiaries has been named or listed as a potentially responsible party by any governmental body or agency in any matter arising under any applicable Environmental Law(s).

Borrower and each of its Subsidiaries have all material permits, licenses and approvals required under applicable Environmental Laws, where the failure to so obtain or maintain any such permits, licenses, or approvals could have a Material Adverse Effect upon the business, operations, conditions (financial or otherwise), performance or properties of Borrower or any of its Subsidiaries.

Warranties, Representations and Agreements

Accuracy of Information

affirmative covenants

Borrower covenants and agrees that, so long as Bank is committed to make any Loan(s) under this Agreement, and thereafter, so long as any Indebtedness remains outstanding under this Agreement, it will, and, as applicable, it will cause its Subsidiaries to:

Preservation of Existence, Etc

Keeping of Books

Reporting Requirements

as soon as possible, and in any event within three (3) calendar days after becoming aware of the occurrence or existence of each Default or Event of Default hereunder or any material adverse change in the financial condition of Borrower, any of its Subsidiaries or any Guarantor, a written statement of the chief financial officers of Borrower (or in his or her absence, a reasonable senior officer of Borrower), setting forth details of such Default, Event of Default or change, and the action which Borrower has taken, or has caused to be taken, or proposes to take, or to cause to be taken, with respect thereto;

as soon as available, and in any event within ninety (90) days after and as of the end of each fiscal year of Borrower, all reports on Form 10-K filed with the Securities and Exchange Commission, a balance sheet and statement of profit and loss and surplus reconciliation and a statement of cash flows of Borrower on a consolidated basis, for and as of such fiscal year then ending, in each case, prepared on an audited basis by independent certified public accountants satisfactory to Bank, and certified by the chief financial officer of Borrower as to consistency with prior financial reports and accounting periods, accuracy, and fairness of presentation;

as soon as available, and in any event within forty-five (45) days after and as of the end of each calendar quarter, including the last calendar quarter of each of Borrower's fiscal years, all reports on Form 10-Q filed with the Securities and Exchange Commission, a balance sheet and statement of profit and loss and surplus reconciliation and a statement of cash flows of Borrower on a consolidated basis for and as of the month then ending and for and as of that portion of the fiscal year of Borrower then ending, in each case, certified by the chief financial officer of Borrower as to consistency with prior financial reports and accounting periods, accuracy, and fairness of presentation;

promptly furnish to Bank upon becoming available, copies of all financial statements, reports, notices, proxy statements and other communications sent by the Borrower or any of its Subsidiaries to their stockholders, and all regular and periodic reports filed by the Borrower or any of its Subsidiaries with any securities exchange or the Securities and Exchange Commission, the Delaware Secretary of State, the Delaware Department of Corporations, or any other governmental authorities;

as soon as available, and in any event within thirty (30) days after and as of the end of each calendar month, including the last calendar month of each of Borrower's fiscal years, a balance sheet and statement of profit and loss and surplus reconciliation and a statement of cash flows of Borrower for and as of the month then ending and for and as of that portion of the fiscal year of Borrower then ending, in each case, certified by the chief financial officer of Borrower as to consistency with prior financial reports and accounting periods, accuracy, and fairness of presentation;

as soon as available, and in any event within fifteen (15) days after and as of the end of each calendar month when total Indebtedness to Bank exceeds $10,000,000, otherwise within forty five 45 days of each fiscal quarter end, agings and reports of Borrower's accounts receivable and accounts payable, in each case, in form and detail satisfactory to Bank; and as soon as available;

within twenty (20) days after the last day of each month when total Indebtedness to Bank exceeds $10,000,000, otherwise within forty five days of each fiscal quarter end, Borrower shall deliver to Bank a Borrowing Base Certificate in substantially the form and content of attached Exhibit B, together with aged listings of accounts receivable and accounts payable;

simultaneously with the financial statements to be delivered to Bank pursuant to Sections 7.3(b) and (c) above, a Compliance Certificate in substantially the form of attached Exhibit C, dated as of the end of such month or year, as the case may be; and

promptly, and in form and detail to be satisfactory to the Bank, such other information as Bank may reasonably request from time to time.

Financial Covenants

Tangible Effective Net Worth

Period	Amount
From the date of this Agreement through November 30, 2001	$85,000,000.00*

* To increase by 505 of new equity and 75% of net income after tax for each fiscal quarter.

Debt-to-Worth Ratio

Period	Amount
From the date of this Agreement through November 30, 2001	0.75:1:00

Profitability

Period	Amount
From the date of this Agreement through March 31, 2001	($15,000,000.00)
From April 1, 2001 through November 30, 2001	$1.00

Net Liquidity Ratio

Inspections

Indemnification

Governmental and Other Approvals

Insurance

Environmental Covenants

Promptly notify Bank, in writing, as soon as Borrower becomes aware of any condition or circumstance which makes any of the environmental representations or warranties set forth in this Agreement incomplete, incorrect or inaccurate in any material respect as of any date; and promptly provide to Bank, immediately upon receive thereof, copies of any material correspondence, notice, pleading, citation, indictment, complaint, order, decree, or other document from any source asserting or alleging a violation of any Environmental Laws by either Borrower, or any of its Subsidiaries, or of any circumstance or condition which requires or may require, a financial contribution by Borrower, or any of its Subsidiaries, or a clean-up, removal, remedial action or other response by or on behalf of Borrower, or any of its Subsidiaries, under applicable Environmental Law(s), or which seeks damages or civil, criminal, or punitive penalties from Borrower, or any of its Subsidiaries, or any violation or alleged violation of Environmental Laws(s).

Principal Depository

Inventory; Location

N/A

Inventory; Returns

N/A

NEGATIVE COVENANTS

Borrower covenants and agrees that, so long as Bank is committed to make any Loan under this Agreement, and thereafter, so long as any Indebtedness remains outstanding under this Agreement or any Note, it will not, and it will not allow its Subsidiaries to, without the prior written consent of Bank:

Capital Structure, Business Objects or Purpose

Mergers or Dispositions

Guaranties

guaranties in favor of and satisfactory to Bank;

endorsements for deposit or collection in the ordinary course of business;

guaranties of indebtedness of Subsidiaries, provided, however, that Bank consents in writing prior to such guaranty; and

guaranties permitted under clause 8.8(g).

Indebtedness

indebtedness and other Debt from time to time outstanding and owing to Bank;

current unsecured trade, utility or non-extraordinary accounts payable arising in the ordinary course of business;

purchase money indebtedness incurred for the purpose of purchasing or acquiring fixed assets, so long as the amount of such purchase money indebtedness incurred by Borrower and its Subsidiaries does not exceed N/A Dollars ($ N/A ), in aggregate, for any fiscal year of Borrower;

indebtedness with respect to capital lease obligations or indebtedness secured by a lien described in clause (c) of the defined term 'Permitted Liens;' provided, however, that such indebtedness does not exceed the lesser of the cost or fair market value of the equipment financed with such Indebtedness and provided further that such Indebtedness does not exceed N/A Dollars ($ N/A ) in the aggregate during any given year; and

Subordinated Debt.

Encumbrances

Acquisitions

Dividends

Investments

Borrower's current ownership interests in those Subsidiaries of Borrower identified on Schedule 1 attached hereto;

any investment in (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;

any investment permitted by Borrower's investment policy, as amended from time to time, provided that such investment policy and any such amendment thereto has been approved in writing by Bank;

extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business;

investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business;

investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations or, and other disputes with, customers or suppliers arising in the ordinary course of business;

investments consisting of (i) compensation of employees, officers and directors of Borrower so long as the Board of Directors of Borrower determines that such compensation is in the best interests of Borrower; (ii) travel advances, employee relocation loans and other employee loans and advances in the ordinary course of business (including guaranties of relocation loans made to employees) in the aggregate outstanding amount not to exceed One Hundred Thousand Dollars ($100,000; (iii) loans to employees, officers, or directors relating to the purchase of equity securities of Borrower; and (iv) other loans to officers and employees approved by the Board of Directors that, together with the relocation loans and guaranties of relocation loans described in clause (ii) hereof, do not in the aggregate exceed N/A Dollars ($_______); and

investments pursuant to or arising under currency agreements or interest rate agreements entered into in the ordinary course of business.

Transactions with Affiliates

Prepayment of Indebtedness

Pension Plans

Subordinate Indebtedness

No Further Negative Pledges

Accounts Receivable

Capital Expenditures

N/A

Inventory

EVENTS OF DEFAULTS

Events of Default

upon non-payment of any principal, interest or other sums due to Bank under this Agreement or any other agreement or if any guarantor shall fail to pay, when due, any indebtedness, obligation or liability whatsoever of any such guarantor to Bank;

any default in the observance or performance or any of the conditions, covenants or agreements of Borrower set forth in Sections 6, 7 or 8 of this Agreement;

default in the observance or performance of any of the other conditions, covenants or agreements of Borrower set forth in this Agreement (other than as provided in (a) or (b) above), and continuance thereof for a period of thirty (30) days;

any representation or warranty made by Borrower, or by any other Person (other than Bank), herein or in any other Loan Document shall be untrue or incorrect in any material respect;

any default or event of default, as the case may be, in the observance or performance or any of the conditions, covenants or agreements of Borrower or any other Person (excluding Bank) set forth in any of the Collateral Documents, or in any of the other Loan Documents, and continuation thereof beyond any applicable period of grace or cure provided with respect thereto;

any default of Borrower, any guarantor, or any of their respective Subsidiaries, in the payment of any Debt (other than Debt owing to Bank), or in the observance or performance of any conditions, covenants or agreements related or given with respect thereto or any other agreement, the failure to perform under which could have a Material Adverse Effect and, in each such case, continuation thereof beyond any applicable grace or cure period;

the rendering of one or more judgments or decrees for the payment of money in excess of the sum of N/A Dollars ($______), in the aggregate, against Borrower, any guarantor, or any of their respective Subsidiaries, and such judgment(s) or decree(s) shall remain unvacated, unbonded or unstayed, by appeal or otherwise, for a period of thirty (30) days after the date of entry;

if there shall be any change in the management, ownership or control of Borrower, whether by reason of incapacity, death, resignation, termination or otherwise, which, in Bank's sole judgment, shall have a Material Adverse Effect upon the future prospects for the successful operation by Borrower, of its businesses as conducted before such change, or its ability to pay and perform its liabilities and obligations under this Agreement, the Indebtedness, or the Loan Documents;

the failure by Borrower, any guarantor, or any of their respective Subsidiaries, to meet the minimum funding requirements under ERISA with respect to any Pension Plan established or maintained by it; the occurrence of any ' reportable event', as defined in ERISA, which could constitute grounds for termination by the PBGC of any Pension Plan or for the appointment by the appropriate United States District Court of a trustee to administer such Pension Plan, and such reportable event is not corrected and such determination is not revoked within thirty (30) days after notice thereof has been given to the plan administrator or Borrower, any such Guarantor, or the respective Subsidiary(ies), as the case may be; or the institution of any proceedings by the PBGC to terminate any such Pension Plan or to appoint a trustee by the appropriate United States District Court to administer any such Pension Plan;

if Borrower, any guarantor, or any of their respective Subsidiaries, becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they mature, or applies for, consents to, or acquiesces in the appointment of a trustee, receiver, liquidator, conservator or other custodian for Borrower, any guarantor, or any such Subsidiary, or a substantial part of their respective property, or makes a general assignment for the benefit of creditors; or files a voluntary petition in bankruptcy or in the absence of such filing application, consent or acquiescence, a trustee, receiver, liquidator, conservator or other custodian is appointed for Borrower, any guarantor, or any of their respective Subsidiaries, or for a substantial part of their respective property, and the same is not discharged within thirty (30) days; or any bankruptcy, reorganization, debt arrangement, or other proceedings under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is instituted by or against Borrower, any guarantor, or any of their respective Subsidiary, the same is consented to or acquiesced in by Borrower, any guarantor, or any such Subsidiary, as the case may be, or otherwise remains undismissed for thirty (30) days; or any warrant of attachment is issued against any substantial part of the property of Borrower, any guarantor or any of their respective Subsidiaries, which is not released within thirty (30) days of service thereof,

if any Collateral Document shall be terminated, revoked, or otherwise rendered void or unenforceable, in any case, without Bank's prior written consent;

if there occurs: (i) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or (ii) a material impairment of the prospect of repayment of any portion of the Indebtedness; or (iii) a material impairment of the value of priority of Bank's security interests in the Collateral;

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 lien or encumbrance upon any material portion of Borrower's assets, or if a notice or 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 credit extensions will be required to be made during such cure period); or

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.

BANK'S RIGHTS AND REMEDIES

Rights and Remedies

declare all Indebtedness, whether evidence 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 9.1(j), all Indebtedness shall become immediately due and payable without any action by Bank);

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;

terminate this Agreement as to any future liability or obligation of Bank, but without affecting Bank's rights and security interests in the Collateral, and the Indebtedness of Borrower to Bank;

demand that Borrower (i) deposit cash with Bank in an amount equal to the amount of any Letters of Credit remaining undrawn, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letters of Credit fees scheduled to be paid or payable over the remaining term of the Letters of Credit.

settle or adjust disputes and claims directly with Account Debtors for amounts, upon terms and in whatever order that Bank reasonably considers advisable;

without notice to or demand upon Borrower or any guarantor, 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 premises, Borrower hereby grants Bank a license to enter 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;

without notice to Borrower set off and apply to the Indebtedness 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;

ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral;

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 the proceeds thereof to the Indebtedness in whatever manner or order Bank deems appropriate; and

credit bid and purchase at any public sale, or at any private sale as permitted by law.

Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower. Without limiting Bank'' rights under any security interest, Bank is hereby granted a license or other right to use, without charge, Borrower's labels, patents, copyrights, rights of use or any name, trade secrets, trade names, trademarks 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 Borrower's rights under all licenses and all franchise agreement shall inure to Bank's benefit, and Bank shall have the right and power to enter into sublicense agreements with respect to all such rights with third parties on terms acceptable to Bank. Borrower shall pay all Bank Expenses incurred in connection with Bank's enforcement and exercise of any of its rights and remedies as herein provided, whether or not suit is commenced by Bank.

Power of Attorney

Accounts Collection

Bank Expenses

Bank's Liability for Collateral

Waiver of Certain Laws

Waiver of Defaults

Receiver

Remedies Cumulative

Demand; Protest

MISCELLANEOUS

Loans to Borrower

Accounting Principles

Audits of Collateral; Fees

Taxes and Fees

Governing Law

Costs and Expenses

Notices

Further Action

Successors and Assigns; Participation

Indulgence

Amendment and Waiver

Severability

Headings and Construction of Terms

Independence of Covenants

Reliance and Survival of Various Provisions

Effective Upon Execution

Complete Agreement; Conflicts

Confidentiality

WAIVER OF JURY TRIAL

Counterparts

WITNESS the due execution hereof as of the day and year first above written.

BANK: BORROWER:

COMERICA BANK-CALIFORNIA COM21, INC.

By: By:

Its: Its:

Address: 333 West Santa Clara Street Address: 750 Tasman Drive, Milpitas, California 95035

Attn: Attn:

Telefax No.: 650-556-5889 Telefax No.:

EXHIBIT A

TO REVOLVING CREDIT AND SECURITY AGREEMENT

COLLATERAL DESCRIPTION

As collateral securing all present and future obligations of Borrower to Bank, Borrower hereby grants to Bank a security interest in the following, whether now owned or hereafter acquired:

(a) all accounts, contract rights, instruments, documents, chattel paper, general intangibles, returned and repossessed goods and all rights as a seller of goods; all collateral securing any of the foregoing; all deposit accounts, special and general, whether on deposit with Secured Party or others;

(b) all inventory wherever located, all present and future claims against any supplier of any of the foregoing, including claims for defective goods or overpayments to or undershipments by suppliers; all proceeds arising from the lease or rental of any of the foregoing;

(d) all warranty and other claims against any vendor or lessor of any of the foregoing;

(e) all investment property; and

(f) all cash and non-cash proceeds of any of the foregoing, in whatever form (including proceeds in the form of inventory, equipment or any other form of personal property), including proceeds of proceeds.

EXHIBIT B

BORROWING BASE CERTIFICATE

EXHIBIT C

COMPLIANCE CERTIFICATE

TO: COMERICA BANK-CALIFORNIA

FROM: COM21, INC.

The undersigned authorized office of COM21, INC. hereby certifies that in accordance with the terms and conditions of the Revolving Credit and Security Agreement between Borrower and 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 Accepting Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes.

Please indicate compliance status by circling Yes/No under 'Complies' column.

Reporting Covenant	Required	Complies
Monthly company prepaid financial statements	Monthly w/in 30 days	Yes	No
Annual (CPA Audited) Statements	FYE w/in 90 days	Yes	No
A/R & A/P Agings	Monthly w/in 15 days when total Indebtedness to Bank exceeds $10,000,000, otherwise due w/in 45 days of each fiscal quarter-end	Yes	No
Form 10Q	Quarterly w/in 45 days	Yes	No
Form 10K	Annually w/in 90 days	Yes	No
Borrowing Base Certificate	Monthly w/in 15 days when total Indebtedness to Bank exceeds $10,000,000, otherwise due w/in 45 days of each fiscal quarter-end.	Yes	No

Reporting Covenant	Required	Actual	Complies
Maintain on a monthly basis:			Yes	No
Tangible Effective Net Worth plus 50% of new equity and 75% of net income after tax for each fiscal quarter	$85,000,000	$	Yes	No
Maximum Debt-to-Worth Ratio	0.75:1.00		Yes	No
Maximum loss on a quarterly basis until 3/31/2001 and thereafter at which time borrower shall have a minimum net profit of $1.00	($15,000,000)	$	Yes	No
Minimum Net Liquidity Commencing 1/31/01	$30,000,000	$	Yes	No

Comments Regarding Exceptions:
See attached.

Sincerely,		BANK USE ONLY
Signature
		Received by: ______________Date:______
Title		Verified by:________________Date:_____

Date		Compliance Status: Yes No

SCHEDULE 1

LISTING OF BORROWER'S SUBSIDIARIES

COM21 Israel

COM21 Ireland

COM21 International

pending Spire off of Wireless Business Unit in 2001

MODIFICATION TO REVOLVING CREDIT AND SECURITY AGREEMENT

This Second Modification to Revolving Credit and Security Agreement (this 'Modification') is entered into by and COM21, INC. ('Borrower') and COMERICA BANK-CALIFORNIA ('Bank') as of this 14th day of March, 2001, at San Jose, California.

RECITALS

This Modification is entered into upon the basis of the following facts and understandings of the parties, which facts and understandings are acknowledged by the parties to be true and accurate:

Bank and Borrower previously entered into a Revolving Credit and Security Agreement (Accounts & Inventory) dated December 1, 2000, which was subsequently amended pursuant to that certain modification agreement dated December 29, 2000. The Revolving Credit and Security Agreement and each modification shall collectively be referred to herein as the 'Agreement.'

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as set forth below.

AGREEMENT

1. Incorporation by Reference. The Recitals and the documents referred to therein are incorporated herein by this reference. Except as otherwise noted, the terms not defined shall have the meaning set forth in the Agreement.

2. Modification to the Agreement. Subject to the satisfaction of the conditions precedent as set forth in Section 3 hereof, the Agreement is hereby modified as set forth below.

Section 7.4 is hereby deleted in its entirety and replaced with the following:

'7.4 Financial Covenants. Maintain the following financial ratios and covenants on a consolidated and non-consolidated basis:

	Tangible Effective Net Worth . Maintain a Tangible Effective Net Worth of not less than the following amounts during each of the respective periods:
	Period From the date of this Agreement through November 30, 2001 *To increase by 75% of new equity and net income after tax for each fiscal quarter.	Amount $70,000,000.00*
	Debt-to-Worth Ratio . Maintain a Debt-to-Worth Ratio of not more than the following during each of the respective periods:
	Period From the date of this Agreement through November 30, 2001	Amount 1:00:1.00
	Quick Ratio . Maintain a Quick Ratio of not less than the following during each of the respective periods:
	Period From the date of this Agreement through November 30, 2001	Amount 1:00:1.00
	Profitability . Borrower shall have a minimum net profit of One Dollar ($1) excluding non-cash charges and one time costs and expenses included in the Borrower's income statement related to the acquisition of businesses of up to Six Million Five Hundred Thousand Dollars ($6,500,000) from the date of this Agreement through March 31, 2000, and then Five Million ($5,000,000) thereafter measured quarterly with the exception of the following: Quarter ending March 31, 2001, loss of up to $11,000,000.00 permitted. Quarter ending June 30, 2001, loss of up to $2,500,000.00 permitted.
	Liquidity . Maintain as of the end of each calendar month, unrestricted cash of not less than $5,000,000.00.'

3. Legal Effect. The effectiveness of this Modification is conditioned upon receipt by Bank of this Modification, and any other documents which Bank may require to carry out the terms hereof. Except as specifically set forth in this Modification, all of the terms and conditions of the Agreement remain in full force and effect.

4. Integration. This is an integrated Modification and supersedes all prior negotiations and agreements regarding the subject matter hereof. All amendments hereto must be in writing and signed by the parties.

IN WITNESS WHEREOF, the parties have agreed as of the date first set forth above.

COM21, INC. COMERICA BANK-CALIFORNIA

By: By:

Rod Werner

Title: Vice President

By:

Title:

Was this helpful?

Easy to understand

Solved my problem

Other

Missing the information I need

Too complicated / too many steps

Out of date

Other