Exhibit

10.31




 




AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT




 




 




This

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as

of November 5, 2002, between SILICON VALLEY BANK, a California chartered

bank, with its principal place of business at 3003 Tasman Drive, Santa

Clara, California 95054 and with a loan production office located at One Newton

Executive Park, Suite 200, 2221 Washington Street, Newton, Massachusetts  02462, doing business under the name

“Silicon Valley East” (“Bank”) and NMS COMMUNICATIONS CORPORATION, formerly

known as NATURAL MICROSYSTEMS CORPORATION, a Delaware corporation with its

chief executive office located at 100 Crossing Boulevard, Framingham,

Massachusetts  (“Borrower”), provides

the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.

This Agreement amends and restates in its entirety a certain Loan and Security

Agreement dated as of May 14, 1999 by and between Borrower and Bank.  The parties agree as follows:




 




1.               ACCOUNTING AND

OTHER TERMS




 




Accounting terms not defined in this Agreement shall be construed

following GAAP.  Calculations and

determinations must be made following GAAP. 

The term “financial statements” includes the notes and schedules.  The terms “including” and “includes” always

mean “including (or includes) without limitation,” in this or any Loan

Document.  Capitalized terms in this

Agreement shall have the meanings set forth in Section 13.




 




2.               LOAN AND TERMS

OF PAYMENT




 




2.1                  Promise to

Pay.  Borrower hereby unconditionally

promises to pay Bank the unpaid principal amount of all Credit Extensions and

interest on the unpaid principal amount of the Credit Extensions as and when

due in accordance with this Agreement.




 




2.1.1       Revolving Advances.




 




                Availability under the Non-Formula Line.  Bank shall make Advances not  exceeding (i) the Non-Formula Line, minus

(ii) the amount of all outstanding Letters of Credit (including drawn but

unreimbursed Letters of Credit) issued under the Non-Formula Line, minus (iii)

the FX Reserve relevant to the Non-Formula Line, and minus (iv) the aggregate

outstanding Advances under the Non-Formula Line (including any Cash Management

Services relating thereto).  Amounts

borrowed under this Section may be repaid and reborrowed during the term of

this Agreement.   The outstanding

principal balance of all Credit Extensions less than or equal to Five Million

Dollars ($5,000,000.00) shall be deemed Credit Extensions under the Non-Formula

Line; the outstanding principal balance of all Credit Extensions greater than

Five Million Dollars ($5,000,000.00) shall be deemed to be Credit Extensions

under the Formula  Line.




 




                Availability under the Formula Line.  Upon Borrower’s utilization of all

availability under the Non-Formula Line in Section 2.1.1(a), Bank shall make

Advances under the Formula Line not 

exceeding (i) the Formula Line or the Borrowing Base, whichever is less,

minus (ii) the amount of all outstanding Letters of Credit (including drawn but

unreimbursed Letters of Credit) issued under the Formula Line, minus (iii) the

FX Reserve relevant to the Formula Line, and minus (iv) the aggregate

outstanding Advances under the Formula Line (including any Cash Management

Services relating thereto).  Amounts

borrowed under this Section may be repaid and reborrowed during the term of

this Agreement.    The outstanding

principal balance of all Credit Extensions less than or equal to Five Million

Dollars ($5,000,000.00) shall be deemed Credit Extensions under the Non-Formula

Line; the outstanding principal balance of all Credit Extensions greater than

Five Million Dollars ($5,000,000.00) shall be deemed to be Credit Extensions

under the Formula Line.




 





























 




                Borrowing Procedure.  To obtain an Advance, Borrower must notify Bank by facsimile or

telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be

made.  If such notification is by

telephone, Borrower must promptly confirm the notification by delivering to

Bank a completed Payment/Advance Form in the form attached as Exhibit B.  Bank shall credit Advances to Borrower’s

deposit account.  Bank may make Advances

under this Agreement based on instructions from a Responsible Officer or his or

her designee or without instructions if the Advances are necessary to meet

Obligations which have become due.  Bank

may rely on any telephone notice given by a person whom Bank believes is a

Responsible Officer or designee. Borrower shall indemnify Bank for any loss

Bank suffers due to such reliance.




 




                Termination; Repayment.  The Revolving Line terminates on the Maturity

Date, when the principal amount of all Advances under the Revolving Line and

the unpaid interest thereon, shall be immediately due and payable.




 




2.1.2       Letters of Credit.




 




(a)           Bank shall issue or

have issued Letters of Credit for Borrower’s account in accordance with

Sections 2.1.1, however the face amount of outstanding Letters of Credit

(including drawn but unreimbursed Letters of Credit and any Letter of Credit

Reserve) may not exceed Ten Million Dollars ($10,000,000.00).  Each Letter of Credit shall have an expiry

date no later than 180 days after the Maturity Date provided Borrower’s Letter

of Credit reimbursement obligation shall be secured by cash on terms acceptable

to Bank on and after (i) the Maturity Date if the term of this Agreement is not

extended by Bank, or (ii) the occurrence of an Event of Default hereunder.  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 Application and Letter of Credit Agreement.  Borrower agrees to execute any further

documentation in connection with the Letters of Credit as Bank may reasonably

request.




 




(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, 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.




 




(c)           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.




 




                Upon the issuance of any letter of credit payable in

a currency other than United States Dollars, Bank shall create a reserve

(the “Letter of Credit Reserve”) under the Revolving Line for letters of credit

against fluctuations in currency exchange rates, in an amount equal to ten

percent (10%) 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

Revolving Line shall be reduced by the amount of such reserve for so long as

such letter of credit remains outstanding.




 




2.1.3       Foreign Exchange Sublimit.  In accordance with Section 2.1.1, Borrower

may enter in foreign exchange forward contracts with the Bank under which

Borrower commits to purchase from or sell to Bank a set amount of foreign

currency more than one business day after the contract date (the “FX Forward

Contract”).  Bank shall subtract 10% of

each outstanding FX Forward Contract from the foreign exchange sublimit which

is a maximum of Ten Million Dollars ($10,000,000.00) (the “FX Reserve”).  The total FX Forward Contracts at any one 




 




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time

may not exceed 10 times the amount of the FX Reserve.  Bank may terminate the FX Forward Contracts if an Event of

Default occurs.




 




2.1.4       Cash Management Services Sublimit.  In accordance with Section 2.1.1, Borrower

may use up to Ten Million Dollars ($10,000,000.00) for the Bank’s Cash

Management Services, which may include merchant services, direct deposit of

payroll, business credit card, and check cashing services identified in the

various cash management services agreements related to such Cash Management

Services (the “Cash Management Services”). 

Such aggregate amounts utilized under the Cash Management Services

Sublimit shall at all times reduce the amount otherwise available for Credit

Extensions.  Any amounts Bank pays on

behalf of Borrower or any amounts that are not paid by Borrower for any Cash

Management Services will be treated as Advances under this Agreement and will

accrue interest at the interest rate applicable to Advances.




 




2.1.5       Undisbursed Credit Extensions.  The Bank’s obligation to lend the

undisbursed portion of the Obligations shall terminate if, in Bank’s sole

discretion, there has been a Material Adverse Change, or there has been any

material adverse deviation by Borrower from the most recent financial

projections of Borrower presented to and accepted by Bank prior to the

execution of this Agreement.




 




2.2          Overadvances.  If Borrower’s Obligations under Section

2.1.1(b) exceed the lesser of either (i) the Formula Line or (ii) the Borrowing

Base, Borrower must immediately pay in cash to Bank the excess.




 




2.3          Interest Rate;

Payments.




 




                Interest Rate. The principal amounts

outstanding under the Revolving Line shall accrue interest at a per annum rate

equal to the aggregate of the Bank’s Prime Rate.   After an Event of Default, Obligations shall bear interest at

five percent (5.0%) above the rate effective immediately before the Event of

Default.  The applicable interest rate

hereunder shall increase or decrease when the Prime Rate changes. Interest is

computed on the basis of a 360 day year for the actual number of days elapsed.




 




                Payments. 

Interest is payable on the Payment Date of each month.  Payments received after 12:00 noon Eastern

time are considered received at the opening of business on the next Business

Day.  When a payment is due on a day

that is not a Business Day, the payment is due the next Business Day and

additional fees or interest, as applicable, shall continue to accrue.




 




(c)           Debit of Accounts.   Bank may debit any of Borrower’s deposit

accounts including Account Number

                   for

principal and interest payments or any amounts Borrower owes Bank. Bank shall

promptly notify Borrower when it debits Borrower’s accounts.  These debits are not a set-off.




 




2.4          Fees.  Borrower shall pay to Bank:




 




                Facility Fee. 

A fully earned, non–refundable facility fee of Twenty-Five

Thousand Dollars ($25,000.00) due on the Closing Date; and




 




                Unused Facility Fee.  In addition to the foregoing, as compensation for the Bank’s

maintenance of sufficient funds available for such  purpose, the Bank shall have earned a Unused Facility Fee (so

referred to herein), which fee shall be paid quarterly, in arrears, on a

calendar year basis, in an amount equal to One Quarter of One percent (0.25%)

of the average unused portion of the Revolving Line, as determined by the Bank.

The Borrower shall not be entitled to any credit, rebate or repayment of any

Facility Fee previously earned by the Bank 




 




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pursuant to this Section

notwithstanding any termination of the within Agreement, or suspension or

termination of the Bank’s obligation to make loans and advances hereunder; and




 




                Bank Expenses.  All Bank Expenses (including reasonable attorneys’ fees and

expenses incurred through and after the Closing Date) when due.




 




3.     CONDITIONS

OF LOANS




 




3.1          Conditions

Precedent to Initial Credit Extension.  The Bank’s obligation to make the initial  Credit Extension is subject

to the condition precedent that Bank shall have received, in form and substance

satisfactory to Bank, the following:




 




                this

Agreement;




 




                a

certificate of the Secretary of Borrower with respect to articles, bylaws,

incumbency and resolutions authorizing the execution and delivery of this

Agreement;




 




                a

legal opinion of Borrower’s in-house counsel, in form and substance acceptable  to

Bank;




 




                Ratification

of Guaranty;




 




                financing

statements (Forms UCC–1);




 




                Account

Control Agreement/ Investment Account Control Agreement;




 




                payment

of the fees and Bank Expenses then due specified in Section 2.4 hereof;




 




                Certificate

of Foreign Qualification (if applicable);




 




                Certificate

of Good Standing/Legal Existence; and




 




                such

other documents, and completion of such other matters, as Bank may reasonably

deem necessary or appropriate.




 




3.2          Conditions

Precedent to all Credit Extensions.  Bank’s obligations to make each Credit Extension, including the

initial Credit Extension, is subject to the following:




 




                timely receipt of any Payment/Advance Form; and




 




                the representations and warranties in Section 5 shall

be materially true on the date of the Payment/Advance Form and on the effective

date of each Credit Extension and no Event of Default shall have occurred and

be continuing, or result from the Credit Extension. Each Credit Extension is

Borrower’s representation and warranty on that date that the representations

and warranties in Section 5 remain true.




 




4.     CREATION

OF SECURITY INTEREST




 




4.1          Grant of

Security Interest.  Borrower

hereby grants Bank, to secure the payment and performance in full of all of the

Obligations and the performance of each of Borrower’s duties under the Loan

Documents, a continuing security interest in, and pledges and assigns to the

Bank, the Collateral, wherever located, whether now owned or hereafter acquired

or arising, and all proceeds and products thereof.  Borrower warrants and represents that




 




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the security interest granted herein shall be a first priority security

interest in the Collateral.  Bank may

place a “hold” on any deposit account pledged as Collateral.




 




Borrower

agrees that any disposition of the Collateral in violation of this Agreement,

by either the Borrower or any other Person, shall be deemed to violate the

rights of the Bank under the Code. If the Agreement is terminated, Bank’s lien

and security interest in the Collateral shall continue until Borrower fully

satisfies its Obligations.




 




4.2          Authorization to File Financing

Statements.  Borrower

hereby authorizes Bank to file financing statements, without notice to

Borrower, with all appropriate jurisdictions in order to perfect or protect

Bank’s interest or rights hereunder.




 




5.     REPRESENTATIONS

AND WARRANTIES




 




Borrower represents and warrants as follows:




 




5.1          Due

Organization and Authorization.  Borrower and each Subsidiary is duly existing and in good

standing in its state of formation and qualified and licensed to do business

in, and in good standing in, any state in which the conduct of its business or

its ownership of property requires that it be qualified except where the

failure to do so could not reasonably be expected to cause a Material Adverse

Change.   In connection with this

Agreement, the Borrower delivered to the Bank a certificate signed by the

Borrower and entitled “Perfection Certificate”.  The Borrower represents and warrants to the Bank that: (a) the

Borrower’s exact legal name is that indicated on the Perfection Certificate and

on the signature page hereof; and (b) the Borrower is an organization of the

type, and is organized in the jurisdiction, set forth in the Perfection

Certificate; and (c) the Perfection Certificate accurately sets forth the

Borrower’s organizational identification number or accurately states that the

Borrower has none; and (d) the Perfection Certificate accurately sets forth the

Borrower’s place of business, or, if more than one, its chief executive office

as well as the Borrower’s mailing address if different, and (e) all other

information set forth on the Perfection Certificate pertaining to the Borrower

is accurate and complete.  If the

Borrower does not now have an organizational identification number, but later

obtains one, Borrower shall forthwith notify the Bank of such organizational

identification number




 




The execution, delivery and performance of the Loan Documents have been

duly authorized, and do not conflict with Borrower’s organizational documents,

nor constitute an event of default under any material agreement by which

Borrower is bound.  Borrower is not in

default under any agreement to which or by which it is bound in which the

default could reasonably be expected to  cause a Material Adverse Change.




 




5.2          Collateral.  Borrower has good title to the Collateral,

free of Liens except Permitted Liens. 

Borrower has no deposit account, other than the deposit accounts with

Bank and deposit accounts described in the Perfection Certificate delivered to

the Bank in connection herewith.  The

Accounts are bona fide, existing obligations, and the service or property has

been performed or delivered to the account debtor or its agent for immediate

shipment to and unconditional acceptance by the account debtor. The Collateral

is not in the possession of any third party bailee (such as a warehouse) with the

exception of contract manufacturers listed on the Perfection Certificate, as

scheduled on this date.  In the event

that Borrower, after the date hereof, intends to store or otherwise deliver any

portion of the Collateral to a bailee, then Borrower will first receive the

written consent of Bank and such bailee must acknowledge in writing that the

bailee is holding such Collateral for the benefit of Bank.  Borrower has no knowledge of any actual or

imminent Insolvency Proceeding of any account debtor whose accounts are an

Eligible Account in any Borrowing Base Certificate.  All Inventory is in all material respects of good and marketable

quality, free from material defects.




 




5.3          Litigation.  Except as shown in the Perfection

Certificate, there are no actions or proceedings pending or, to the knowledge

of Borrower’s Responsible Officers or legal counsel, threatened by or against

Borrower or any Subsidiary in which an adverse decision could reasonably be

expected to  cause a Material Adverse Change.




 




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5.4          No Material

Deviation  in Financial Statements.  All consolidated financial statements for

Borrower and any Subsidiary delivered to Bank fairly present in all material

respects Borrower’s consolidated financial condition and Borrower’s

consolidated results of operations. 

There has not been any material deterioration in Borrower’s consolidated

financial condition since the date of the most recent financial statements

submitted to Bank.




 




5.5          Solvency.  Borrower is able to pay its debts (including

trade debts) as they mature.




 




5.6          Regulatory

Compliance.  Borrower

is not an “investment company” or a company “controlled” by an “investment

company” under the Investment Company Act. 

Borrower is not engaged as one of its important activities in extending

credit for margin stock (under Regulations T and U of the Federal Reserve Board

of Governors).  Borrower has complied in

all material respects with the Federal Fair Labor Standards Act.  Borrower has not violated any laws,

ordinances or rules, the violation of which could reasonably be expected to

cause a Material Adverse Change.  None

of Borrower’s or any Subsidiary’s properties or assets has been used by

Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous

Persons, in disposing, producing, storing, treating, or transporting any

hazardous substance other than legally. 

Borrower and each Subsidiary has timely filed all required tax returns

and paid, or made adequate provision to pay, all material taxes, except those

being contested in good faith with adequate reserves under GAAP.  Borrower and each Subsidiary has obtained

all consents, approvals and authorizations of, made all declarations or filings

with, and given all notices to, all government authorities that are necessary

to continue its business as currently conducted  except where the failure to

make such declarations, notices or filings would  not reasonably be expected to cause a Material Adverse Change.




 




5.7          Subsidiaries.  Borrower does not own any stock, partnership

interest or other equity securities except for Permitted Investments.




 




5.8          Full Disclosure.  No written representation, warranty or other

statement of Borrower in any certificate or written statement given to Bank

taken together with all such written certificates and written statements given

to Bank contains any untrue statement of a material fact or omits to state a

material fact necessary to make the statements contained in the certificates or

statements not misleading  (it being recognized by Bank that the

projections and forecasts provided by Borrower in good faith and based upon

reasonable assumptions are not viewed as facts and that actual results during

the period or periods covered by such projections and forecasts may differ from

the projected or forecasted results).




 




6.     AFFIRMATIVE

COVENANTS




 




Borrower shall do all of the following:




 




6.1          Government

Compliance.  Borrower

shall maintain its and all Subsidiaries’ legal existence and good standing in

its jurisdiction of formation and maintain qualification in each jurisdiction

in which the failure to so qualify would reasonably be expected to have a

material adverse effect on Borrower’s business or operations.  Borrower shall comply, and have each

Subsidiary comply, with all laws, ordinances and regulations to which it is

subject, noncompliance with which could have a Material Adverse Change.




 




6.2          Financial

Statements, Reports, Certificates.




 




                Borrower shall deliver to Bank:  (i) quarterly, but no later than five (5)

days of filing with the Securities Exchange Commission (the “SEC”), a

Compliance Certificate signed by a Responsible Officer in the form of Exhibit D,

together with a company prepared consolidated balance sheet and income

statement covering the Borrower’s consolidated operations during such period;

(ii) annually, but not later than five(5) days of filing with the SEC, audited

consolidated financial statements prepared under GAAP, consistently applied,

together with an unqualified opinion on the financial statements from an

independent certified public accounting firm acceptable to Bank; (iii) within

five (5) days of filing, copies of all statements, reports and 




 




6





























 




notices made available to

Borrower’s security holders or to any holders of Subordinated Debt and all

reports on Form 10-K, 10-Q and 8–K filed with the SEC; (iv) a prompt

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 ($100,000.00) or more; (v) as soon as

available, but no later than thirty days (30) of approval, revised budgets,

sales projections, operating plans; (vi) any other financial information

reasonably requested by Bank.




 




                Within thirty (30) days after the last day of each  quarter

in which either (i) Obligations under the Formula Line are outstanding, or (ii)

Advances under the Formula Line were made, Borrower shall deliver to Bank a

Borrowing Base Certificate signed by a Responsible Officer in the form of Exhibit C,

with aged listings of accounts receivable (by invoice date).




 




6.3          Inventory;

Returns.  Borrower shall keep all

Inventory in good and marketable condition, free from material defects.  Returns and allowances between Borrower and

its account debtors shall follow Borrower’s customary practices as they exist

at the Closing Date.  Borrower must

promptly notify Bank of all returns, recoveries, disputes and claims that involve

more than Fifty Thousand Dollars ($50,000.00).




 




6.4          Taxes.  Borrower shall make, and cause each

Subsidiary to make, timely payment of all material federal, state, and local

taxes or assessments (other than taxes and assessments which Borrower is

contesting in good faith, with adequate reserves maintained in accordance with

GAAP) and will deliver to Bank, on demand, appropriate certificates attesting

to such payments.




 




6.5          Insurance.  Borrower shall keep its business and the

Collateral insured for risks and in amounts,  

and as Bank may reasonably request. 

Insurance policies shall be in a form, with companies, and in amounts

that are satisfactory to Bank.  The Bank

acknowledges that it has been provided with a Certificate of Insurance with

acceptable coverage limits.  All

property policies shall have a lender’s loss payable endorsement showing Bank

as an additional  loss payee and all

liability policies shall show the Bank as an additional insured and  all policies shall provide that the insurer

must give Bank at least  twenty (20) days notice before canceling

its policy.  At Bank’s request, Borrower

shall deliver certified copies of policies and evidence of all premium

payments. Proceeds payable under any policy shall, at Bank’s option, be payable

to Bank on account of the Obligations. 

Notwithstanding the foregoing, so long as no Event of Default has

occurred and is continuing, Borrower shall have the option of applying the

proceeds of any casualty policy  up to

$200,000.00, in the aggregate, toward the replacement or repair of destroyed or

damaged property; provided that (i) any such replaced or repaired property (a)

shall be of equal or like value as the replaced or repaired Collateral and (b)

shall be deemed Collateral in which Bank has been granted a first priority

security interest and (ii) after the occurrence and during the continuation of

an Event of Default all proceeds payable under such casualty policy shall, at

the option of the Bank, be payable to Bank on account of the Obligations.  If Borrower fails to obtain insurance as

required under Section 6.5 or to pay any amount or furnish any required proof

of payment to third persons and the Bank, Bank may make all or part of such

payment or obtain such insurance policies required in Section 6.5, and take any

action under the policies Bank deems prudent.




 




6.6           Accounts. In order to

permit the Bank to monitor the Borrower’s financial performance and condition,

Borrower, and all Borrower’s Subsidiaries, shall maintain Borrower’s, and such

Subsidiaries’, primary depository, operating, and securities accounts with

Bank, except as set forth on the Perfection Certificate delivered to the Bank

as of the date hereof.  In

addition to the foregoing, on the Closing Date, and at all times thereafter,

Borrower shall maintain not less than Ten Million Dollars ($10,000,000.00) in

unrestricted cash or securities, in accounts with the Bank or a Bank

subsidiary, directed by Bank.  Any

Guarantor shall maintain all depository, operating and securities accounts with

Bank, except as set forth on the Perfection Certificate delivered to the Bank

as of the date hereof.  Borrower shall

identify to Bank, in writing, any bank or securities account opened by Borrower

with any institution other than Bank. 

In addition, for each such account that the Borrower or Guarantor at any

time opens or maintains, Borrower shall use reasonably efforts, at the Bank’s

request and option, pursuant to an agreement in form and substance acceptable

to the Bank, cause the depositary bank or securities intermediary to agree that

such account is the collateral of the Bank pursuant to the terms

hereunder.  The provisions of this 




 




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paragraph shall not apply to deposit accounts exclusively used for

payroll, payroll taxes and other employee wage and benefit payments to or for

the benefit of the Borrower’s employees.




 




6.7          Financial

Covenants.




 




Borrower shall maintain at all times, to be tested as of the last day

of each quarter, unless otherwise noted:




 




(a)  Tangible

Net Worth.  Borrower

shall maintain a Tangible Net Worth of not less than One Hundred Million

Dollars ($100,000,000.00).




 




6.8          Further

Assurances.  Borrower

shall execute any further instruments and take further action as Bank

reasonably requests to perfect or continue Bank’s security interest in the

Collateral or to effect the purposes of this Agreement.




 




6.9          Ratification of

Negative Pledge Agreement.   Borrower hereby ratifies, confirms and reaffirms, all and

singular, the terms and conditions of a certain Negative Pledge Agreement dated

as of May 14, 1999 between Borrower and Bank, and acknowledges, confirms and

agrees that said Negative Pledge Agreement shall remain in full force and

effect.




 




7.     NEGATIVE

COVENANTS




 




Borrower shall not do any of the following without the Bank’s prior

written consent which shall not be unreasonably withheld.




 




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, except for Transfers (i)

of Inventory in the ordinary course of business; (ii) of non-exclusive licenses

and similar arrangements for the use of the property of Borrower or its

Subsidiaries in the ordinary course of business; (iii) that constitute payment

of normal and usual operating expenses in the ordinary course of business; or

(iv) of worn–out or obsolete Equipment.




 




7.2          Changes in

Business, Ownership, Management or Business Locations.  Engage in or permit any of its Subsidiaries

to engage in any business other than the businesses currently engaged in by

Borrower or reasonably related thereto, or  have a material change in its ownership

(other than by the sale of Borrower’s equity securities in a public offering or

to venture capital investors so long as Borrower identifies to Bank the venture

capital investors prior to the closing of the investment), or management.  Borrower shall not, without at least ten

(10) days subsequent written notice to Bank: (i) relocate its chief executive

office, or (ii) change its jurisdiction of organization, or (iii) change its

organizational structure or type, or (iv) change its legal name, or (v) change

any organizational number (if any) assigned by its jurisdiction of

organization.




 




7.3          Mergers or

Acquisitions.  Merge or

consolidate, or permit any of its Subsidiaries to merge or consolidate, with

any other Person, or acquire, or permit any of its Subsidiaries to acquire, all

or substantially all of the capital stock or property of another Person.   A Subsidiary may merge or

consolidate into another Subsidiary or into Borrower.




 




7.4          Indebtedness.  Create, incur, assume, or be liable for any

Indebtedness, or permit any Subsidiary to do so, other than Permitted

Indebtedness.




 




7.5          Encumbrance.  Create, incur, or allow any Lien on any of its

property, or assign or convey any right to receive income, including the sale

of any Accounts, or permit any of its Subsidiaries to do so, except for

Permitted Liens, or permit any Collateral not to be subject to the first

priority security interest granted herein. 

The Collateral may also be subject to Permitted Liens.




 




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7.6          Distributions;

Investments.  (i)  Directly

or indirectly acquire or own any Person, or make any Investment in any Person,

other than Permitted Investments, or permit any of its Subsidiaries to do so;

or (ii) pay any dividends or make any distribution or payment or redeem, retire

or purchase any capital stock.




 




7.7          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 non-affiliated Person.




 




7.8          Subordinated

Debt.  Make or permit any payment on

any Subordinated Debt, except under the terms of the Subordinated Debt, or

amend any provision in any document relating to the Subordinated Debt, without

Bank’s prior written consent.




 




7.9          Compliance.  Become an “investment company” or

a company controlled by an “investment company”, under the Investment Company

Act of 1940 or undertake as one of its important activities extending credit to

purchase or carry margin stock, or use the proceeds of any Credit Extension for

that 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 other law or

regulation, if the violation could reasonably be expected to  have

a material adverse effect on Borrower’s business or operations or would

reasonably be expected to  cause a Material Adverse Change, or permit

any of its Subsidiaries to do so.




 




8.     EVENTS

OF DEFAULT




 




Any one of the following is an Event of Default:




 




8.1          Payment Default.  Borrower fails to pay any of the Obligations

within three (3) days after their due date. During the additional period the

failure to cure the default is not an Event of Default (but no Credit Extension

shall be made during the cure period);




 




8.2            Covenant

Default.  Borrower fails or neglects

to perform any obligation in Section 6 or violates any covenant in Section 7 or

fails or neglects to perform, keep, or observe any other material term,

provision, condition,  covenant or

agreement contained in this Agreement, any Loan Documents, or in any present or

future agreement between Borrower and Bank and as to any default under such

other material term, provision, condition, covenant or agreement that can be

cured, has failed to cure the default within ten (10) days after the occurrence

thereof; provided, however, that if the default cannot by its nature be cured

within the ten (10) day period or cannot after diligent attempts by Borrower be

cured within such ten (10) day period, and such default is likely to be cured

within a reasonable time, then Borrower shall have an additional 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 cure the default shall not be deemed an Event of Default

(but no Credit Extensions shall be made during such cure period).  Grace periods provided under this section

shall not apply, to financial covenants or any other covenants that are

required to be satisfied, completed or tested by a date certain.




 




8.3            Material

Adverse Change.  A Material Adverse

Change occurs;




 




8.4            Attachment.  (i) Any material portion of Borrower’s

assets is attached, seized, levied on, or comes into possession of a trustee or

receiver and the attachment, seizure or levy is not removed in fifteen (15)

days; (ii) the service of process upon the Borrower seeking to attach, by

trustee or similar process, any funds of the Borrower on deposit with the Bank;

(iii) Borrower is enjoined, restrained, or prevented by court order from

conducting a material part of its business; (iv) a judgment or other claim

becomes a Lien on a material portion of Borrower’s assets; or (v) a notice of

lien, levy, or assessment is filed against any of Borrower’s assets by any

government agency and not paid within fifteen (15) days after Borrower receives

notice.  These are not Events of Default

if stayed or if a bond is posted pending contest by Borrower (but no Credit

Extensions shall be made during the cure period);




 




9





























 




8.5          Insolvency.  (i) Borrower becomes insolvent; (ii)

Borrower begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is

begun against Borrower and not dismissed or stayed within thirty (30) days (but

no Credit Extensions shall be made before any Insolvency Proceeding is

dismissed);




 




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 result in

a  Material Adverse Change;




 




8.7          Judgments.  If a judgment or judgments for the payment

of money in an amount, individually or in the aggregate, of at least Two

Hundred Thousand Dollars ($200,000) shall be rendered against Borrower and

shall remain unsatisfied and unstayed for a period of twenty  (20) days (provided that no Credit

Extensions will be made prior to the satisfaction or stay of such judgment);




 




8.8          Misrepresentations.  If Borrower or any Person acting for

Borrower makes any material misrepresentation or material misstatement now or

later in any warranty or representation in this Agreement or in any writing

delivered to Bank or to induce Bank to enter this Agreement or any Loan

Document.




 




8.1          ­Guaranty.  (i) Any guaranty of any Obligations

terminates or ceases for any reason to be in full force; or (ii) any Guarantor

does not perform any obligation under any guaranty of the Obligations; or (iii)

any material misrepresentation or material misstatement exists now or later in

any warranty or representation in any guaranty of the Obligations or in any

certificate delivered to Bank in connection with the guaranty; or (iv) any

circumstance described in Section 7, or Sections 8.4, 8.5 or 8.7 occurs to any

Guarantor, or (v) the death, liquidation, winding up, termination of existence,

or insolvency of any Guarantor.




 




9.     BANK’S

RIGHTS AND REMEDIES




 




9.1          Rights and

Remedies.  When an

Event of Default occurs and continues Bank may, without notice or demand, do

any or all of the following:




 




        Declare all Obligations immediately due and payable (but if

an Event of Default described in Section 8.5 occurs all Obligations are

immediately due and payable without any action by Bank);




 




        Stop advancing money or extending credit for Borrower’s

benefit under this Agreement or under any other agreement between Borrower and

Bank;




 




        Settle or adjust disputes and claims directly with account

debtors for amounts, on terms and in any order that Bank considers advisable

and notify any Person owing Borrower money of Bank’s security interest in such

funds and verify the amount of such account. 

Borrower shall collect all payments in trust for Bank and, if requested

by Bank, immediately deliver the payments to Bank in the form received from the

account debtor, with proper endorsements for deposit;




 




        Make any payments and do any acts it considers necessary or

reasonable to protect its security interest in the Collateral.  Borrower shall assemble the Collateral if

Bank requests and make it available as Bank designates.  Bank may enter premises where the Collateral

is located, take and maintain possession of any part of the Collateral, and

pay, purchase, contest, or compromise any Lien which appears to be prior or

superior to its security interest and pay all expenses incurred. Borrower

grants Bank a license to enter and occupy any of its premises, without charge,

to exercise any of Bank’s rights or remedies;




 




        Apply to the Obligations any (i) balances and deposits of

Borrower it holds, or (ii) any amount held by Bank owing to or for the credit

or the account of Borrower;




 




10





























 




        Ship, reclaim, recover, store, finish, maintain, repair,

prepare for sale, advertise for sale, and sell the Collateral.  Bank is hereby granted a non-exclusive,

royalty-free license or other right, solely pursuant to the provisions of this

Section 9.1, to use, without charge, Borrower’s labels, patents, copyrights,

mask works, rights of use of any name, trade secrets, trade names, trademarks,

service marks, and advertising matter, or any similar property as it pertains

to the Collateral, in completing production of, advertising for sale, and

selling any Collateral.  In connection

with Bank’s exercise of its rights under this Section, Borrower’s rights under all

licenses and all franchise agreements inure to Bank’s benefit; and




 




        Dispose of the Collateral according to the Code.




 




9.2          Power of

Attorney.  Borrower

hereby irrevocably appoints Bank as its lawful attorney-in-fact, to be

effective upon the occurrence and during the continuance of an Event of

Default, to:  (i) endorse Borrower’s

name on any checks or other forms of payment or security; (ii) sign Borrower’s

name on any invoice or bill of lading for any Account or drafts against account

debtors; (iii) settle and adjust disputes and claims about the Accounts

directly with account debtors, for amounts and on terms Bank determines

reasonable; (iv) make, settle, and adjust all claims under Borrower’s insurance

policies; and (v) transfer the Collateral into the name of Bank or a third

party as the Code permits.  Borrower

hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on

any documents necessary to perfect or continue the perfection of any security

interest regardless of whether an Event of Default has occurred until all

Obligations have been satisfied in full and Bank is under no further obligation

to make Credit Extensions hereunder. 

Bank’s foregoing appointment as Borrower’s attorney in fact, and all of

Bank’s rights and powers, coupled with an interest, are irrevocable until all

Obligations have been fully repaid and performed and Bank’s obligation to

provide Credit Extensions terminates.




 




9.3          Bank Expenses.  Any amounts paid by Bank as provided herein

are Bank Expenses and are immediately due and payable, and shall bear interest

at the then applicable rate and be secured by the Collateral.  No payments by Bank shall be deemed an

agreement to make similar payments in the future or Bank’s waiver of any Event

of Default.




 




9.4          Bank’s Liability

for Collateral.  So long as

the Bank complies with reasonable banking practices regarding the safekeeping

of collateral, the Bank shall not be liable or responsible for: (a) the

safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c)

any diminution in the value of the Collateral; or (d) any act or default of any

carrier, warehouseman, bailee, or other person.  Borrower bears all risk of loss, damage or destruction of the

Collateral.




 




9.5          Remedies

Cumulative.  Bank’s

rights and remedies under this Agreement, the Loan Documents, and all other

agreements are cumulative.  Bank has all

rights and remedies provided under the Code, by law, or in equity. Bank’s

exercise of one right or remedy is not an election, and Bank’s waiver of any

Event of Default is not a continuing waiver. Bank’s delay is not a waiver,

election, or acquiescence. No waiver hereunder shall be effective unless signed

by Bank and then is only effective for the specific instance and purpose for

which it was given.




 




9.6          Demand Waiver.  Borrower waives demand, 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 held by Bank on

which Borrower is liable.




 




10.   NOTICES




 




All notices or demands by any party to this Agreement or any other

related agreement must be in writing and be personally delivered or sent by an

overnight delivery service, by certified mail, postage prepaid, return receipt

requested, or by telefacsimile at the addresses listed below.  Either Bank or Borrower  may change its notice address by giving the

other written notice.




 




If to Borrower:      NMS

Communications Corporation




100 Crossing Boulevard




 




11





























 




Framingham, Massachusetts 01702




Attn: 




FAX:




 




If to Bank:              Silicon Valley Bank




One Newton Executive Park,

Suite 200




2221 Washington Street




Newton, Massachusetts  02462




Attn: Mr. Jonathan Gray




Fax:  (617) 969-5973




 




with a copy to:      Riemer & Braunstein LLP




Three Center Plaza




Boston, Massachusetts 02108




Attn: David A. Ephraim,

Esquire




FAX: (617) 880-3456




 




 




11.     CHOICE

OF LAW, VENUE AND JURY TRIAL WAIVER




 




Massachusetts law governs the Loan Documents without regard to

principles of conflicts of law. 

Borrower and Bank each submit to the exclusive jurisdiction of the State

and Federal courts in Massachusetts; provided, however, that if for any reason

Bank cannot avail itself of such courts in the Commonwealth of Massachusetts,

Borrower accepts jurisdiction of the courts and venue in Santa Clara County,

California.  NOTWITHSTANDING THE

FOREGOING,  THE BANK SHALL HAVE THE RIGHT

TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE

COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE

IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK’S RIGHTS

AGAINST THE BORROWER OR ITS PROPERTY.




 




BORROWER AND BANK EACH WAIVE THEIR

RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED

UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,

INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A

MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS

COUNSEL.




 




12.   GENERAL

PROVISIONS




 




12.1        Successors and

Assigns.  This Agreement binds and is

for the benefit of the successors and permitted assigns of each party.  Borrower may not assign this Agreement or

any rights or Obligations under it without Bank’s prior written consent which

may be granted or withheld in Bank’s discretion.  Bank has 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 under this Agreement,

the Loan Documents or any related agreement.




 




12.2        Indemnification.  Borrower hereby indemnifies, defends and

holds the Bank and its officers, employees and agents against:  (a) all obligations, demands, claims, and

liabilities asserted by any other party in connection with the transactions

contemplated by the Loan Documents; and (b) all losses or Bank Expenses

incurred, or paid by Bank from, following, or consequential to transactions

between Bank and Borrower (including reasonable attorneys’ fees and expenses),

except for losses caused by Bank’s gross negligence or willful misconduct.




 




12





























 




12.3        Right of

Set-Off.   Borrower

and any guarantor hereby grant to Bank, a lien, security interest and right of

setoff as security for all Obligations to Bank, whether now existing or

hereafter arising upon and against all deposits, credits, collateral and property,

now or hereafter in the possession, custody, safekeeping or control of Bank or

any entity under the control of the Bank or in transit to any of them.  At any time after the occurrence and during

the continuance of an Event of Default, without demand or notice, Bank may set

off the same or any part thereof and apply the same to any liability or

obligation of Borrower and any guarantor even though unmatured and regardless

of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE BANK TO

EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH

SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT

TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE

HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.




 




12.4        Time of Essence.  Time is of the essence for the performance

of all Obligations in this Agreement.




 




12.5        Severability of

Provision.  Each

provision of this Agreement is severable from every other provision in

determining the enforceability of any provision.




 




12.6        Amendments in

Writing; Integration.  All

amendments to this Agreement must be in writing signed by both Bank and

Borrower.  This Agreement and the Loan

Documents represent the entire agreement about this subject matter, and

supersede prior negotiations or agreements. 

All prior agreements, understandings, representations, warranties, and

negotiations between the parties about the subject matter of this Agreement and

the Loan Documents merge into this Agreement and the Loan Documents.




 




12.7        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, are an original, and all taken together,

constitute one Agreement.




 




12.8        Survival.  All covenants, representations and

warranties made in this Agreement continue in full force while  any Obligations remain outstanding.  The obligation of Borrower in Section 12.2

to indemnify Bank shall survive until the statute of limitations with respect

to such claim or cause of action shall have run; provided that so long as the

Obligations have been satisfied, and Bank has no commitment to make any Credit

Extensions or to make any other loans to Borrower, Bank shall release all

security interests granted hereunder and redeliver all Collateral held by it in

accordance with applicable law.




 




12.9        Confidentiality.  In handling any confidential information,

Bank shall exercise the same degree of care that it exercises for its own

proprietary information, but disclosure of information may be made: (i) to

Bank’s subsidiaries or affiliates in connection with their business with

Borrower; (ii) to prospective transferees or purchasers of any interest in the

Credit Extensions (provided, however, Bank shall use commercially reasonable

efforts in obtaining such prospective transferee’s or purchaser’s agreement to

the terms of this provision); (iii) as required by law, regulation, subpoena,

or other order, (iv) as required in connection with Bank’s examination or

audit; and (v) as Bank considers appropriate in exercising remedies under this

Agreement.  Confidential information

does not include information that either: (a) is in the public domain or in

Bank’s possession when disclosed to Bank, or becomes part of the public domain

after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank

does not know that the third party is prohibited from disclosing the

information.




 




12.10      Amended and

Restated Loan and Security Agreement.  This Agreements amends and restates in its entirety a certain

Loan and Security Agreement dated as of May 14, 1999 by and between Borrower

and Bank.




 




13.   DEFINITIONS




 




13.1        Definitions.  In this Agreement:




 




13





























 




“Accounts”

are all accounts, contract rights, and 

other  obligations owed Borrower

in connection with its sale or lease of goods (including licensing software and

other technology) or provision of services,  all credit insurance, guaranties, other

security and  all merchandise returned

or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing,

as such definition may be amended from time to time according to the Code.




 




“Advance”

or “Advances”

is a loan advance (or advances) under the Revolving Line.




 




“Affiliate”

of a Person is a Person that owns or controls directly or indirectly the

Person, any Person that controls or is controlled by or is under common control

with the Person, and each of that Person’s senior executive officers,

directors, partners and, for any Person that is a limited liability company,

that Person’s managers and members.




 




“Bank

Expenses” are all audit fees and expenses and reasonable costs or

expenses (including reasonable attorneys’ fees and expenses) for preparing,

negotiating, administering, defending and enforcing the Loan Documents

(including appeals or Insolvency Proceedings).




 




“Borrower’s

Books” are all Borrower’s books and records including ledgers,

records regarding Borrower’s assets or liabilities, the Collateral, business

operations or financial condition and all computer programs or discs or any

equipment containing such information.




 




“Borrowing

Base” is seventy-five percent (75.0%) of Eligible Accounts, as

determined by Bank from Borrower’s most recent Borrowing Base Certificate.




 




“Business

Day” is any day that is not a Saturday, Sunday or a day on which the

Bank is closed.




 




“Cash

Management Services” are defined in Section 2.1.4.




 




“Closing

Date” is the date of this Agreement.




“Code”

is the Uniform Commercial Code as adopted in Massachusetts, as amended and as

may be amended and in effect from time to time.




 




“Collateral”

is any and all properties, rights and assets of the Borrower listed on Exhibit A,

now, or in the future, in which the Borrower obtains an interest, or the power

to transfer rights.




 




“Contingent

Obligation” is, for any Person, any direct or indirect liability,

contingent or not, of that Person for (i) any indebtedness, lease, dividend,

letter of credit or other obligation of another such as an obligation directly

or indirectly guaranteed, endorsed, co–made, discounted or sold with

recourse by that Person, or for which that Person is directly or indirectly

liable; (ii) any obligations for undrawn letters of credit for the account of

that Person; and (iii) all obligations from any interest rate, currency or

commodity swap agreement, interest rate cap or collar agreement, or other

agreement or arrangement designated to protect a Person against fluctuation in

interest rates, currency exchange rates or commodity prices;  but “Contingent Obligation” does not include

endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the stated or determined

amount of the primary obligation for which the Contingent Obligation is made

or, if not determinable, the maximum reasonably anticipated liability for it

determined by the Person in good faith; but the amount may not exceed the

maximum of the obligations under the guarantee or other support arrangement.




 




“Credit

Extension” is each Advance, Letter of Credit, Exchange Contract, or

any other extension of credit by Bank for Borrower’s benefit.




 




“Current

Assets” are amounts that under GAAP should be included on that date

as current assets on Borrower’s consolidated balance sheet.




 




14





























 




“Eligible

Accounts” are billed Accounts in the ordinary course of Borrower’s

business that meet all Borrower’s representations and warranties in Section

5.2; but Bank may change eligibility standards by giving Borrower

notice.  Unless Bank agrees otherwise in

writing, Eligible Accounts shall not include:




 




        Accounts that the account debtor has not paid within ninety

(90) days of invoice date;




 




        Accounts for an account debtor, fifty percent (50%) or more

of whose Accounts have not been paid within ninety (90) days of invoice date;




 




        Credit balances over ninety (90) days from invoice date;




 




        Accounts for an account debtor, including Affiliates, whose

total obligations to Borrower exceed twenty-five (25%) of all Accounts, for the

amounts that exceed that percentage, unless Bank approves in writing;




 




        Accounts for which the account debtor does not have its

principal place of business in the United States;




 




        Accounts for which the account debtor is a federal, state or

local government entity or any department, agency, or instrumentality thereof;




 




        Accounts for which Borrower owes the account debtor, but only

up to the amount owed (sometimes called “contra” accounts, accounts payable,

customer deposits or credit accounts);




 




        Accounts for demonstration or promotional equipment, or in

which goods are consigned, sales guaranteed, sale or return, sale on approval,

bill and hold, or other terms if account debtor’s payment may be conditional;




 




        Accounts for which the account debtor is Borrower’s

Affiliate, officer, employee, or agent;




 




        Accounts in which the account debtor disputes liability or

makes any claim and Bank believes there may be a basis for dispute (but only up

to the disputed or claimed amount), or if the Account Debtor is subject to an

Insolvency Proceeding, or becomes insolvent, or goes out of business;




 




        Accounts for which Bank reasonably determines  after

reasonable inquiry and reasonable consultation with Borrower collection  to

be doubtful by reason of the account debtor’s financial condition.




 




“ERISA”

is the Employment Retirement Income Security Act of 1974, and its regulations.




 




“Formula

Line” is an Advance or Advances of up to Five Million Dollars

($5,000,000.00).




 




“FX Forward

Contract” is defined in Section 2.1.3.




 




“FX

Reserve” is defined in Section 2.1.3.




 




“GAAP”

is generally accepted accounting principles.




 




“Guarantor” is any present

or future guarantor of the Obligations, including Natural Microsystems

Securities Corporation.




 




“Indebtedness”

is (a) indebtedness for borrowed money or the deferred price of property or

services, such as reimbursement and other obligations for surety bonds and

letters of credit, (b) obligations evidenced by notes, bonds, debentures or

similar instruments, (c) capital lease obligations and (d) Contingent

Obligations.




 




15





























 




“Insolvency

Proceeding” is any proceeding by or against any Person under the

United States Bankruptcy Code, or any other bankruptcy or insolvency law,

including assignments for the benefit of creditors, compositions, extensions

generally with its creditors, or proceedings seeking reorganization,

arrangement, or other relief.




 




“Intellectual

Property”

is  any copyright

rights, copyright applications, copyright registrations and like protections in

each work of authorship and derivative work, whether published or unpublished,

now owned or later acquired; any patents, trademarks, service marks and

applications therefor; any trade secret rights, including any rights to

unpatented inventions, now owned or hereafter acquired.




 




“Inventory”

is present and future inventory in which Borrower has any interest, including

merchandise, raw materials, parts, supplies, packing 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

later owned by or in the custody or possession, actual or constructive, of

Borrower, including inventory temporarily out of its custody or possession or

in transit and including returns on any accounts or other proceeds (including

insurance proceeds) from the sale or disposition of any of the foregoing and

any documents of title.




 




“Investment”

is any beneficial ownership of (including stock, partnership interest or other

securities) any Person, or any loan, advance or capital contribution to any

Person.




 




“Letter of

Credit” means a letter of credit or similar undertaking

issued by Bank pursuant to Section 2.1.2.




 




“Letter of

Credit Reserve” has the meaning set forth in Section 2.1.2.




 




“Lien”

is a mortgage, lien, deed of trust, charge, pledge, security interest or other

encumbrance.




 




“Loan

Documents” are, collectively, this Agreement, any note, or notes or

guaranties executed by Borrower or Guarantor, and any other present or future

agreement between Borrower and/or for the benefit of Bank in connection with

this Agreement, all as amended, extended or restated.




 




“Material

Adverse Change “ is: (i) A material impairment in the perfection or

priority of Bank’s security interest in the Collateral or in the value of such

Collateral; (ii) a material adverse change in the business, operations, or

condition (financial or otherwise) of the Borrower and Guarantor taken as a

whole; or (iii)  a material impairment of the prospect of repayment of any

portion of the Obligations; or (iv) Bank determines, based upon information

available to it and in its reasonable judgment, that there is a substantial

likelihood that Borrower shall fail to comply with one or more of the financial

covenants in Section 6 during the next succeeding financial reporting period.




 




“Maturity

Date” is May 12, 2003.




 




“Non-Formula

Line” is an Advance or Advances of up to Five Million Dollars

($5,000,000.00).




 




“Obligations”

are debts, principal, interest, Bank Expenses and other amounts Borrower owes

Bank now or later, including letters of credit, cash management services, and

foreign exchange contracts, if any, and including interest accruing after

Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower

assigned to Bank.




 




“Other

Assets” means any asset represented by shares of stock in

another Person, including, without limitation, in the Borrower’s Subsidiaries

or Affiliates, or any instrument evidencing any indebtedness owing by any

Person to the Borrower (other than trade payables to the Borrower).




 




“Payment

Date” means the first calendar day of each month.




 




“Permitted

Indebtedness” is:




 




16





























 




                Borrower’s indebtedness to Bank under this Agreement

or the Loan Documents;




 




                Indebtedness existing on the Closing Date and shown

on the Perfection Certificate;




 




                Subordinated Debt;




 




                Indebtedness to trade creditors incurred in the

ordinary course of business; and




 




                Indebtedness secured by Permitted Liens; and




 




                Extensions, refinancings, modifications, amendments

and restatements of any items of Permitted Indebtedness (a) through (f) above,

provided that the principal amount thereof is not increased or the terms

thereof are not modified to impose more burdensome terms upon Borrower or its

Subsidiary, as the case may be.




 




“Permitted

Investments” are:




 




2              Investments shown on the Perfection Certificate and

existing on the Closing Date; and




 




2              (i)  marketable

direct obligations issued or unconditionally guaranteed by the United States or

its agency or any state maturing within 1 year from its acquisition, (ii)

commercial paper maturing no more than 1 year after its creation and having the

highest rating from either Standard & Poor’s Corporation or Moody’s

Investors Service, Inc., (iii) certificates of deposit issued maturing no more

than 1 year after issue, (iv) any other investments administered through the

Bank.




 




“Permitted

Liens” are:




 




(a)           Liens

existing on the Closing Date and shown on the Perfection Certificate or arising

under this Agreement or other Loan Documents;




(b)           Liens

for taxes, fees, assessments or other government charges or levies, either not

delinquent or being contested in good faith and for which Borrower maintains

adequate reserves on its Books, if they have no priority over any of

Bank’s security interests;




 




(c)           Leases

or subleases and non-exclusive licenses or sublicenses granted in the ordinary

course of Borrower’s business, if the leases, subleases, licenses and

sublicenses do not prohibit granting Bank a security interest; and




 




(d)           Liens

incurred in the extension, renewal or refinancing of the indebtedness secured

by Liens described in (a) through (c), but any extension, renewal or

replacement Lien must be limited to the property encumbered by the existing

Lien and the principal amount of the indebtedness may not increase.




 




“Person”

is any individual, sole proprietorship, partnership, limited liability company,

joint venture, company, trust, unincorporated organization, association,

corporation, institution, public benefit corporation, firm, joint stock

company, estate, entity or government agency.




 




“Prime

Rate” is Bank’s most recently announced “prime rate,” even if it is

not Bank’s lowest rate.  Except as

otherwise provided elsewhere herein, any Credit Extension made hereunder based

on the Bank’s Prime Rate shall increase or decrease with the changes in the

Bank’s Prime Rate.




 




“Responsible

Officer”

is each of the Chief Executive Officer, President, Chief Financial Officer and

Controller of Borrower.




 




17





























 




“Revolving

Line” means collectively, the Formula Line and Non-Formula Line.




 




“Subordinated

Debt” is debt incurred by Borrower subordinated to Borrower’s debt

to Bank on terms acceptable to Bank (and identified as being such by Borrower

and Bank).




 




“Subsidiary”

is any Person, corporation, partnership, limited liability company, joint

venture, or any other business entity of which more than 50% of the voting

stock or other equity interests is owned or controlled, directly or indirectly,

by the Person or one or more Affiliates of the Person.




 




“Tangible

Net Worth” means as of any applicable date, the consolidated total

assets of Borrower and its Subsidiaries plus (A) Subordinated Debt, minus

(B), 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; and (iii) Other Assets, and

(iv) tax assets, and (v) security deposits.




 




“Total

Liabilities”means

as of any applicable date, 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.




 




 




 




 




 




 




 




 




IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be

executed as a sealed instrument




under

the laws of the Commonwealth of Massachusetts as of the date first above

written.




 




18





























 




 




	

  BORROWER:


  
	

   


  	

   


  
	

  NMS COMMUNICATIONS CORPORATION


  
	

   


  	

   


  
	

  By


  	

   


  
	

   


  	

   


  
	

  Name:


  	

   


  
	

   


  	

   


  
	

  Title:


  	

   


  
	

   


  	

   


  
	

  BANK:


  	

   


  
	

   


  	

   


  
	

  SILICON

  VALLEY BANK, d/b/a


  
	

  SILICON

  VALLEY EAST


  
	

   


  	

   


  
	

  By


  	

   


  
	

   


  	

   


  
	

  Name:


  	

   


  
	

   


  	

   


  
	

  Title:


  	

   


  
	

   


  	

   


  
	

  SILICON

  VALLEY BANK


  
	

   


  	

   


  
	

  By


  	

   


  
	

   


  	

   


  
	

  Name:


  	

   


  
	

   


  	

   


  
	

  Title:


  	

   


  
	

   


  	

  (Signed

  in Santa Clara County, California)


  
									





 




 




19





























 




EXHIBIT A




 




The Collateral consists of all right, title and interest of Borrower in

and to the following:




 




All goods, equipment, inventory, contract rights or rights to payment

of money, license agreements, franchise agreements, general intangibles

(including payment intangibles), accounts (including health-care receivables),

documents, instruments (including any promissory notes), chattel paper (whether

tangible or electronic), cash, deposit accounts, fixtures, letters of credit

rights (whether or not the letter of credit is evidenced by a writing),

commercial tort claims, securities, and all other investment property

supporting obligations, and financial assets, whether now owned or hereafter

acquired, wherever located; and




 




All Borrower’s Books relating to the foregoing and any and all claims,

rights and interests in any of the above and all substitutions for, additions,

attachments, accessories, accessions and improvements to and replacements,

products, proceeds and insurance proceeds of any or all of the foregoing.




 




The Collateral does not include:




 




 Any copyright rights,

copyright applications, copyright registrations and like protections in each

work of authorship and derivative work, whether published or unpublished, now

owned or later acquired; any patents, trademarks, service marks and

applications therefor; any trade secret rights, including any rights to

unpatented inventions, now owned or hereafter acquired.  Notwithstanding the foregoing, the

Collateral shall include all accounts, license and royalty fees and other

revenues, proceeds, or income arising out of or relating to any of the

foregoing intellectual property.  To the

extent a court of competent jurisdiction holds that a security interest in any

Intellectual Property is necessary to have a security interest in any accounts,

license and royalty fees and other revenues, proceeds, or income arising out of

or relating to any of the foregoing Intellectual Property, then the Collateral

shall, effective as of the Closing Date, include the Intellectual Property, to

the extent necessary to permit perfection of the Bank’s security interest in

such accounts, license and royalty fees and other revenues, proceeds, or income

arising out of or relating to any of the Intellectual Property.




 




20





























 




 EXHIBIT B




 




Loan

Payment/Advance Request Form




Deadline for same day processing is 3:00 E.S.T.




Fax To:  (617) 969–5965                                                                                        Date:

                                                     




 




LOAN

PAYMENT:




Sample documents Client Name (Borrower)




 








	

  From

  Account #


  	

   


  	

   


  	

  To

  Account #


  	

   


  
	

   


  	

  (Deposit Account #)


  	

   


  	

   


  	

  (Loan Account #)


  










 




Principal $                                                        

and/or Interest $                                                                                  




 




All Borrower’s representation and warranties in the

Loan and Security Agreement are true, correct and complete in all material

respects to on the date of the telephone transfer request for and advance, but

those representations and warranties expressly referring to another date shall

be true, correct and complete in all material respects as of the date:




 




Authorized

Signature:                                                                                                  Phone Number:                                    




Loan Advance:




Complete Outgoing

Wire Request section below if all or a portion of the funds from

this loan advance are for an outgoing wire.




 








	

  From

  Account #


  	

   


  	

   


  	

  To

  Account #


  	

   


  
	

   


  	

  (Loan Account #)


  	

   


  	

   


  	

  (Deposit Account #)


  










 




Amount of Advance $                                  




 




All Borrower’s representation and warranties in the

Loan and Security Agreement are true, correct and complete in all material

respects to on the date of the telephone transfer request for and advance, but

those representations and warranties expressly referring to another date shall

be true, correct and complete in all material respects as of the date:




 




Authorized Signature:                                                                                    Phone Number:                                                    




Outgoing Wire Request




Complete

only if all or a portion of funds from the loan advance above are to be wired.




Deadline for same day processing is 3:00pm, E.S.T.




 








	

  Beneficiary

  Name:


  	

   


  	

   


  	

   


  	

  Amount

  of Wire:


  	

   


  	

  $


  	

  ­


  
	

  Beneficiary

  Bank:


  	

   


  	

   


  	

   


  	

  Account

  Number:


  	

   


  	

   


  
	

  City

  and Sate:


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Beneficiary

  Bank Transit (ABA) #: 


  	

  __

  __ __ __ __ __ __


  	

   


  	

  Beneficiary

  Bank Code (Swift, Sort, Chip, etc.):


  
	

   


  	

   


  	

   


  	

   


  	

  (For

  International Wire Only)


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Intermediary

  Bank:


  	

   


  	

   


  	

   


  	

  Transit

  (ABA) #:


  	

   


  	

   


  
	

  For

  Further Credit to:


  	

   


  
	

  Special

  Instruction:


  	

   


  
										










 




By signing below, I (we) acknowledge and agree that

my (our) funds transfer request shall be processed in accordance with and

subject to the terms and conditions set forth in the agreements(s) covering

funds transfer service(s), which agreements(s) were previously received and

executed by me (us).




 




	

  Authorized Signature:


  	

   


  	

   


  	

  2nd Signature

  (If Required):


  	

   


  
	

  Print Name/Title:


  	

   


  	

   


  	

  Print

  Name/Title:


  	

   


  
	

  Telephone #


  	

   


  	

   


  	

  Telephone #


  	

   


  
									





 




21





























 




EXHIBIT C




BORROWING BASE CERTIFICATE




 






















 




Borrower:           NMS

Communications Corporation




 




Lender:       Silicon Valley Bank




 




Commitment Amount:     $5,000,000.00

under the Formula Line




 






















 




 




	

  ACCOUNTS RECEIVABLE


  	

   


  	

   


  	

   


  
	

  1.


  	

   


  	

  Accounts Receivable Book

  Value as of 


  	

   


  	

  $


  	

   


  	

   


  
	

  2.


  	

   


  	

  Additions (please explain

  on reverse)


  	

   


  	

  $


  	

   


  	

   


  
	

  3.


  	

   


  	

  TOTAL ACCOUNTS RECEIVABLE


  	

   


  	

  $


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  ACCOUNTS RECEIVABLE

  DEDUCTIONS (without duplication)


  	

   


  	

   


  	

   


  
	

  4.


  	

   


  	

  Amounts over 90 days due


  	

   


  	

  $


  	

   


  	

   


  
	

  5.


  	

   


  	

  Balance of 50 over 90 day

  accounts


  	

   


  	

  $


  	

   


  	

   


  
	

  6.


  	

   


  	

  Credit balances over 90

  days


  	

   


  	

  $


  	

   


  	

   


  
	

  7.


  	

   


  	

  Concentration Limits


  	

   


  	

  $


  	

   


  	

   


  
	

  8.


  	

   


  	

  Foreign Accounts


  	

   


  	

  $


  	

   


  	

   


  
	

  9.


  	

   


  	

  Governmental Accounts


  	

   


  	

  $


  	

   


  	

   


  
	

  10.


  	

   


  	

  Contra Accounts


  	

   


  	

  $


  	

   


  	

   


  
	

  11.


  	

   


  	

  Promotion or Demo Accounts


  	

   


  	

  $


  	

   


  	

   


  
	

  12.


  	

   


  	

  Intercompany/Employee

  Accounts


  	

   


  	

  $


  	

   


  	

   


  
	

  13.


  	

   


  	

  Other (please explain on

  reverse)


  	

   


  	

  $


  	

   


  	

   


  
	

  14.


  	

   


  	

  TOTAL ACCOUNTS RECEIVABLE

  DEDUCTIONS


  	

   


  	

  $


  	

   


  	

   


  
	

  15.


  	

   


  	

  Eligible Accounts (#3

  minus #14)


  	

   


  	

  $


  	

   


  	

   


  
	

  16.


  	

   


  	

  LOAN VALUE OF ACCOUNTS

  (75% of #15)


  	

   


  	

  $


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  BALANCES


  	

   


  	

   


  	

   


  
	

  17.


  	

   


  	

  Maximum Loan Amount


  	

   


  	

  $


  	

   


  	

   


  
	

  18.


  	

   


  	

  Total Funds Available

  (Lesser of #17 or #16)


  	

   


  	

  $


  	

   


  	

   


  
	

  19.


  	

   


  	

  Present balance owing on

  Line of Credit


  	

   


  	

  $


  	

   


  	

   


  
	

  20.


  	

   


  	

  Outstanding under

  Sublimits (L/C, Foreign Exchange, Cash Mgt.)


  	

   


  	

  $


  	

   


  	

   


  
	

  21.


  	

   


  	

  RESERVE POSITION

  (#18 minus #19 and #20)


  	

   


  	

  $


  	

   


  	

   


  





 




The

undersigned represents and warrants that this is true, complete and correct,

and that the information in this Borrowing Base Certificate complies with the

representations and warranties in the Loan and Security Agreement between the

undersigned and Silicon Valley Bank.




 




 




22