Exhibit 10.44

SILICON VALLEY BANK

LOAN AND SECURITY AGREEMENT

 

Borrower:    VERTICAL COMMUNICATIONS, INC. Address:    One Memorial Drive   
Cambridge, Massachusetts 02142 Borrower:    VERTICAL COMMUNICATIONS ACQUISITION
CORP. Address:    One Memorial Drive    Cambridge, Massachusetts 02142 Borrower:
   VODAVI TECHNOLOGY, INC. Address:    One Memorial Drive    Cambridge,
Massachusetts 02142 Borrower:    VODAVI COMMUNICATIONS SYSTEMS, INC. Address:   
One Memorial Drive    Cambridge, Massachusetts 02142 Date:    May     , 2007

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into on the above
date 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 (“Silicon”) and the
borrower named above (jointly and severally, individually and collectively, the
“Borrower”), whose chief executive office is located at the above address
(“Borrower’s Address”). The Schedule and Exhibits to this Agreement (the
“Schedule” and the “Exhibits,” respectively) shall for all purposes be deemed to
be part of this Agreement, and the same are integral parts of this Agreement.
(Definitions of certain terms used in this Agreement are set forth in Section 8
below.)

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RECITALS

Each of the entities comprising Borrower wishes to obtain credit from time to
time from Silicon, and Silicon desires to extend credit to each and/or any one
of the entities comprising Borrower. This Agreement sets forth the terms on
which Silicon will advance credit to Borrower, and Borrower, jointly and
severally, will repay the amounts owing to Silicon.

Section 1 LOANS.

1.1 Loans. Silicon will make loans to Borrower (the “Loans”) up to the amounts
(the “Credit Limit”) shown on the Schedule, provided no Default or Event of
Default has occurred and is continuing, and subject to deduction of any Reserves
for accrued interest and such other Reserves as Silicon deems proper from time
to time in its good faith business judgment. Amounts borrowed may be repaid and
reborrowed during the term of this Agreement.

1.2 Interest. All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the
contrary in this Agreement. Interest shall be payable monthly, on the last
Business Day of the month. Interest may, in Silicon’s discretion, be charged to
Borrower’s loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower’s Deposit Accounts maintained with Silicon. Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall pay
Silicon minimum monthly interest during the term of this Agreement in the amount
set forth on the Schedule (the “Minimum Monthly Interest”).

1.3 Overadvances. If at any time or for any reason the total of all outstanding
Loans and all other monetary Obligations exceeds the Credit Limit (an
“Overadvance”), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower’s obligation to
repay to Silicon the amount of any Overadvance, Borrower agrees to pay Silicon
interest on the outstanding amount of any Overadvance, on demand, at the Default
Rate.

1.4 Fees. Borrower shall pay Silicon the fees shown on the Schedule, which are
in addition to all interest and other sums payable to Silicon and are not
refundable.

1.5 Loan Requests. To obtain a Loan, Borrower shall make a request to Silicon by
facsimile or telephone. Loan requests received after 12:00 Noon will not be
considered by Silicon until the next Business Day. Silicon may rely on any
telephone request for a Loan given by a person whom Silicon believes is an
authorized representative of Borrower, and Borrower will indemnify Silicon for
any loss Silicon suffers as a result of that reliance.

1.6 Letters of Credit. At the request of Borrower, Silicon may, in its good
faith business judgment, issue or arrange for the issuance of letters of credit
for the account of Borrower, in each case in form and substance satisfactory to
Silicon in its sole discretion (collectively, “Letters of Credit”). The
aggregate face amount of all Letters of Credit outstanding from time to time
(plus all Silicon exposure under any foreign exchange contracts and Cash
Management Services) shall not exceed the amount shown on the Schedule (the
“Letter of Credit Sublimit”), and shall be reserved against Loans which would
otherwise be available hereunder, and in the event at any time there are
insufficient Loans available to Borrower for such reserve, Borrower shall
deposit and maintain with Silicon cash collateral in an amount at all times
equal to such deficiency, which shall be held as Collateral for all purposes of
this Agreement. Borrower shall pay all bank charges (including charges of
Silicon) for the issuance of Letters of Credit, together with such additional
fee as Silicon’s letter of credit department shall charge in connection with the
issuance of the Letters of Credit. Any payment by Silicon under or in connection
with a Letter of Credit shall constitute a Loan hereunder on the date such
payment is made. Each Letter of Credit shall have an expiry date no later than
thirty days prior to the Maturity Date. Borrower hereby agrees to indemnify,
save, and hold Silicon

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harmless from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys’ fees incurred by Silicon arising
out of or in connection with any Letters of Credit. Borrower agrees to be bound
by the regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower’s account or by Silicon’s
interpretations of any Letter of Credit issued by Silicon for Borrower’s
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower’s instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon’s indemnification of any such issuing bank. The
provisions of this Agreement, as it pertains to Letters of Credit, and any other
Loan Documents relating to Letters of Credit are cumulative.

1.7 Cash Management Services Sublimit. In addition to Section 1.6 above,
Borrower may also use up to the amount set forth on the Schedule for Cash
Management Services (the “Cash Management Services Sublimit”). Such aggregate
amounts utilized under the Cash Management Services Sublimit shall at all times
reduce the amount otherwise available for Loans, letters of credit, foreign
exchange contracts or other credit accommodations hereunder. Any amounts Silicon
pays on behalf of Borrower or any amounts that are not paid by Borrower for any
Cash Management Services will be treated as Loans hereunder and will accrue
interest at the interest rate applicable to Loans.

1.8 Designation of Agent. Each Borrower hereby designates Vertical
Communications, Inc. (the “Agent”) as the agent of that Borrower to discharge
the duties and responsibilities of the Agent as provided herein.

1.9 Operation of Agreement.

(a) Except as otherwise permitted by Silicon, Loans hereunder shall be requested
solely by the Agent as agent for each Borrower.

(b) Any Loan which may be made by Silicon under this Agreement and which is
directed to the Agent is received by the Agent in trust for that Borrower who is
intended to receive such Loan. The Agent shall distribute the proceeds of any
such Loan solely to that Borrower. Each Borrower shall be directly indebted to
Silicon for each Loan distributed to any Borrower by the Agent, together with
all accrued interest thereon, as if that amount had been advanced directly by
Silicon to a Borrower (whether or not the subject Loan was based upon the
accounts and/or inventory or other assets of the Borrower which actually
received such distribution), in addition to which each Borrower shall be liable
to Silicon for all Obligations under this Agreement, whether or not the proceeds
of the Loan are distributed to any particular Borrower.

(c) Silicon shall have no responsibility to inquire as to the distribution of
Loans made by Silicon through the Agent as described herein.

1.10 Loans Directly to Borrower.

(a) If, for any reason, and at any time during the term of this Agreement,

(i) any Borrower, including the Agent, as agent for each Borrower, shall be
unable to, or prohibited from carrying out the terms and conditions of this
Agreement (as determined by Silicon in Silicon’s sole and absolute discretion);
or

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(ii) Silicon deems it inexpedient (in Silicon’s sole and absolute discretion) to
continue making Loans to or for the account of any particular Borrower, or to
channel such loans and Loans through the Agent, then Silicon may make Loans
directly to such Borrower as Silicon determines to be expedient, which Loans may
be made without regard to the procedures otherwise included herein.

(b) Each Borrower shall remain liable to Silicon for the payment and performance
of all Obligations (which payment and performance shall continue to be secured
by all Collateral) notwithstanding any determination by Silicon to cease making
Loans to or for the benefit of any Borrower.

1.11 Indemnification. Except to the extent caused by Silicon’s gross negligence
or willful misconduct, the Agent and each Borrower respectively shall indemnify,
defend, and save and hold Silicon harmless from and against any liabilities,
claims, demands, expenses, or losses made against or suffered by Silicon on
account of, or arising out of, this Agreement, Silicon’s reliance upon Loan
requests made by the Agent, or any other action taken by Silicon hereunder or
under any of Silicon’s various agreements with the Agent and/or any Borrower
and/or any other person arising under this Agreement.

Section 2 SECURITY INTEREST.

2.1 Security Interest. To secure the payment and performance of all of the
Obligations when due, and the performance of each of the Borrower’s duties under
this Agreement and all documents executed in connection herewith, Borrower
hereby grants to Silicon a continuing security interest in all of Borrower’s
interest in the following, whether now owned or hereafter acquired, and wherever
located: All Inventory, Equipment, Payment Intangibles, Letter-of-Credit Rights,
Supporting Obligations, Accounts, and General Intangibles, including, without
limitation, all of Borrower’s Intellectual Property, Deposit Accounts, and all
money, and all property now or at any time in the future in Silicon’s possession
(including claims and credit balances), and all proceeds (including proceeds of
any insurance policies, proceeds of proceeds and claims against third parties),
all products and all books and records related to any of the foregoing (all of
the foregoing, together with all other property in which Silicon may now or in
the future be granted a lien or security interest, is referred to herein,
collectively, as the “Collateral”). The security interest granted herein shall
be a first priority security interest in the Collateral, except as expressly set
forth in the Intercreditor Agreement. After the occurrence of a Default, Silicon
may place a “hold” on any Deposit Account pledged as collateral. Except as noted
on the Perfection Certificate, Borrower is not a party to, nor is bound by, any
material license (other than over the counter software that is commercially
available to the public) or other material agreement with respect to which
Borrower is the licensee that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower’s interest in such license or agreement
or any other property. Borrower shall provide written notice to Silicon within
ten (10) days of entering or becoming bound by, any such license or agreement
which is reasonably likely to have a material impact on Borrower’s business or
financial condition. Borrower shall take such steps as Silicon requests to
obtain the consent of, authorization by, or waiver by, any person whose consent
or waiver is necessary for all such licenses or contract rights to be deemed
“Collateral” and for Silicon to have a security interest in it that might
otherwise be restricted or prohibited by law or by the terms of any such license
or agreement (such consent or authorization may include a licensor’s agreement
to a contingent assignment of the license to Silicon if the Silicon determines
that is necessary in its good faith judgment), whether now existing or entered
into in the future.

Section 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations (other than those that speak as to a specific
date) will continue to be true, and that Borrower will at all times comply with
all of the

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following covenants, throughout the term of this Agreement and until all
Obligations have been paid and performed in full:

3.1 Corporate Existence and Authority. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a material adverse effect on Borrower. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors’ rights generally), (iii) do not violate
Borrower’s organizational documents, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.

3.2 Name; Trade Names and Styles. The name of Borrower set forth in the heading
to this Agreement is its correct name. Listed on the Perfection Certificate are
all prior names of Borrower and all of Borrower’s present and prior trade names.
Borrower shall give Silicon 30 days’ prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.

3.3 Place of Business; Location of Collateral. The address set forth in the
heading to this Agreement is Borrower’s chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Perfection Certificate. Borrower will give Silicon at least 30
days prior written notice before opening any additional place of business,
changing its chief executive office, changing its state of formation or moving
any of the Collateral to a location other than Borrower’s Address or one of the
locations set forth on the Perfection Certificate, except that Borrower may
maintain sales offices in the ordinary course of business at which not more than
a total of $10,000 fair market value of Equipment is located.

3.4 Title to Collateral; Perfection; Permitted Liens.

(a) Borrower is now, and will at all times in the future be, the sole owner of
all the Collateral, except for items of Equipment which are leased to Borrower.
The Collateral now is and will remain free and clear of any and all liens,
charges, security interests, encumbrances and adverse claims, except for
Permitted Liens. Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to the Permitted Liens and as expressly set forth in the Intercreditor
Agreement, and Borrower will at all times defend Silicon and the Collateral
against all claims of others.

(b) Borrower has set forth in the Perfection Certificate all of Borrower’s
Deposit Accounts, and Borrower will give Silicon five Business Days advance
written notice before establishing any new Deposit Accounts and will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to Silicon a control agreement in form sufficient to perfect Silicon’s
security interest in the Deposit Account and otherwise satisfactory to Silicon
in its good faith business judgment. Nothing herein limits any requirements
which may be set forth in the Schedule as to where Deposit Accounts will be
maintained.

(c) In the event that Borrower shall at any time after the date hereof have any
commercial tort claims against others, which it is asserting or intends to
assert, and in which the potential recovery exceeds $100,000, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall request (unless providing such
information would waive the Borrower’s attorney-client privilege). Such
notification to Silicon shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
execute and deliver all such documents and take all such actions as Silicon
shall request in connection therewith.

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(d) None of the Collateral now is or will be affixed to any real property in
such a manner, or with such intent, as to become a fixture. Borrower is not and
will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower’s
right to remove any Collateral from the leased premises. Whenever any Collateral
is located upon premises in which any third party has an interest, Borrower
shall, whenever requested by Silicon, use commercially reasonable efforts to
cause such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon shall specify in its good
faith business judgment. Borrower will keep in full force and effect, and will
comply with all material terms of, any lease of real property where any of the
Collateral now or in the future may be located.

(e) Borrower hereby authorizes Silicon to file financing statements, without
notice to Borrower, with all appropriate jurisdictions in order to perfect or
protect Silicon’s interest or rights hereunder, which financing statements may
indicate the Collateral as “all assets of the Debtor” or words of similar
effect, or as being of an equal or lesser scope, or with greater detail, all in
Silicon’s discretion.

3.5 Maintenance of Collateral. Borrower will maintain the Collateral in good
working condition (ordinary wear and tear excepted), and Borrower will not use
the Collateral for any unlawful purpose. Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.

3.6 Books and Records. Borrower has maintained and will maintain at Borrower’s
Address complete and accurate books and records, comprising an accounting system
in accordance with GAAP.

3.7 Financial Condition, Statements and Reports. All financial statements now or
in the future delivered to Silicon have been, and will be, prepared in
conformity with GAAP and now and in the future will fairly present the results
of operations and financial condition of Borrower, in accordance with GAAP, at
the times and for the periods therein stated. Between the last date covered by
any such statement provided to Silicon and the date hereof, there has been no
material adverse change in the financial condition or business of Borrower.
Borrower is now and will continue to be solvent.

3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely filed,
and will timely file, all required tax returns and reports, and Borrower has
timely paid, and will timely pay, all foreign, federal, state and local taxes,
assessments, deposits and contributions now or in the future owed by Borrower.
Borrower may, however, defer payment of any contested taxes, provided that
Borrower (i) in good faith contests Borrower’s obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower’s prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid, and shall continue to pay all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

3.9 Compliance with Law. Borrower has, to the best of its knowledge, complied,
and will comply, in all material respects, with all provisions of all foreign,
federal, state and local laws and regulations applicable to Borrower, including,
but not limited to, those relating to Borrower’s ownership of real or personal
property, the conduct and licensing of Borrower’s business, and all
environmental matters.

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3.10 Litigation. Except as disclosed in the Schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of Borrower’s
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.

3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for working
capital purposes in the ordinary course of business. Borrower is not purchasing
or carrying any “margin stock” (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any Loan
will be used to purchase or carry any “margin stock” or to extend credit to
others for the purpose of purchasing or carrying any “margin stock.”

Section 4 ACCOUNTS.

4.1 Representations Relating to Accounts. Borrower represents and warrants to
Silicon as follows: Each Account with respect to which Loans are requested by
Borrower shall, on the date each Loan is requested and made, (i) represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services, or the non-exclusive licensing of Intellectual Property, in the
ordinary course of Borrower’s business, and (ii) meet the Minimum Eligibility
Requirements set forth in Section 8 below.

4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower’s books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Account shall fully comply
in all material respects with all applicable laws and governmental rules and
regulations. To the best of Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.

4.3 Schedules and Documents relating to Accounts. Borrower shall deliver to
Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon’s standard forms; provided, however, that Borrower’s
failure to execute and deliver the same shall not affect or limit Silicon’s
security interest and other rights in all of Borrower’s Accounts, nor shall
Silicon’s failure to advance or lend against a specific Account affect or limit
Silicon’s security interest and other rights therein. Loan requests received
after 12:00 Noon will not be considered by Silicon until the next Business Day.
Together with each such schedule and assignment, or later if requested by
Silicon, Borrower shall furnish Silicon with copies (or, at Silicon’s request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave
rise to such Accounts, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to Silicon an aged accounts receivable
trial balance in such form and at such intervals as Silicon shall request. In
addition, Borrower shall deliver to Silicon, on its request, the originals of
all instruments, chattel paper, security agreements, guarantees and other
documents and property evidencing or securing any Accounts, in the same form as
received, with all necessary endorsements and copies of all credit memos.

4.4 Collection of Accounts. Borrower shall cause the Account Debtors to remit
all Accounts to Silicon and Silicon shall hold all payments on, and proceeds of,
Accounts in a lockbox account, the Cash Collateral Account, or such other
“blocked account” as Silicon may specify, pursuant to a blocked account
agreement in such

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form as Silicon may specify. All such payments on, and proceeds of, Accounts
shall be applied to the then-outstanding Obligations of Borrower due and owing
in such order as Silicon shall determine. In the event any payments on, or
proceeds of, such Accounts (or the proceeds from the sale of Inventory) are
deposited directly into the Designated Deposit Account or any other account
maintained at Silicon, Borrower hereby authorizes Silicon to transfer such funds
to the Cash Collateral Account for application to the then-outstanding
Obligations of Borrower due and owing in such order as Silicon shall determine
(and such transfer shall not be deemed to constitute a Collection Action under
the Intercreditor Agreement). Silicon or its designee may, during the existence
of an Event of Default, notify Account Debtors that the Accounts have been
assigned to Silicon.

4.5 Remittance of Proceeds. All proceeds arising from the disposition of any
Collateral shall be delivered, in kind, by Borrower to Silicon in the original
form in which received by Borrower not later than the following Business Day
after receipt by Borrower, to be applied to the Obligations in such order as
Silicon shall determine; provided that, if no Default or Event of Default has
occurred and is continuing, Borrower shall not be obligated to remit to Silicon
the proceeds of the sale of worn out or obsolete Equipment disposed of by
Borrower in good faith in an arm’s length transaction for an aggregate purchase
price of $100,000 or less (for all such transactions in any fiscal year).
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower’s other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Silicon.
Nothing in this Section 4.5 limits the restrictions on disposition of Collateral
set forth elsewhere in this Agreement.

4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or claims
relating to Accounts. Borrower shall not forgive (completely or partially),
compromise or settle any Account for less than payment in full, or agree to do
any of the foregoing, except that Borrower may do so, provided that:
(i) Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm’s length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. Silicon may, at any time after the
occurrence and during the existence of an Event of Default, settle or adjust
disputes or claims directly with Account Debtors for amounts and upon terms
which Silicon considers advisable in its reasonable credit judgment and, in all
cases, Silicon shall credit Borrower’s Loan account with only the net amounts
received by Silicon in payment of any Accounts.

4.7 Returns. Provided no Event of Default has occurred and is continuing, if any
Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and promptly issue a credit memorandum to
the Account Debtor in the appropriate amount (sending a copy to Silicon). In the
event any attempted return occurs after the occurrence and during the
continuance of any Event of Default, Borrower shall hold the returned Inventory
in trust for Silicon and immediately notify Silicon of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on Silicon’s request deliver such returned Inventory
to Silicon.

4.8 Verification. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

4.9 No Liability. Silicon shall not be responsible or liable for any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gives rise to an Account, or for any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account, or for settling any Account in
good faith for less than the full amount thereof, nor shall Silicon be deemed to
be responsible for any of Borrower’s obligations under any contract or agreement
giving rise to an Account. Nothing herein shall, however, relieve Silicon from
liability for its own gross negligence or willful misconduct.

Section 5 ADDITIONAL DUTIES OF THE BORROWER.

5.1 Financial and Other Covenants. Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.

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5.2 Insurance. Borrower shall, at all times insure all of the tangible personal
property Collateral and carry such other business insurance, with insurers
reasonably acceptable to Silicon, in such form and amounts as Silicon may
reasonably require and that are customary and in accordance with standard
practices for Borrower’s industry and locations, and Borrower shall provide
evidence of such insurance to Silicon. All such insurance policies shall name
Silicon as an additional loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon. Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in reduction
of the Obligations as Silicon shall determine in its good faith business
judgment, except that, provided no Default or Event of Default has occurred and
is continuing, Silicon shall release to Borrower insurance proceeds with respect
to Equipment totaling less than $100,000, which shall be utilized by Borrower
for the replacement of the Equipment with respect to which the insurance
proceeds were paid. Silicon may require reasonable assurance that the insurance
proceeds so released will be so used. If Borrower fails to provide or pay for
any insurance, Silicon may, but is not obligated to, obtain the same at
Borrower’s expense. Borrower shall promptly deliver to Silicon copies of all
material reports made to insurance companies.

5.3 Reports. Borrower, at its expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as Silicon shall from time to time specify in its good
faith business judgment.

5.4 Access to Collateral, Books and Records. At reasonable times, and on one
Business Day’s notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower’s books and records.
Silicon shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but Silicon shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower’s expense and the charge therefor
shall be $750 per person per day (or such higher amount as shall represent
Silicon’s then current standard charge for the same), plus reasonable
out-of-pocket expenses. In the event Borrower and Silicon schedule an audit more
than 10 days in advance, and Borrower seeks to reschedule the audit with less
than 10 days’ written notice to Silicon, then (without limiting any of Silicon’s
rights or remedies), Borrower shall pay Silicon a cancellation fee of $1,000
plus any out-of-pocket expenses incurred by Silicon, to compensate Silicon for
the anticipated costs and expenses of the cancellation.

5.5 Negative Covenants. Except as may be permitted in the Schedule, Borrower
shall not, without Silicon’s prior written consent which shall be a matter of
its good faith business judgment, do any of the following: (i) merge or
consolidate with another corporation or entity except that Borrowers may merge
with each other; (ii) acquire any assets, except in the ordinary course of
business; (iii) enter into any other transaction outside the ordinary course of
business; (iv) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of Borrower’s business, and except for the sale
of obsolete or unneeded Equipment in the ordinary course of business and
transfers between Borrowers; (v) store any Inventory or other Collateral with
any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis;
(vii) except for advances in the ordinary course of business not exceeding
$100,000 in the aggregate outstanding at any time, make any loans of any money
or other assets; (viii) incur any debts outside the ordinary course of business
other than debts outstanding as of the date of this Agreement as set forth on
EXHIBIT 5.5(viii) annexed hereto and debt for the purchase of equipment or
software up to an aggregate amount not to exceed $2,000,000; (ix) guarantee or
otherwise become liable with respect to the obligations of another party or
entity, except as set forth on Exhibit 5.5(viii); (x) pay or declare any
dividends on Borrower’s stock (except for payments not exceeding $75,000 in the
aggregate made to stockholders of Vertical Communications, Inc. in payment for
fractional shares in connection with any stock split of its capital stock and
except for dividends payable solely in stock of Borrower) or dividends paid by
Vertical Communications Acquisition Corp., Vodavi Technology, Inc. or Vodavi
Communications Systems, Inc, directly or indirectly, to Vertical Communications,
Inc.; (xi) redeem, retire,

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purchase or otherwise acquire, directly or indirectly, any of Vertical
Communications, Inc.’s Borrower’s stock (except for payments not exceeding
$75,000 in the aggregate made to stockholders of Vertical Communications, Inc.
in payment for fractional shares in connection with any stock split of its
capital stock); (xii) make any change in Borrower’s capital structure which
would have a material adverse effect on Borrower or on the prospect of repayment
of the Obligations or have any change in management of the Borrower;
(xiii) engage, directly or indirectly, in any business other than the business
currently engaged in by Borrower or reasonably related thereto; (xiv) dissolve
or elect to dissolve; or (xv) transfer any proceeds of Loans or Collateral to
any account in which Silicon does not have a first perfected security interest,
unless required pursuant to the terms of the NEIPF Facility but only as
permitted pursuant to the Intercreditor Agreement. Transactions permitted by the
foregoing provisions of this Section are only permitted if no Default or Event
of Default would occur as a result of such transaction.

5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Silicon, make available Borrower
and its officers, employees and agents and Borrower’s books and records, to the
extent that Silicon may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.

5.7 Further Assurances. Borrower agrees, at its expense, on request by Silicon,
to execute all documents and take all actions, as Silicon may, in its good faith
business judgment, deem necessary or useful in order to perfect and maintain
Silicon’s perfected first-priority security interest in the Collateral (subject
to Permitted Liens and the terms expressly set forth in the Intercreditor
Agreement), and in order to fully consummate the transactions contemplated by
this Agreement.

Section 6 TERM.

6.1 Maturity Date. This Agreement shall continue in effect as to the Loans until
the maturity date set forth on the Schedule (the “Maturity Date”) subject to
Section 6.2 below.

6.2 Payment of Obligations. On the applicable Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations relating to the applicable loan being repaid, whether evidenced by
installment notes or otherwise, and whether or not all or any part of the
Obligations relating to such loan are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date applicable to
Loans, or on any earlier effective date of termination, there are any
outstanding Letters of Credit issued by Silicon or issued by another institution
based upon an application, guarantee, indemnity or similar agreement on the part
of Silicon, then on such date Borrower shall provide to Silicon cash collateral
in an amount equal to 105% of the face amount of all such Letters of Credit plus
all interest, fees and cost due or to become due in connection therewith (as
estimated by Silicon in its good faith business judgment), to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon’s then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon’s security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided that
Silicon may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and written
termination of this Agreement by Silicon, Silicon shall promptly deliver to
Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate Silicon’s security interests.

Section 7 EVENTS OF DEFAULT AND REMEDIES.

7.1 Events of Default. The occurrence of any of the following events shall
constitute an “Event of Default” under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower’s officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made; or

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(b) Borrower shall fail to pay any Loan or any interest thereon when due or
Borrower shall fail to pay any other monetary Obligation within five (5) days of
when due; or (c) the total Loans and other Obligations outstanding at any time
shall exceed the Credit Limit; or (d) Borrower shall fail to comply with any of
the financial covenants set forth in the Schedule or shall fail to perform any
other non-monetary Obligation which by its nature cannot be cured, or shall fail
to permit Silicon to conduct an inspection or audit as specified in Section 5.4
hereof; or (e) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within 10 Business Days after the date due; or
(f) any levy, assessment, attachment, seizure, lien or encumbrance (other than a
Permitted Lien) is made on all or any part of the Collateral which is not cured
within 10 days after the occurrence of the same, or immediately upon the service
of process upon Silicon seeking to attach by trustee or other process, any of
Borrower’s funds on deposit with, or assets of the Borrower in the possession
of, Silicon; or (g) any default or event of default occurs under any obligation
secured by a Permitted Lien that permits acceleration or exercise of remedies,
which is not cured within any applicable cure period or waived in writing by the
holder of the Permitted Lien; or (h) Borrower breaches any material contract or
obligation, which has or may reasonably be expected to have a material adverse
effect on Borrower’s business or financial condition; or (i) Dissolution,
termination of existence, insolvency or business failure of Borrower; or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding by Borrower under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect; or (j) the commencement of any
proceeding against Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within 30 days
after the date commenced; or (k) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing, or commencement of proceedings by any guarantor of any of
the Obligations under any bankruptcy or insolvency law; or (l) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party affiliated with Borrower to secure any or all of the
Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower defaults under any agreement evidencing any
indebtedness to any third party; or (n) (i) Borrower makes any payment on
account of any indebtedness or obligation which has been subordinated to the
Obligations other than as permitted in the Intercreditor Agreement or other
applicable subordination agreement, or a default occurs under any instrument
evidencing such subordinated indebtedness, or the holder of any such
subordinated indebtedness accelerates all or any portion of such subordinated
indebtedness or if any Person who has subordinated such indebtedness or
obligations terminates or in any way limits his subordination agreement other
than in accordance with its terms or (ii) Borrower or any creditor of Borrower
or any of its subsidiaries fails to comply with the terms of any subordination
agreement or the Intercreditor Agreement or any subordination provisions of any
note or other document inuring to the benefit of Silicon, or if such document
becomes null and void or any party denies further liability under any such
document or provides notice to that effect; or (o) (i) there shall be any change
in the record or beneficial ownership of the outstanding shares of stock of
Vertical Communications Acquisition Corp., Vodavi Technology, Inc. or Vodavi
Communications Systems, Inc. (each a direct or indirect wholly-owned subsidiary
of Vertical Communications, Inc.) compared to the ownership of outstanding
shares of stock of Borrower in effect on the date hereof, without the prior
written consent of Silicon or (ii) any “person” or “group” (within the meaning
of Section 13(d) and 14 (d)(2) of the Securities Exchange Act of 1934, as
amended, becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, directly or indirectly of 40% of
the shares of all classes of stock then outstanding of Vertical Communications,
Inc. ordinarily entitled to vote in the election of directors; or (p) Borrower
shall generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or (q) there shall be (i) a material impairment in the perfection or
priority of Silicon’s security interest in any material portion of 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;
(iii) a material impairment of the prospect of repayment of any portion of the
Obligations; or (iv) Silicon determines, based upon information available to it
and in its reasonable judgment, that there is substantial likelihood that
Borrower shall fail to comply

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with one or more of the financial covenants in Section 5.1 during the next
succeeding financial reporting period; or (r) Silicon, acting in good faith and
in a commercially reasonable manner, deems itself insecure because of the
occurrence of an event prior to the effective date hereof of which Silicon had
no knowledge on the effective date; or (s) Borrower shall breach any term of the
IP Security Agreement granted by the Borrower to Silicon. Silicon may cease
making any Loans hereunder during any of the above cure periods, and thereafter
if an Event of Default has occurred and is continuing.

7.2 Remedies. Upon the occurrence and during the continuance of any Event of
Default, Silicon, at its option, and without notice or demand of any kind (all
of which are hereby expressly waived by Borrower), may do any one or more of the
following: (a) Cease making Loans or otherwise extending credit to Borrower
under this Agreement or any other document or agreement; (b) Accelerate and
declare all or any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by any
instrument evidencing or relating to any Obligation; (c) Take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Silicon without judicial process to enter onto any of
Borrower’s premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Silicon seek to take possession of any
of the Collateral by court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Silicon retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower’s premises,
vehicles, hoists, lifts, cranes, and other Equipment and all other property
without charge; (f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale; and in connection therewith,
(i) Silicon shall have the right to conduct such disposition on Borrower’s
premises without charge, for such time or times as Silicon deems reasonable, or
on Silicon’s premises, or elsewhere and the Collateral need not be located at
the place of disposition, (ii) Silicon may directly or through any affiliated
company purchase or lease any Collateral at any such public disposition, and if
permissible under applicable law, at any private disposition, and (iii) any sale
or other disposition of Collateral shall not relieve Borrower of any liability
Borrower may have if any Collateral is defective as to title or physical
condition or otherwise at the time of sale; (g) Demand payment of, and collect
any Accounts and General Intangibles comprising Collateral and, in connection
therewith, Borrower irrevocably authorizes Silicon to endorse or sign Borrower’s
name on all collections, receipts, instruments and other documents, to take
possession of and open mail addressed to Borrower and remove therefrom payments
made with respect to any item of the Collateral or proceeds thereof, and, in
Silicon’s sole discretion, to grant extensions of time to pay, compromise claims
and settle Accounts and the like for less than face value; (h) Offset against
any sums in any of Borrower’s general, special or other Deposit Accounts with
Silicon against any or all the Obligations; and (i) Demand and receive
possession of any of Borrower’s federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto. All
reasonable attorneys’ fees, expenses, costs, liabilities and obligations
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
Without limiting any of Silicon’s rights and remedies, from and after the
occurrence and during the continuance of any Event of Default, the interest rate
applicable to the Obligations shall be increased by an additional three percent
(3%) per annum (the “Default Rate”).

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7.3 Standards for Determining Commercial Reasonableness. Borrower and Silicon
agree that a sale or other disposition (collectively, “sale”) of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least
ten (10) days prior to the sale, and, in the case of a public sale, notice of
the sale is published at least five (5) days before the sale in a newspaper of
general circulation in the county where the sale is to be conducted; (ii) Notice
of the sale describes the collateral in general, non-specific terms; (iii) The
sale is conducted at a place designated by Silicon, with or without the
Collateral being present; (iv) The sale commences at any time between 8:00 a.m.
and 6:00 p.m; (v) Payment of the purchase price in cash or by cashier’s check or
wire transfer is required; (vi) With respect to any sale of any of the
Collateral, Silicon may (but is not obligated to) direct any prospective
purchaser to ascertain directly from Borrower any and all information concerning
the same. Silicon shall be free to employ other methods of noticing and selling
the Collateral, in its discretion, if they are commercially reasonable.

7.4 Power of Attorney. Upon the occurrence and during the continuance of any
Event of Default, without limiting Silicon’s other rights and remedies, Borrower
grants to Silicon an irrevocable power of attorney coupled with an interest,
authorizing and permitting Silicon (acting through any of its employees,
attorneys or agents) at any time, at its option, but without obligation, with or
without notice to Borrower, and at Borrower’s expense, to do any or all of the
following, in Borrower’s name or otherwise, but Silicon agrees to exercise the
following powers in a commercially reasonable manner: (a) Execute on behalf of
Borrower any documents that Silicon may, in its good faith business judgment,
deem advisable in order to perfect and maintain Silicon’s security interest in
the Collateral, or in order to exercise a right of Borrower or Silicon, or in
order to fully consummate all the transactions contemplated under this
Agreement, and all other present and future agreements; (b) Execute on behalf of
Borrower any document exercising, transferring or assigning any option to
purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any
real or personal property which is part of Silicon’s Collateral or in which
Silicon has an interest; (c) Execute on behalf of Borrower, any invoices
relating to any Account, any draft against any Account Debtor and any notice to
any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim
of mechanic’s, materialman’s or other lien, or assignment or satisfaction of
mechanic’s, materialman’s or other lien; (d) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Silicon’s possession; (e) Endorse all checks and other forms
of remittances received by Silicon; (f) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (g) Grant extensions of time to pay, compromise claims and
settle Accounts and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (h) Pay any sums required
on account of Borrower’s taxes or to secure the release of any liens therefor,
or both; (i) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (j) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other rights
with respect thereto as Silicon has under this Agreement; and (k) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other present or future agreements. Any and all reasonable sums paid and any and
all reasonable costs, expenses, liabilities, obligations and attorneys’ fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon’s rights under the foregoing power of attorney or any
of Silicon’s other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.

7.5 Application of Proceeds. All proceeds realized as the result of any sale of
the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency. If, Silicon, in its good faith
business judgment, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, Silicon
shall have the option, exercisable at any time, in its good faith business
judgment, of either reducing the Obligations by the principal amount of purchase
price or deferring the reduction of the Obligations until the actual receipt by
Silicon of the cash therefor.

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7.6 Remedies Cumulative. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the Massachusetts Uniform Commercial Code and under all
other applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.

Section 8 DEFINITIONS.

As used in this Agreement, the following terms have the following meanings:

“Accounts” means all of Borrower’s now owned and hereafter acquired accounts
(whether or not earned by performance), accounts receivable, health-care
insurance receivables, rights to payment, letters of credit, contract rights,
chattel paper, instruments, securities, securities accounts, investment
property, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, all merchandise returned
to or repossessed by Borrower, and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.

“Account Debtor” means the obligor on an Account.

“Affiliate” means, with respect to any Person, a relative, partner, shareholder,
director, officer, or employee of such Person, or any parent or subsidiary of
such Person, or any Person controlling, controlled by or under common control
with such Person.

“Business Day” means a day on which Silicon is open for business.

“Cash Collateral Account” means Borrower’s account no.                      [re:
Vertical] and account no.                      [re: Vodavi] maintained at
Silicon.

“Cash Management Services” means Silicon’s cash management services, direct
deposit of payroll, business credit card, and check cashing services as may be
further identified in the various cash management services agreements related to
such Cash Management Services.

“Code” means the Uniform Commercial Code as adopted and in effect in the
Commonwealth of Massachusetts from time to time.

“Collateral” has the meaning set forth in Section 2.1 above.

“Collateral Reserve” means $2,000,000; provided, however, in the event Borrower
achieves positive EBITDA from operations for two consecutive calendar quarters
from and after the date of this Agreement, Collateral Reserve shall at all times
thereafter mean $1,500,000.

“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

“Default Rate” has the meaning set forth in Section 7.2 above.

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“Deferred Revenue” is all amounts received in advance of performance under
contracts and not yet recognized as revenue.

“Deposit Account” has the meaning set forth in Section 9-102 of the Code.

“Designated Deposit Account” means Borrower’s account no.                     
[re: Vertical] maintained at Silicon.

“Eligible Accounts” means Accounts, General Intangibles, and Payment Intangibles
arising in the ordinary course of Borrower’s business from the sale of goods or
the rendition of services, or the non-exclusive licensing of Intellectual
Property, which Silicon, in its good faith business judgment, shall deem
eligible for borrowing. Without limiting the fact that the determination of
which Accounts are eligible for borrowing is a matter of Silicon’s discretion,
the following (the “Minimum Eligibility Requirements”) are the minimum
requirements for an Account to be an Eligible Account: (i) the Account must not
be outstanding for more than 90 days from its invoice date, (ii) the Account
must not represent progress billings, be due under a fulfillment or requirements
contract with the Account Debtor or represent Deferred Revenue (provided that,
subject to the balance of the terms of this Agreement, Silicon shall apply a 25%
offset to Deferred Revenue relating to subscription revenue, as determined by
Silicon), (iii) the Account must not be subject to any contingencies (including
Accounts arising from sales on consignment, guaranteed sale or other terms
pursuant to which payment by the Account Debtor may be conditional, except as
may otherwise be acceptable to Silicon in its discretion), (iv) the Account must
not be owing from an Account Debtor with whom the Borrower has any dispute
(whether or not relating to the particular Account), (v) the Account must not be
owing from an Affiliate of Borrower, (vi) the Account must not be owing from an
Account Debtor which is subject to any insolvency or bankruptcy proceeding, or
whose financial condition is not acceptable to Silicon, or which, fails or goes
out of a material portion of its business, (vii) the Account must not be owing
from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to Silicon’s satisfaction, with the United
States Assignment of Claims Act), (viii) the Account must not be owing from an
Account Debtor located outside the United States except for up to $200,000 in
Accounts owing from Account Debtors located in Canada but excluding Quebec
(unless pre-approved by Silicon in its discretion in writing, or backed by a
letter of credit satisfactory to Silicon, or FCIA insured satisfactory to
Silicon), (ix) the Account must not be owing from an Account Debtor to whom
Borrower is or may be liable for goods purchased from such Account Debtor or
otherwise, and (x) the Account must not represent an “evaluation unit”, “advance
replacement unit”, or “sales reserve”, as determined by Silicon. Accounts owing
from one Account Debtor will not be deemed Eligible Accounts to the extent they
exceed 25% of the total Accounts outstanding except as may be otherwise
determined by Silicon on a case-by-case basis in its good faith judgment. In
addition, if more than 50% of the Accounts owing from an Account Debtor are
outstanding more than 90 days from their invoice date (without regard to
unapplied credits) or are otherwise not Eligible Accounts, then all Accounts
owing from that Account Debtor will be deemed ineligible for borrowing. Silicon
may, from time to time, in its good faith business judgment, revise the Minimum
Eligibility Requirements, upon written notice to the Borrower.

“Eligible Inventory” means, at any time, the aggregate of Borrower’s Inventory
that (a) consists of finished goods, in good, new, and salable condition, which
is not perishable, returned, consigned, obsolete, not sellable, damaged, or
defective, and is not comprised of demonstrative or custom inventory, works in
progress, packaging or shipping materials, or supplies; (b) meets all applicable
governmental standards; (c) has been manufactured in compliance with the Fair
Labor Standards Act; (d) is not subject to any liens, except the first priority
liens granted or in favor of Silicon under this Agreement or any of the other
Loan Documents and the subordinate lien in favor of Columbia Partners, L.L.C.
Investment Management, as agent for NEIPF, L.P., and NEIPF, L.P. under the NEIPF
Credit Agreement (as such terms are defined in the Intercreditor Agreement);
(e) is located at Borrower’s principal place of business or at a location listed
on the Perfection Certificate with respect to which location Silicon has
received a landlord’s waiver, bailee’s waiver or warehouseman’s waiver in form
and substance satisfactory to Silicon; and (f) is otherwise acceptable to
Silicon in its good faith business judgment.

“Equipment” means all of Borrower’s present and hereafter acquired machinery,
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and

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other tangible personal property (other than Inventory) of every kind and
description used in Borrower’s operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.

“Event of Default” means any of the events set forth in Section 7.1 of this
Agreement.

“GAAP” means generally accepted accounting principles, consistently applied.

“General Intangibles” means all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, rights to payment for credit extended, amounts
due to Borrower, credit memoranda in favor of Borrower, warranty claims, causes
of action, corporate or other business records, deposits, Deposit Accounts,
inventions, designs, drawings, blueprints, patents, patent applications,
trademarks and the goodwill of the business symbolized thereby, names, trade
names, trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, security and other deposits, rights in all litigation presently
or hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all claims of
Borrower against Silicon, rights to purchase or sell real or personal property,
rights as a licensor or licensee of any kind, royalties, telephone numbers,
proprietary information, purchase orders, and all insurance policies and claims
(including without limitation life insurance, key man insurance, credit
insurance, liability insurance, property insurance and other insurance), tax
refunds and claims, computer programs, discs, tapes and tape files, claims under
guaranties, security interests or other security held by or granted to Borrower,
all rights to indemnification and all other intangible property of every kind
and nature (other than Accounts).

“Intellectual Property” is the Intellectual Property Collateral, as defined in
the IP Security Agreement.

“Intercreditor Agreement” is the Intercreditor Agreement dated as of the date
hereof between Silicon, Columbia Partners, L.L.C. Investment Management, and
NEIPF, L.P. dated as of the date hereof.

“IP Security Agreement” means, singly and collectively, those certain
Intellectual Property Security Agreements of even date herewith by and between
Borrower and Silicon.

“Inventory” means all of Borrower’s now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower’s business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.

“Letter-of-Credit Rights” means all letter-of-credit rights including, without
limitation, “letter-of-credit rights” as defined in the Code and also any right
to payment or performance under a letter of credit, whether or not the
beneficiary has demanded or is at the time entitled to demand payment or
performance.

“Loan Documents” means, collectively, this Agreement, the Perfection
Certificate, the IP Security Agreement, and all other present and future
documents, instruments and agreements between Silicon and Borrower, including,
but not limited to those relating to this Agreement, and all amendments and
modifications thereto and replacements therefor.

“Loans” is defined in Section 1.1.

“NEIPF Facility” means that certain credit facility as memorialized by that
certain Credit Agreement among the Borrower, Columbia Partners, L.L.C.
Investment Management, and NEIPF, L.P.

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“Obligations” means all present and future Loans, advances, debts, liabilities,
obligations, guaranties, covenants, duties and indebtedness at any time owing by
Borrower to Silicon, whether evidenced by this Agreement or any note or other
instrument or document, including, without limitation, the Borrower’s
obligations pursuant to the IP Security Agreement, whether arising from an
extension of credit, opening of a letter of credit, banker’s acceptance, foreign
exchange contracts, loan, Cash Management Services, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by Silicon in Borrower’s debts
owing to others), absolute or contingent, due or to become due, including,
without limitation, all interest, charges, expenses, fees, attorney’s fees,
expert witness fees, audit fees, letter of credit fees, collateral monitoring
fees, closing fees, facility fees, termination fees, minimum interest charges
and any other sums chargeable to Borrower under this Agreement or under any
other present or future instrument or agreement between Borrower and Silicon.

“Payment” means all checks, wire transfers and other items of payment received
by Silicon (including proceeds of Accounts and payment of the Obligations in
full) for credit to Borrower’s outstanding Loans or, if the balance of the Loans
have been reduced to zero or as otherwise provided for herein (including,
without limitation, in accordance with Section 4.4), for credit to its
Designated Deposit Account.

“Payment Intangibles” means all payment intangibles including, without
limitation, “payment intangibles” as defined in the Code and also any general
intangible under which the Account Debtor’s primary obligation is a monetary
obligation.

“Perfection Certificate” means, singly and collectively, those certain
Perfection Certificates of even date herewith executed by Borrower in favor of
Silicon.

“Permitted Liens” means the following: (i) purchase money security interests in
specific items of Equipment in an amount not to exceed $250,000 in the aggregate
at any time during the term of this Agreement; (ii) leases of specific items of
Equipment in an amount not to exceed $250,000 in the aggregate at any time
during the term of this Agreement; (iii) liens for taxes not yet payable;
(iv) additional security interests and liens consented to in writing by Silicon,
which consent shall not be unreasonably withheld; (v) security interests being
terminated substantially concurrently with this Agreement; (vi) liens of
materialmen, mechanics, warehousemen, carriers, or other similar liens arising
in the ordinary course of business and securing obligations which are not
delinquent; (vii) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (i) or (ii) above, provided that any extension, renewal or replacement
lien is limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; (viii)Liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods;
and (ix) subject to the terms of the Intercreditor Agreement, Liens in favor of
Columbia Partners Investment Management, L.L.C., as agent for NEIPF under the
NEIPF Credit Agreement (as such terms are defined in the Intercreditor
Agreement). Silicon will have the right to require, as a condition to its
consent under subsection (iv) above, that the holder of the additional security
interest or lien sign an intercreditor agreement on Silicon’s then standard
form, acknowledge that the security interest is subordinate to the security
interest in favor of Silicon, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding, and
that Borrower agree that any uncured default in any obligation secured by the
subordinate security interest shall also constitute an Event of Default under
this Agreement.

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.

“Reserves” means, as of any date of determination, such amounts as Silicon may
from time to time establish and revise in good faith reducing the amount of
Loans, Letters of Credit and other financial accommodations which would
otherwise be available to Borrower under the lending formula(s) provided in the
Schedule: (a) to reflect events, conditions, contingencies or risks which, as
determined by Silicon in good faith, do

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or may affect (i) the Collateral or any other property which is security for the
Obligations or its value (including without limitation any increase in
delinquencies of Accounts), (ii) the assets, business or prospects of Borrower
or any Guarantor, or (iii) the security interests and other rights of Silicon in
the Collateral (including the enforceability, perfection and priority thereof);
or (b) to reflect Silicon’s good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any guarantor to
Silicon is or may have been incomplete, inaccurate or misleading in any material
respect; or (c) in respect of any state of facts which Silicon determines in
good faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default.

“Supporting Obligations” means all supporting obligations including, without
limitation, “supporting obligations” as defined in the Code and also any
letter-of-credit right or secondary obligation which supports the payment or
performance of an account, chattel paper, a document, a general intangible, an
instrument, or investment property.

Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP.
All other terms contained in this Agreement, unless otherwise indicated, shall
have the meanings provided by the Code, to the extent such terms are defined
therein.

Section 9 GENERAL PROVISIONS.

9.1 Interest Computation; Float Charge. In computing interest on the
Obligations, all Payments received after 12:00 Noon on any day shall be deemed
received on the next Business Day. In addition, Silicon shall be entitled to
charge Borrower a “float” charge in an amount equal to three Business Days
interest, at the interest rate applicable to the Loans, on all Payments received
by Silicon. Said float charge is not included in interest for purposes of
computing Minimum Monthly Interest under this Agreement. The float charge for
each month shall be payable on the last day of the month. Silicon shall not,
however, be required to credit Borrower’s account for the amount of any item of
payment which is unsatisfactory to Silicon in its good faith business judgment,
and Silicon may charge Borrower’s loan account for the amount of any item of
payment which is returned to Silicon unpaid.

9.2 Application of Payments. All payments with respect to the Obligations may be
applied, and in Silicon’s good faith business judgment reversed and re-applied,
to the Obligations, in such order and manner as Silicon shall determine in its
good faith business judgment.

9.3 Charges to Accounts. Silicon may, in its discretion, require that Borrower
pay monetary Obligations in cash to Silicon, or charge them to Borrower’s Loan
account, in which event they will bear interest at the same rate applicable to
the Loans. Silicon may also, in its discretion, charge any monetary Obligations
to Borrower’s Deposit Accounts maintained with Silicon.

9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement.
Such account shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Silicon), unless Borrower notifies Silicon
in writing to the contrary within sixty (60) days after each account is
rendered, describing the nature of any alleged errors or omissions.

9.5 Notices. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Silicon or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.

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9.6 Severability. Should any provision of this Agreement be held by any court of
competent jurisdiction to be void or unenforceable, such defect shall not affect
the remainder of this Agreement, which shall continue in full force and effect.

9.7 Integration. This Agreement and such other written agreements, documents and
instruments as may be executed in connection herewith are the final, entire and
complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.

9.8 Waivers; Indemnity. The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Silicon shall not waive
or diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives the benefit of all statutes of limitation
relating to any of the Obligations or this Agreement or any document related
hereto, and Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Silicon on which
Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement. Borrower hereby agrees to
indemnify Silicon and its affiliates, subsidiaries, parent, directors, officers,
employees, agents, and attorneys, and to hold them harmless from and against any
and all claims, debts, liabilities, demands, obligations, actions, causes of
action, penalties, costs and expenses (including reasonable attorneys’ fees), of
every kind, which they may sustain or incur based upon or arising out of any of
the Obligations, or any relationship or agreement between Silicon and Borrower,
or any other matter, relating to Borrower or the Obligations; provided, that
this indemnity shall not extend to damages proximately caused by the
indemnitee’s own gross negligence or willful misconduct. Notwithstanding any
provision in this Agreement to the contrary, the indemnity agreement set forth
in this Section shall survive any termination of this Agreement and shall for
all purposes continue in full force and effect.

9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.

9.10 Amendment. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by Borrower and a duly authorized officer
of Silicon.

9.11 Time of Essence. Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.

9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys’ fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys’ fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrower; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend

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actions by, Account Debtors; commence, intervene in, or defend any action or
proceeding; initiate any complaint to be relieved of the automatic stay in
bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party
claim, or other claim; examine, audit, copy, and inspect any of the Collateral
or any of Borrower’s books and records; protect, obtain possession of, lease,
dispose of, or otherwise enforce Silicon’s security interest in, the Collateral;
and otherwise represent Silicon in any litigation relating to Borrower. In
satisfying Borrower’s obligation hereunder to reimburse Silicon for attorneys
fees, Borrower may, for convenience, issue checks directly to Silicon’s
attorneys, Riemer & Braunstein, LLP, but Borrower acknowledges and agrees that
Riemer & Braunstein, LLP is representing only Silicon and not Borrower in
connection with this Agreement. If either Silicon or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, Silicon shall be
entitled to recover its reasonable costs and attorneys’ fees, including (but not
limited to) reasonable attorneys’ fees and costs incurred in the enforcement of,
execution upon or defense of any order, decree, award or judgment. All
attorneys’ fees and costs to which Silicon may be entitled pursuant to this
Section 9.12 shall immediately become part of Borrower’s Obligations, shall be
due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations.

9.13 Benefit of Agreement. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Silicon; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.

9.14 Joint and Several Liability. If Borrower consists of more than one Person,
their liability shall be joint and several, and the compromise of any claim
with, or the release of, any Borrower shall not constitute a compromise with, or
a release of, any other Borrower.

9.15 Limitation of Actions. Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Agreement, or any other present or
future document or agreement, or any other transaction contemplated hereby or
thereby or relating hereto or thereto, or any other matter, cause or thing
whatsoever, occurred, done, omitted or suffered to be done by Silicon, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one year after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of Silicon, or on any other person
authorized to accept service on behalf of Silicon, within thirty (30) days
thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action. The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Silicon in its sole discretion. This
provision shall survive any termination of this Agreement or any other present
or future agreement.

9.16 Right of Set-Off. Borrower and any guarantor hereby grant to Silicon a
lien, security interest, and right of setoff as security for all Obligations to
Silicon, 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 Silicon or any entity under the control of
Silicon Valley Bank or in transit to any of them. Subject to the terms of the
Intercreditor Agreement, at any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Silicon may set
off the same or any part thereof and apply the same to any liability or
obligation of Borrower and any guarantor then due and regardless of the adequacy
of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE SILICON
TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOAN, 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.

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9.17 Section Headings; Construction. Section headings are only used in this
Agreement for convenience. Borrower and Silicon acknowledge that the headings
may not describe completely the subject matter of the applicable section, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. The term “including”,
whenever used in this Agreement, shall mean “including (but not limited to)”.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Silicon or Borrower under any rule of construction or
otherwise.

9.18 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the Commonwealth of Massachusetts. As a
material part of the consideration to Silicon to enter into this Agreement,
Borrower (i) agrees that all actions and proceedings relating directly or
indirectly to this Agreement shall, at Silicon’s option, be litigated in state
or federal courts located within Massachusetts; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Borrower may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding, provided, however, that if for any reason Silicon cannot
avail itself of such courts in the Commonwealth of Massachusetts, Borrower
accepts jurisdiction of the courts and venue in Santa Clara, California.

9.19 Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

9.20 Confidentiality. In handling any confidential information, Silicon will
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made (i) to Silicon’s
subsidiaries or affiliates, (ii) to prospective transferees or purchasers of any
interest in the loans (provided, however, Silicon shall use commercially
reasonable efforts in obtaining such prospective transferee or purchasers
agreement of the terms of this provision), (iii) as required by law, regulation,
subpoena, or other order, (iv) as required in connection with Silicon’s
examination or audit and (v) as Silicon considers appropriate exercising
remedies under this Agreement. Confidential information does not include
information that either: (a) is in the public domain or in Silicon’s possession
when disclosed to Silicon, or becomes part of the public domain after disclosure
to Silicon; or (b) is disclosed to Silicon by a third party, if Silicon does not
know that the third party is prohibited from disclosing the information.

9.21 INTERCREDITOR AGREEMENT. THIS AGREEMENT IS SUBJECT TO THE TERMS OF THE
INTERCREDITOR AGREEMENT, WHICH AGREEMENT IS INCORPORATED HEREIN BY REFERENCE.
NOTWITHSTANDING ANY STATEMENT TO THE CONTRARY CONTAINED IN THIS AGREEMENT, NO
REMEDIES, INCLUDING, WITHOUT LIMITATION, THE RIGHT OF SET OFF SET FORTH IN
SECTION 9.16, SHALL BE PURSUED, EXCEPT IN ACCORDANCE WITH THE TERMS OF THE
INTERCREDITOR AGREEMENT. NOTWITHSTANDING THE INCORPORATION BY REFERENCE OF THE
INTERCREDITOR AGREEMENT, BORROWER ACKNOWLEDGES THAT NO OTHER PARTIES, INCLUDING
THE BORROWER OR ANY OF THEIR SUCCESSORS OR ASSIGNS, ARE INTENDED TO BE
BENEFITED, IN ANY WAY, BY THE INTERCREDITOR AGREEMENT.

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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.

 

BORROWER: VERTICAL COMMUNICATIONS, INC. By  

 

Name:   Title:   VERTICAL COMMUNICATIONS ACQUISITION CORP. By  

 

Name:   Title:   VODAVI TECHNOLOGY, INC. By  

 

Name:   Title:   VODAVI COMMUNICATIONS SYSTEMS, INC. By  

 

Name:   Title:   SILICON: SILICON VALLEY BANK By  

 

Name:   Title:  

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SILICON VALLEY BANK

SCHEDULE TO

LOAN AND SECURITY AGREEMENT

 

Borrower:    VERTICAL COMMUNICATIONS, INC. Address:    One Memorial Drive   
Cambridge, Massachusetts 02142 Borrower:    VERTICAL COMMUNICATIONS ACQUISITION
CORP. Address:    One Memorial Drive    Cambridge, Massachusetts 02142 Borrower:
   VODAVI TECHNOLOGY, INC. Address:    One Memorial Drive    Cambridge,
Massachusetts 02142 Borrower:    VODAVI COMMUNICATIONS SYSTEMS, INC. Address:   
One Memorial Drive    Cambridge, Massachusetts 02142 Date:    May     , 2007

This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.

Section 1 Credit Limit

(Section 1.1): An amount not to exceed the lesser of (A) or (B), below:

(A) (i) $10,000,000.00 (the “Maximum Credit Limit”); minus

(ii) the aggregate amounts then undrawn on all outstanding letters of credit,
foreign exchange contracts, or any other accommodations issued or incurred, or
caused to be issued or incurred by Silicon for the account and/or benefit of the
Borrower.

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  (B) (i) 80% of the amount of Vertical Communications, Inc.’s Eligible Accounts
and Vertical Communications Acquisition Corp.’s Eligible Accounts; plus

(ii) 80% of the amount of Vodavi Technology, Inc.’s Eligible Accounts and Vodavi
Communications Systems, Inc.’s Eligible Accounts; plus

(iii) the lesser of (a) 20% of Borrower’s Eligible Inventory, valued at the
lower of cost or wholesale market value, or (b) 2,000,000; minus

(iv) the aggregate amounts then undrawn on all outstanding letters of credit,
foreign exchange contracts, or any other accommodations issued or incurred, or
caused to be issued or incurred by Silicon for the account and/or benefit of the
Borrower; minus

(v) the Collateral Reserve.

Silicon may, from time to time, modify the advance rates set forth herein in its
good faith business judgment upon notice to Borrower based on changes in
collection experience with respect to the Accounts or other issues or factors
relating to the Accounts or the Collateral including, without limitation, in
connection with any merger of the Borrowers.

Letter of Credit/Foreign Exchange Contract/Cash Management Services Sublimit

(Section 1.6, 1.7): $2,000,000.00 in the aggregate.

Section 2 INTEREST.

Interest Rate (Section 1.2):

For all Loans hereunder: A rate per annum equal to the “Prime Rate” in effect
from time to time, plus 2.00% per annum.

Interest in all circumstances shall be calculated on the basis of a 360-day year
for the actual number of days elapsed. “Prime Rate” means the rate announced
from time to time by Silicon as its “prime rate;” it is a base rate upon which
other rates charged by Silicon are based, and it is not necessarily the best
rate available at Silicon. The interest rate applicable to the Obligations shall
change on each date there is a change in the Prime Rate.

Minimum Monthly Interest (Section 1.2): In the event the aggregate amount of
interest earned by Silicon on the Loans in any month (exclusive of any
collateral monitoring fees, unused line fees, or any other fees and charges
hereunder) is less than interest which would have been payable calculated based
upon fifteen (15%) percent of the Maximum Credit Limit having been advanced and
outstanding with respect to each month (as if such amount were outstanding) (the
“Minimum Monthly Interest”), Borrower shall pay Silicon an amount, payable on
the last day of such month, equal to the (i) Minimum Monthly Interest minus
(ii) the aggregate amount of all interest earned by Silicon on the Loans
(exclusive of any collateral monitoring fees, unused line fees, or any other
fees and charges hereunder) in such month.

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Section 3 FEES

(Section 1.4):

Loan Fee: (i) $75,000.00 payable concurrently herewith plus (ii) $50,000 payable
on the date that is one year from the date of this Agreement provided that this
Agreement has not been terminated prior to the one year anniversary of this
Agreement.

Collateral Handling Fee: Intentionally omitted.

Unused Line Fee: Intentionally omitted.

Early Termination Fee: If the Obligations are voluntarily or involuntarily
prepaid or if this Agreement is otherwise terminated prior to the date that is
thirty (30) days prior to its maturity, the Borrower shall pay to Silicon a
termination fee in the amount of $100,000.00, provided that no such termination
fee shall be charged if the credit facility hereunder is replaced or transferred
to another division of Silicon. The termination fee shall be due and payable
upon prepayment by the Borrower in the case of voluntary prepayments or upon
demand by Silicon in the event of involuntary prepayment, and if not paid
immediately shall bear interest at a rate equal to the highest rate applicable
to any of the Obligations.

Section 4 MATURITY DATE

(Section 6.1): With respect to all Loans: 729 days from the date of this
Agreement.

Section 5 FINANCIAL COVENANTS

(Section 5.1): Borrower, together with its subsidiaries on a consolidated basis,
shall comply with each of the following covenants.

Compliance shall be determined as of the end of each month, except as otherwise
specifically provided below:

a. Minimum Revenue:

(i) For the six-month period ended March 31, 2007, Borrower shall have achieved
Revenue of not less than $30,000,000; and

(ii) For the twelve-month period ending September 30, 2007 and for each
twelve-month period ending at each quarter end thereafter, Borrower shall
achieve Revenue of not less than $80,000,000 (including Borrower and each of its
Subsidiaries on a consolidated basis as of the date of calculation). For every
trailing twelve-month period measured on a calendar quarterly basis thereafter,
Borrower shall not permit total consolidated Revenue to be less than 2% greater
than in the same trailing twelve-month period from the immediately preceding
twelve-month period (including Borrower and each of its Subsidiaries on a
consolidated basis as of the date of calculation).

b. Minimum Cash or Excess Availability (Unrestricted Liquidity):

Borrower shall, as of the last day of each month, maintain Unrestricted
Liquidity in excess of $5,000,000.00.

c. Minimum EBITDA:

(i) For the six-month period ended March 31, 2007, Borrower shall not permit its
EBITDA losses to be greater than $2,000,000; and

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(ii) For the twelve-month period ending September 30, 2007 and for each
twelve-month period ending at each quarter end thereafter, Borrower shall not
permit its EBITDA to be less than $1.00.

Silicon and Borrower shall establish financial covenants for Borrower’s fiscal
year 2008 in good faith based on the Borrower’s financial statements and
projections provided to Silicon within sixty (60) days of Borrower’s 2007 fiscal
year end. However, in the event that new covenants are not mutually agreed to by
the end of Borrower’s 2007 fiscal year end, Borrower shall be required to
continue to comply with each of the foregoing covenants.

Definitions. For purposes of the foregoing financial covenants, the following
term shall have the following meaning:

“EBITDA” shall mean, consistent with the Borrower’s internal management
reporting system as of the date of this Agreement, for any given period for
Borrower, earnings before interest, taxes, depreciation and amortization
determined on a pro-forma basis that excludes the effect of non-cash stock
options compensation expense, accrued but not paid liquidated damages referred
to in clause (ii) of the definition of “Restricted Payment” (as set forth in the
Credit Agreement entered into in connection with the NEIPF Facility, as in
effect as of the date of this Agreement) and certain other extraordinary profit
and loss items agreed upon between Borrower and Silicon; provided that if such
items are not agreed upon by Silicon in its sole discretion they shall not be
excluded from EBITDA.

“Revenue” shall mean, consistent with Borrower’s internal management reporting
system as of the date of this Agreement, the pro-forma sales of products and
services, which is equal to revenue determined in accordance with GAAP, plus
current period invoiced amounts that are deferred under GAAP for systems sales
associated with long-term customer contractual obligations, minus the current
period revenue recognition of prior period systems sales.

“Unrestricted Liquidity” shall mean (i) unrestricted cash deposits, plus
(ii) excess “availability” under this Agreement (net of the Collateral Reserve
and all Loans, Letters of Credit or other indebtedness under this Agreement), as
determined by Silicon based upon the Credit Limit restrictions set forth in
Section 1 above).

Section 6 REPORTING.

(Section 5.3):

Borrower shall provide Silicon with the following:

(a) Weekly, on Wednesday of each week, and upon each loan request, borrowing
base certificates and transaction reports.

(b) Monthly accounts payable agings, aged by invoice date, and outstanding or
held check registers, if any, within fifteen days after the end of each month.

(c) Monthly accounts receivable agings, aged by invoice date, and receivable
reconciliations, within fifteen days after the end of each month.

(d) Monthly unaudited financial statements, as soon as available, and in any
event within thirty days after the end of each month.

(e) Monthly Compliance Certificates, within thirty days after the end of each
month, in such form as Silicon shall reasonably specify, signed by the Chief
Financial Officer of Borrower, certifying that

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as of the end of such month Borrower was in full compliance with all of the
terms and conditions of this Agreement, and setting forth calculations showing
compliance with the financial covenants set forth in this Agreement and such
other information as Silicon shall reasonably request, including, without
limitation, a statement that at the end of such month there were no held checks.

(f) Annual operating budgets and projections (including income statements,
balance sheets and cash flow statements, by month) for the upcoming fiscal year
of Borrower within sixty days prior to the end of each fiscal year of Borrower.

(g) Annual audited financial statements, as soon as available, and in any event
within 90 days following the end of Borrower’s fiscal year, prepared under GAAP,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm reasonably
acceptable to Silicon.

(h) Such additional reports and information as Silicon may from time to time
specify.

Section 7 OTHER COVENANTS

Borrower shall at all times comply with all of the following additional
covenants:

(a) Banking Relationship. In order for Silicon to properly monitor its loan
arrangement with the Borrower, Borrower shall at all times maintain its primary
banking relationship with Silicon, with all significant deposits and investment
accounts to be maintained at Silicon.

(b) Subordination of Inside Debt. All present and future indebtedness of the
Borrower to its officers, directors and shareholders (“Inside Debt”) shall, at
all times, be subordinated to the Obligations pursuant to a subordination
agreement on Silicon’s standard form. Borrower represents and warrants that
there is no Inside Debt presently outstanding. Prior to incurring any Inside
Debt in the future, Borrower shall cause the person to whom such Inside Debt
will be owed to execute and deliver to Silicon a subordination agreement on
Silicon’s standard form.

(c) Subordination Agreements. As a condition precedent to the effectiveness of
this Agreement, Borrower shall cause to be delivered to Silicon the
Intercreditor Agreement, which Intercreditor Agreement shall be in form and
substance satisfactory to Silicon. Prior to incurring any additional
indebtedness, Borrower shall cause each creditor to execute and deliver to
Silicon a subordination agreement on Silicon’s standard form subordinating to
the Obligations the indebtedness of Borrower to any such creditor.

(d) Intellectual Property Security Agreements. As a condition precedent to the
effectiveness of this Agreement, Borrower shall have executed and delivered to
Silicon Intellectual Property Security Agreements (singly and collectively, the
“IP Security Agreement”), substantially in the form attached hereto as Exhibit
B.

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IN WITNESS WHEREOF, the parties hereto have caused this Schedule to Loan and
Security Agreement to be executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first above written.

 

BORROWER: VERTICAL COMMUNICATIONS, INC. By  

 

Name:   Title:   VERTICAL COMMUNICATIONS ACQUISITION CORP. By  

 

Name:   Title:   VODAVI TECHNOLOGY, INC. By  

 

Name:   Title:   VODAVI COMMUNICATIONS SYSTEMS, INC. By  

 

Name:   Title:   SILICON: SILICON VALLEY BANK By  

 

Name:   Title: