Document:

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                                                                   EXHIBIT 10.69

                                MOVABLE HYPOTHEC

1.       DEFINITION AND INTERPRETATION

         1.1      In the Agreement, the following words shall, unless otherwise
                  provided, have the meanings set out below:

                  1.1.1    "AGREEMENT" the expression "Agreement" shall include
                           this Agreement, as it may hereafter be amended,
                           supplemented, modified, extended, renewed, replaced
                           or restated from time to time;

                  1.1.2    "CONTINUING" when used with reference to a Default or
                           an Event of Default means that the Default or Event
                           of Default has occurred and has not been either
                           waived in writing by the Holder or cured within any
                           applicable cure period;

                  1.1.3    "DEFAULT" or "DEFAULT" means any event or
                           circumstance which constitutes an Event of Default or
                           which, with the giving of notice of lapse of time or
                           both would, unless cured or waived, constitute an
                           Event of Default;

                  1.1.4    "EVENT OF DEFAULT" shall have the meaning set forth
                           in Section 7.1 hereof;

                  1.1.5    "EXIM LOAN AGREEMENT" means the Loan and Security
                           Agreement dated February 12, 2003 between, among
                           others, the Grantor, as co-borrower, and the Holder,
                           as lender, as amended, supplemented, modified,
                           extended, renewed, replaced or restated from time to
                           time;

                  1.1.6    "EXIM OBLIGATIONS" means the "Obligations" as defined
                           under the Exim Loan Agreement;

                  1.1.7    "GRANTOR" means Verso Technologies, Inc. and any
                           Person resulting from the amalgamation, merger,
                           consolidation, reorganization, continuation or other
                           transformation thereof;

                  1.1.8    "HOLDER" means Silicon Valley Bank;

                  1.1.9    "HYPOTHECATED PROPERTY" means all property, assets
                           and undertaking of the Grantor charged pursuant to
                           Section 2.1 of this Agreement and shall include all
                           or any part thereof;

                  1.1.10   "INTELLECTUAL PROPERTY COLLATERAL" means all present
                           and future intellectual property (whether registered
                           or unregistered) including

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                           without limitation all computer programs, application
                           software, hardware/software maintenance support
                           agreements and all other documents related thereto,
                           licenses of software, copyrights, patents and
                           inventions, trademarks, trade names, business names,
                           trade styles and other business identifiers,
                           industrial designs, integrated circuit topographies,
                           trade secrets and other confidential information and
                           all know-how obtained, developed or used by the
                           Grantor or contemplated at any time for use by the
                           Grantor;

                  1.1.11   "LIEN" shall mean any mortgage, charge, pledge,
                           hypothec, lien (statutory or otherwise), prior claim,
                           priority, legal hypothec, trust, deemed trust, title
                           retention, deposit, right to distrain, landlord's
                           liens, security interest, assignment or other
                           encumbrance of any nature however arising, or any
                           other security agreement, hypothecation or
                           arrangement creating in favour of any creditor a
                           right in respect of any particular property that is
                           prior to the right of any other creditor in respect
                           of such property, and includes the right of a lessor
                           relative to a lease of movable property, or a leasing
                           contract and the right of a vendor under a
                           conditional (installment) sale agreement;

                  1.1.12   "LOAN AGREEMENT" means collectively the Exim Loan
                           Agreement and the Non-Exim Loan Agreement;

                  1.1.13   "NON-EXIM LOAN AGREEMENT" means the Loan and Security
                           Agreement dated December 14, 2001, between, among
                           others, the Grantor, as co-borrower, and the Holder,
                           as lender, as amended on July 31, 2002, November 11,
                           2002, December 13, 2002 and February 12, 2003, as
                           same may be further supplemented, modified, extended,
                           renewed, replaced or restated from time to time;

                  1.1.14   "NON-EXIM OBLIGATIONS" means the "Obligations" as
                           defined under the Non-Exim Loan Agreement;

                  1.1.15   "PLEDGE AGREEMENT" means the Pledge Agreement
                           governed by the laws of the State of California
                           executed by the Grantor in favour of the Holder on
                           February 12, 2003 in respect of the Specific
                           Securities;

                  1.1.16   "PROPERTY" the expression "property" shall include
                           property, titles and rights;

                  1.1.17   "SECURED OBLIGATIONS" means collectively the Exim
                           Obligations and the Non-Exim Obligations, and all
                           interest, commissions, legal and other costs
                           (including legal fees as between a solicitor and its
                           own client), charges and expenses accruing or
                           incurred under or in connection with this Agreement;

                  1.1.18   "SECURITIES" the expression "Securities" shall
                           include shares in the capital stock of a legal
                           person, bonds, warrants, debentures, bills of

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                           exchange, promissory notes, negotiable instruments
                           and other evidences of indebtedness, options or
                           rights in respect of the foregoing, and any other
                           instrument or title generally called or included as a
                           security and the expression "SECURITIES" shall mean
                           any or all Securities and shall include the Specific
                           Securities; and

                  1.1.19   "SPECIFIC SECURITIES" means 100 common shares of
                           Clarent Canada Ltd., being all of the issued and
                           outstanding shares of Clarent Canada Ltd.

         1.2      Other capitalized terms used herein which are not defined
                  herein shall have the meanings ascribed to such terms in the
                  Loan Agreement.

         1.3      References to a section shall refer to sections in this
                  Agreement and references to dollar amounts herein are, unless
                  expressly otherwise provided, expressed in terms of Canadian
                  Dollars.

         1.4      The headings in the Agreement are included for convenience of
                  reference only, and shall not constitute a part of this
                  Agreement for any other purpose.

         1.5      The words "GRANTOR" and "HOLDER", the personal pronoun "it" or
                  "its" and any verb relating thereto and used therewith shall
                  be read and construed as required by and in accordance with
                  the context in which such words are used. The term
                  "successors" shall include, without limiting its meaning, any
                  corporation resulting from the amalgamation of a corporation
                  with another corporation.

         1.6      If one or more of the provisions contained herein shall be
                  invalid, illegal or unenforceable in any respect, the
                  validity, legality and enforceability of the remaining
                  provisions contained herein shall not in any way be affected
                  or impaired thereby.

         1.7      If the event that any day, on or before which any action is
                  required to be taken hereunder, is not a Business Day, then
                  such action shall be required to be taken on or before the
                  specified time on the first Business Day thereafter.

         1.8      This Agreement shall be construed in accordance with and be
                  governed by the laws of the Province of Quebec and the federal
                  laws of Canada applicable therein. For the purpose of legal
                  proceedings, this Agreement shall be deemed to have been made
                  in the said Province and to be performed therein and the
                  courts of that Province shall have jurisdiction over all
                  disputes which may arise under this Agreement. The Grantor
                  hereby irrevocably and unconditionally submits to the
                  non-exclusive jurisdiction of such courts, provided always
                  that nothing herein contained shall prevent the Holder from
                  proceeding at its election against the Grantor in the courts
                  of any other province, country or jurisdiction.

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2.       HYPOTHEC

         2.1      For good and valuable consideration, and as continuing and
                  collateral security for the payment and performance when due
                  of all of the Secured Obligations, the Grantor hereby
                  hypothecates in favour of the Holder (and with respect to
                  incorporeal or intangible property, and corporeal movable
                  property located outside of the Province of Quebec, hereby
                  charges , assigns, and mortgages and creates a security
                  interest in favour of the Holder in), the universality of all
                  present and future movable property of the Grantor, both
                  corporeal and incorporeal, now owned or hereafter acquired by
                  the Grantor, including without limitation the following:

                  2.1.1    all present and future machinery and equipment of the
                           Grantor, including tools, implements, furniture,
                           rolling stock, vehicles, spare parts and additions;

                  2.1.2    all present and future property in stock and
                           inventory of the Grantor whether in its possession,
                           in transit or held on its behalf, including, without
                           limitation, all movable property in reserve, raw
                           materials, goods in process, finished products,
                           packaging materials, property held by third parties
                           pursuant to a rental, leasing, franchise, licence or
                           other agreement entered into with or on behalf of the
                           Grantor, property evidenced by bill of lading,
                           animals, wares, as well as any other property held
                           for sale, lease or processing in the manufacture or
                           transformation of property intended for sale, for
                           lease, or for use in providing a service by the
                           Grantor in the ordinary course of operation of its
                           enterprise;

                  2.1.3    all present and future claims of the Grantor of any
                           nature or kind, whatever their cause, whether or not
                           evidenced by any title, and whether or not such title
                           is negotiable, bill of exchange or draft; and whether
                           or not they constitute book debts or trade accounts
                           receivable, including, without limitation, all
                           customer accounts, accounts receivable, rights of
                           action, demands, judgements, contract rights,
                           options, permits, licenses, consents, approvals,
                           orders, rulings, quotas, subsidies, franchises,
                           immunities, amounts on deposit, proceeds of sale,
                           assignment or lease of any property, rights or
                           titles, any indemnities payable under any contract of
                           insurance whether or not such insurance is on
                           property forming part of the Hypothecated Property
                           and any indemnity or proceeds of expropriation, the
                           whole which are now due or which may become due to
                           the Grantor, together with all judgments and all
                           other rights, benefits, guarantees and securities for
                           the said claims which now or may hereafter exist in
                           favour of the Grantor, and together with all books
                           and accounts, titles, letters, invoices, papers and
                           documents in any way evidencing or relating to all or
                           any of the claims;

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                  2.1.4    all present and future Securities, including, without
                           limitation, all other Securities issued or received
                           in substitution, renewal, addition or replacement of
                           Securities, or issued or received on the purchase,
                           redemption, conversion, cancellation or other
                           transformation of Securities or issued or received by
                           way of dividend or otherwise to holders of
                           Securities, and all present and future instruments,
                           bills of lading, warehouse receipts, documents or
                           other evidences of title of the Grantor, and all
                           interests of the Grantor in any partnership;

                  2.1.5    all present and future Intellectual Property
                           Collateral, goodwill, other intangible property,
                           monies, agreements and rights under agreements of the
                           Grantor, as well as all rights in any action
                           pertaining to the protection, in Canada or abroad, of
                           any such Intellectual Property Collateral or rights,
                           and all its present and future undertaking;

                  2.1.6    the proceeds of any sale, assignment, lease or other
                           disposition of the Hypothecated Property any claim
                           resulting from such a sale, assignment, lease or
                           other disposition, as well as any property acquired
                           in replacement thereof;

                  2.1.7    any present and future rights attached to the
                           Hypothecated Property as well as the fruits and
                           revenues thereof; and

                  2.1.8    all present and future titles, documents, records,
                           receipts, invoices, accounts and data of the Grantor
                           evidencing or relating to any of the Hypothecated
                           Property including, without limitation, computer
                           disks, tapes and related electronic data processing
                           media, rights of the Grantor to retrieve the same
                           from third parties, delivery receipts, catalogs,
                           insurance certificates and the like;

(all such present and future property being herein called the "HYPOTHECATED
PROPERTY").

         2.2      The amount for which the hypothec in Section 2.1 is granted is
                  TWENTY-FOUR MILLION Canadian dollars ($24,000,000), with
                  interest from the date hereof at the rate of TWENTY-FIVE
                  PERCENT (25%) per annum.

         2.3      The hypothec which is granted in this Agreement constitutes a
                  pledge of such of the Hypothecated Property which is delivered
                  to or now in possession of the Holder, including the Specific
                  Securities, as well as a pledge of any of the Hypothecated
                  Property which may in the future be delivered to or held by
                  the Holder to be initially held at the Holder's office at 3003
                  Tasman Drive, Santa Clara, California, the Holder to advise
                  the Grantor in writing of any change of location.

         2.4      The hypothec and security interest hereby created and granted
                  do not and shall not extend to, and the Hypothecated Property
                  shall not include, any contract, agreement, right, franchise,
                  licence, lease or permit (each, a "CONTRACTUAL RIGHT") to
                  which the Grantor is a party or of which the Grantor has the
                  benefit, to the

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                  extent that the creation and granting of the hypothec and
                  security interest herein would constitute a breach of the
                  terms of or permit any Person to terminate one or more
                  contractual rights, and the foregoing hypothec and security
                  interest is constituted under the suspensive condition of
                  obtaining the required authorizations or consents. The Grantor
                  shall hold such contractual rights as mandatary of the Holder
                  until such time as the suspensive condition is fulfilled in
                  respect of such contractual right. The Grantor agrees that it
                  shall, upon the request of the Holder and whether before or
                  after a default by the Grantor has occurred and the security
                  herein has become enforceable, use all commercially reasonable
                  efforts to obtain any consent required to permit any material
                  contractual rights to be subjected to the hypothec and
                  security interest hereby created and granted.

3.       REPRESENTATIONS

         In addition to the representations and warranties of the Grantor under
         the Loan Agreement which shall apply mutatis mutandis hereto, the
         Grantor represents to the Holder as follows:

         3.1      The Grantor is carrying on an enterprise and its head office
                  is situated at 400 Galleria Parkway, Suite 300, Atlanta,
                  Georgia (USA).

         3.2      The Grantor uses no business or trade name other than those
                  set forth in Schedule "A".

         3.3      This Agreement has been properly authorized and constitutes a
                  legally valid and binding obligation of the Grantor
                  enforceable in accordance with its terms.

4.       COVENANTS

         In addition to the covenants of the Grantor under the Loan Agreement
         which shall apply mutatis mutandis hereto, the Grantor agrees with the
         Holder as follows:

         4.1      The Grantor shall, at its expense, insure the Hypothecated
                  Property and shall keep the Hypothecated Property at all times
                  insured in accordance with the terms of the Loan Agreement. If
                  the Grantor fails to procure or maintain any such insurance,
                  the Holder shall have the right, but not the obligation, to
                  effect such insurance in its name or in the Grantor's name,
                  and any premiums or other expenses paid or incurred by the
                  Holder in so doing shall forthwith be due and payable by the
                  Grantor to the Holder with interest as provided in Section
                  4.5.

         4.2      The Grantor shall defend title to the Hypothecated Property
                  and shall not create or permit to exist any Lien in favour of
                  a third party on or which may affect the Hypothecated
                  Property, other than Permitted Liens and those which the
                  Holder shall have previously agreed to in writing prior to
                  their creation or assumption.

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         4.3      Except with the prior written consent of the Holder, the
                  Grantor will not change the use, destination or nature of the
                  Hypothecated Property, nor will the Grantor move the
                  Hypothecated Property to a jurisdiction in which the hypothec
                  and security interest hereby created or any other security
                  interest in favour of the Holder has not been registered and
                  perfected; nor will it permit the Hypothecated Property to be
                  incorporated in an immovable property or to be permanently
                  physically attached or joined to an immovable property, unless
                  such Hypothecated Property does not lose its individuality and
                  unless such Hypothecated Property is and will continue to be
                  used for the operation of the Grantor's enterprise or the
                  pursuit of the Grantor's activities.

         4.4      The Grantor will furnish to the Holder any information which
                  the Holder may reasonably request in respect of the Grantor's
                  operations or the Hypothecated Property or to verify if the
                  Grantor is in compliance with its covenants and obligations
                  contained in this Agreement.

         4.5      The Grantor will reimburse the Holder promptly on demand all
                  out-of-pocket fees, costs and expenses, including reasonable
                  legal fees and expenses, incurred by the Holder relating to or
                  in connection with the execution, publication, performance,
                  interpretation, administration, enforcement and realization of
                  or in respect of this Agreement, the exercise of all rights of
                  the Holder and the preservation and protection of its
                  interests under this Agreement and the rendering of the rights
                  of the Holder opposable to all third parties, including,
                  without limitation, any fees, costs and expenses of
                  consultants, professionals, legal counsel or agents retained
                  by the Holder in connection with its rights hereunder,
                  including those for and in respect of any appraisal or
                  valuation of the Hypothecated Property whether in connection
                  with the sale of an enterprise or otherwise. The Grantor will
                  pay interest on all such amounts from the date the Holder
                  demands payment thereof from the Grantor at an annual rate
                  equal to the highest rate of interest prescribed under the
                  Loan Agreement, including Section 7.2 thereof. All such costs,
                  fees, expenses and charges owing by the Grantor to the Holder,
                  with interest thereon, shall form part of the Secured
                  Obligations.

         4.6      The Grantor will duly perform and comply with all its
                  obligations to the Holder, whether under this Agreement or any
                  other agreement, instrument or other document, including under
                  the Loan Agreement and the Pledge Agreement.

5.       CERTAIN RIGHTS OF THE HOLDER

         5.1      In the event the Grantor fails to observe or perform any of
                  its obligations or undertakings under this Agreement, the
                  Holder may, but shall not be obliged to, perform the same,
                  without waiving any rights to enforce this Agreement, and any
                  fees, costs or expenses incurred in so doing shall be
                  forthwith due and payable by the Grantor to the Holder, with
                  interest as provided in Section 4.5, and shall form part of
                  the Secured Obligations.

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         5.2      The Holder may, but shall not be obliged to, cause the Holder,
                  or its nominee, to be registered as holder of Securities, in
                  which case the Holder may exercise all rights in respect of
                  such Securities, including any right to vote, any right of
                  conversion or any right of redemption, and shall be entitled
                  to receive all revenues, dividends and capital distributions
                  (but the Holder shall not be responsible for any loss
                  occasioned by the exercise of any of such rights or by failure
                  to exercise the same within the time prescribed); provided
                  however that until an Event of Default shall have occurred
                  which is continuing hereunder, the Holder hereby grants the
                  Grantor a proxy, revocable at any time, authorizing the
                  Grantor to exercise any voting rights (subject to the prior
                  written consent of the Holder) and other rights attached to
                  such Securities (subject to the prior written consent of the
                  Holder) and to receive such revenues, dividends and capital
                  distributions.

         5.3      The Grantor hereby irrevocably constitutes the Holder or any
                  officer, or representative of the Holder, its agent, with the
                  power of substitution, in order to perform any act and sign
                  any document, including any transfer or endorsement of
                  Securities, necessary or useful to the exercise of the rights
                  conferred on the Holder pursuant to this Agreement.

         5.4      The Holder may grant extensions of time and other indulgences,
                  take and give up security, accept compositions, grant releases
                  and discharges and otherwise deal with the Grantor, debtors of
                  the Grantor, sureties and others and with the Hypothecated
                  Property or other security as the Holder may see fit without
                  prejudice to the liability of the Grantor and the rights of
                  the Holder under this Agreement.

         5.5      The exercise by the Holder of any of its rights shall not
                  prevent it from exercising any other rights it may have
                  arising from this Agreement the Loan Agreement, the Pledge
                  Agreement or by law; the rights of the Holder are cumulative
                  and not alternative. The Holder may waive any provision hereof
                  or any default, however the non-exercise by the Holder of any
                  of its rights or any such waiver shall not constitute a
                  renunciation of the exercise thereafter of such right or a
                  renunciation of any other provision or of any other default.
                  The Holder may exercise the rights arising from this Agreement
                  without having exercised its rights against any other Person
                  liable for the payment of the Secured Obligations, or any of
                  them, and without having realized any other security securing
                  the Secured Obligations.

         5.6      All rights of the Holder under this Agreement shall be
                  assignable and in any action brought by an assignee to enforce
                  such rights, the Grantor shall not assert against the assignee
                  any claim or defence which the Grantor now has or may
                  hereafter have against the Holder.

         5.7      The Holder is only required to exercise reasonable prudence
                  and diligence in the exercise of its rights or the fulfilment
                  of its obligations and, in any event, the Holder is only
                  responsible for its intentional or gross fault. The Grantor
                  shall

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                  indemnify the Holder for any losses or expenses incurred by
                  the Holder, or damages claimed against the Holder, for which
                  the Holder is not so responsible.

         5.8      The Holder may delegate to any other Person, or be represented
                  by any other Person in, the exercise of its rights or the
                  fulfilment of its obligations resulting from this Agreement;
                  the Holder may furnish to such Person any information which
                  the Holder may have concerning the Grantor or the Hypothecated
                  Property.

6.       PROVISIONS APPLICABLE TO CLAIMS

         6.1      In addition to the other provisions of this Agreement, the
                  following provisions shall apply in respect of all claims
                  forming part of the Hypothecated Property:

                  6.1.1    The Holder shall, subject to the terms of the Loan
                           Agreement, have the right to collect (i) the capital
                           falling due of, and any revenues of, any such claim
                           which is or represents the indemnity payable under
                           any insurance policy in respect of loss or damage to
                           the Hypothecated Property or which is or represents
                           the indemnity payable in respect of any expropriation
                           of the Hypothecated Property and (ii) the capital and
                           revenues of any proceeds of any sale or other
                           disposition of any Hypothecated Property made outside
                           the ordinary course of business of the Grantor;

                  6.1.2    The Holder authorizes the Grantor to collect when due
                           the capital falling due of, and any revenues of, any
                           other claim until the Holder shall have given the
                           Grantor a notice withdrawing such authorization,
                           whereupon the Holder shall immediately have the right
                           to collect all such capital and revenues. This notice
                           of withdrawal may be given and/or registered at any
                           time after an Event of Default shall have occurred
                           which is continuing, and may be given and/or
                           registered from time to time in respect of all or any
                           part or parts of the claims;

                  6.1.3    Upon notice by the Holder to the Grantor, which may
                           be given after an Event of Default shall have
                           occurred which is continuing or before or after the
                           notice of withdrawal referred to in Section 6.1.2,
                           the Holder may require the Grantor to immediately
                           remit to the Holder all or a specified part of
                           capital and revenues of claims received by the
                           Grantor or to deposit the same in one or more
                           designated bank accounts or otherwise to hold, deal
                           with or deliver such capital and revenues, all on
                           such terms and conditions as the Holder may specify
                           in such notice;

                  6.1.4    The Holder shall have no obligation to exercise any
                           rights in respect of any claims nor to enforce or to
                           see to payment of the same, whether by legal action
                           or otherwise. The Holder may give acquittances for
                           any sums it collects and may, but shall not be
                           obligated to, realize any of the claims, grant
                           extensions, grant releases, accept compositions,
                           renounce and generally deal with the claims, and any
                           guarantees or security

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                           therefor, and take any action to preserve, protect or
                           secure such claims, at such times and in such manner
                           as it deems advisable in its sole discretion, without
                           notice to or the consent of the Grantor, and without
                           incurring any liability therefor and without any
                           obligation to render any account in respect thereof
                           or in respect of moneys collected, other than to
                           remit to the Grantor any amounts collected over and
                           above the Secured Obligations;

                  6.1.5    Any amounts collected by the Grantor or by the Holder
                           or deposited in a designated bank account shall form
                           part of the Hypothecated Property and be subject to
                           the hypothec and security hereof. The Holder may
                           apply any amounts received by it towards payment of
                           all or part of the Secured Obligations, including any
                           fees, costs or other expenses incurred by the Holder
                           and secured hereunder and may impute and apply such
                           amounts towards payment of any part or parts of the
                           Secured Obligations as the Holder in its sole
                           discretion shall decide, and may change any
                           imputation or application as it sees fit;

                  6.1.6    The Grantor waives any obligation the Holder may have
                           to inform the Grantor of any irregularity in the
                           payment of any sums exigible on any claims or rights;

                  6.1.7    The Grantor shall from time to time on request of the
                           Holder deliver to the Holder, or permit the Holder or
                           its officers or agents access to its premises, in
                           accordance with the terms of the Loan Agreement, for
                           the purpose of examining and making copies of, all
                           books and accounts, letters, invoices, papers,
                           agreements, negotiable instruments, documents of
                           title, hypothecs and other documents in any way
                           evidencing or relating to all or any of the claims
                           forming part of the Hypothecated Property and shall
                           otherwise assist the Holder and furnish the Holder
                           with all information which may assist the Holder in
                           the collection thereof;

                  6.1.8    The hypothec in Section 2 on claims extends also to
                           any claim under any insurance contract on the other
                           property of the Grantor;

                  6.1.9    The Grantor represents that none of the claims which
                           now exist is itself secured by a hypothec or
                           guaranteed by a third party in favour of the Grantor,
                           and the Grantor undertakes to notify the Holder
                           immediately of any claim, present or future, which
                           hereafter is or becomes secured by a hypothec or
                           guaranteed by a third party in favour of the Grantor
                           and to deliver to the Holder the agreements or other
                           documents now or hereafter constituting or evidencing
                           the same;

                  6.1.10   If any claims arises out of a contract with the
                           federal government of Canada or the government of the
                           Province of Quebec, or any of their departments,
                           agencies or instrumentalities, the Grantor agrees to,
                           at the

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                                       11

                           request of the Holder, execute whatever instruments
                           and documents are required by the Holder in order
                           that such claims shall be assigned to the Holder and
                           the proper notice of such assignment shall be given
                           under any statute relating to the assignment of such
                           claims.

7.       DEFAULTS AND RECOURSES

         7.1      The Grantor will be in default under this Agreement
                  immediately upon the occurrence of any of the following events
                  (each an "EVENT OF DEFAULT"):

                  7.1.1    if the Grantor is in default under this Agreement; or

                  7.1.2    if an "Event of Default" (as defined in each of the
                           Exim Loan Agreement and the Non-Exim Loan Agreement)
                           has occurred.

         7.2      If an Event of Default shall have occurred which is
                  continuing, the Holder may exercise any and all of the rights
                  and recourses it may have hereunder or by law and it may
                  enforce and realize its hypothec, including the exercise of
                  the hypothecary rights in virtue of the Civil Code of Quebec.
                  The Holder may exercise its hypothecary rights against all or
                  any part of the Hypothecated Property and shall not be bound
                  to exercise the same hypothecary right against all the
                  Hypothecated Property. If the Holder gives the Grantor a prior
                  notice of its intention to exercise a hypothecary right the
                  Grantor shall, and shall cause any other Person in possession
                  of Hypothecated Property to, immediately voluntarily surrender
                  it to the Holder.

         7.3      If an Event of Default shall have occurred which is
                  continuing, whichever hypothecary right or rights or other
                  recourses the Holder may decide to exercise, the following
                  provisions shall apply:

                  7.3.1    if the Hypothecated Property has been surrendered to
                           the Holder or its agent or if the Holder or its agent
                           has possession of the Hypothecated Property, neither
                           the Holder nor its agent shall have any obligation to
                           continue to carry on the Grantor's enterprise or the
                           use, operation or exploitation of the Hypothecated
                           Property or to continue the use for which it is
                           ordinarily destined or to exercise the rights
                           pertaining to the Hypothecated Property or to make it
                           productive; and the Grantor agrees that the Holder or
                           its agent may do such acts and things, or refrain
                           from doing such acts and things, as the Holder or its
                           agent, in its sole discretion, deems appropriate for
                           the exercise of its rights and the realization and
                           enforcement of its hypothec and security;

                  7.3.2    in order to protect or to realize the value of the
                           Hypothecated Property, the Holder, at the Grantor's
                           expense, may, but shall not be obliged to:

                           7.3.2.1  continue and complete the processing,
                                    manufacture and transformation of the
                                    Hypothecated Property or any work

<PAGE>
                                       12

                                    in process or unfinished goods comprised in
                                    the Hypothecated Property as well as take
                                    any other action necessary or useful in
                                    order to prepare such property for sale;

                           7.3.2.2  alienate or dispose of any Hypothecated
                                    Property which may be obsolete, may perish
                                    or is likely to deteriorate rapidly;

                           7.3.2.3  use for its benefit all information obtained
                                    in the course of the exercise of its rights;

                           7.3.2.4  perform any obligation or covenant of the
                                    Grantor and any right with respect to the
                                    Hypothecated Property;

                           7.3.2.5  take physical possession of any and all of
                                    the Hypothecated Property and anything found
                                    therein, with the right for that purpose to
                                    enter without legal process upon any
                                    premises where the Hypothecated Property may
                                    be found, and to exclude the Grantor, its
                                    employees and agents therefrom, and the
                                    right to use such premises and to maintain
                                    such possession on the Grantor's premises or
                                    to remove the Hypothecated Property or any
                                    part thereof to such other places as the
                                    Holder may desire;

                           7.3.2.6  the Holder may, directly or indirectly,
                                    purchase or acquire the Hypothecated
                                    Property;

                  7.3.3    the Holder may, in the course of exercising its
                           rights, renounce or waive any right of the Grantor,
                           with or without consideration therefor;

                  7.3.4    the Holder shall not be bound to make an inventory,
                           to take out insurance or to furnish any bond or other
                           security;

                  7.3.5    the Grantor shall, at the request of the Holder,
                           assemble the Hypothecated Property and make same
                           available at any place designated by the Holder
                           which, in its opinion, is reasonably convenient.

         7.4      Where the Holder sells the Hypothecated Property itself, it
                  shall not be required to obtain any prior appraisal or
                  evaluation by a third party.

         7.5      The Holder may choose to sell the Hypothecated Property with
                  legal warranty given by the Grantor or with complete or
                  partial exclusion of such warranty.

         7.6      The Grantor agrees that with respect to any sale by the Holder
                  of any of the Hypothecated Property in the exercise of its
                  rights, it will be commercially reasonable to sell such
                  Hypothecated Property:

<PAGE>
                                       13

                  7.6.1    together or separately;

                  7.6.2    by auction or by call for tenders by advertising such
                           sale or call for tenders once in a local daily
                           newspaper at least ten (10) days prior to such sale
                           or close of call for tenders; and

                  7.6.3    by sale by agreement after receipt by the Holder of
                           at least two (2) offers from prospective purchasers,
                           who may include Persons related to or affiliated with
                           the Grantor or other customers of the Holder.

                  Any such sale may be on such terms as to credit or otherwise
                  and as to upset price or reserve bid or price as the Holder in
                  its sole discretion may deem advantageous, and the Grantor
                  agrees that the price received at any such sale shall
                  constitute a commercial reasonable price.

                  The foregoing shall not preclude the Holder from agreeing to
                  or making any sale in any other manner not prohibited by law
                  nor shall it be interpreted to mean that only a sale made in
                  conformity with the foregoing is commercially reasonable or
                  that only the price received at a sale made in conformity with
                  the foregoing shall constitute a commercially reasonable
                  price.

8.       GENERAL PROVISIONS

         8.1      The hypothec and security interest constituted by this
                  Agreement is in addition to and not in substitution for any
                  other hypothec or security held by the Holder, including any
                  security granted pursuant to the Loan Agreement and the Pledge
                  Agreement.

         8.2      This hypothec constitutes continuing security which shall
                  continue in effect notwithstanding any payment from time to
                  time in whole or in part of the Secured Obligations and shall
                  subsist until cancelled by the Holder. This hypothec may, by
                  agreement between the Holder and the Grantor from time to
                  time, secure obligations in addition to or in substitution of
                  the Secured Obligations.

         8.3      The mere lapse of the time provided for the Grantor to perform
                  any obligation or the arrival of any term shall automatically
                  put the Grantor in default, without any notice putting the
                  Grantor in default being required, except as may be required
                  under applicable law and the Loan Agreement.

         8.4      The rights conferred on the Holder by this Agreement shall
                  inure to the benefit of each successor of the Holder. The
                  Holder shall have the right to assign all or any part of the
                  Secured Obligations to any other Person and this Agreement
                  shall inure to the benefit of any such assignee in respect of
                  all, or such part, of the Secured Obligations which have been
                  so assigned. This Agreement shall bind any successor and
                  permitted assigns of the Grantor.

<PAGE>
                                       14

         8.5      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.

         8.6      The terms and provisions of this Agreement may not be waived
                  or amended, except in a writing executed by Grantor and a duly
                  authorized officer of Holder.

         8.7      All notices, demands and other communications to the Grantor
                  may be given to it in accordance with the terms of the Loan
                  Agreement.

         8.8      The amount of the hypothec and rate of interest specified in
                  Section 2.2 is the amount with the rate of interest for which
                  the Hypothecated Property is hypothecated. The amount of
                  credit which the Grantor is entitled to obtain from the Holder
                  is determined by the applicable separate agreements and not by
                  the amount of the hypothec specified in Section 2.2 of this
                  Agreement.

         8.9      If the Grantor amalgamates with any corporation or
                  corporations, the Secured Obligations and the hypothec and
                  security interest created hereby shall continue and shall
                  extend to the present and future undertaking, property and
                  assets of the amalgamated corporation, as if the amalgamated
                  corporation had executed this Agreement as the Grantor.

         8.10     The Grantor shall sign, acknowledge or deliver all such
                  further instruments and shall do such other things as the
                  Holder may reasonably require to give effect to or to confirm
                  or protect the hypothec hereby constituted, including
                  necessary inscriptions for the registration, renewal, carrying
                  over or conservation of the hypothec and notices to third
                  parties.

         8.11     In the event of a conflict between any of the provisions of
                  this Agreement and the Loan Agreement, the provisions of the
                  Loan Agreement shall prevail to the extent of such conflict
                  provided that no such conflict shall invalidate the hypothecs
                  and security interest created hereunder and the absence of a
                  provision shall not be deemed to be a conflict.

         8.12     The parties hereby confirm their express wish that this
                  Agreement and all documents, agreements or notices directly or
                  indirectly related hereto be drawn up in the English language.
                  Les parties reconnaissent leur volonte expresse que le present
                  contrat ainsi que tous les documents, conventions ou avis s'y
                  rattachant directement ou indirectement soient rediges en
                  langue anglaise.

<PAGE>

SIGNED AT Atlanta, Georgia this twentieth  (20th) day of February 2003

                                       Grantor:  VERSO TECHNOLOGIES, INC.

                                       by:   /s/ Juliet M. Reising
                                          --------------------------------------
                                       by:   /s/ Steven A. Odom
                                          --------------------------------------

Accepted and agreed, as of the
date above-written

Holder: SILICON VALLEY BANK

by:  /s/ Peter M. Bendoris
   -------------------------------

<PAGE>

                                  SCHEDULE "A"

                                   TRADE NAMES

Verso Technologies,

NACT Telecommunications,

Clarent

Telemate.Net Software<PAGE>

                                                                   EXHIBIT 10.70

                                MOVABLE HYPOTHEC

1.       DEFINITION AND INTERPRETATION

         1.1      In the Agreement, the following words shall, unless otherwise
                  provided, have the meanings set out below:

                  1.1.1    "AGREEMENT" the expression "Agreement" shall include
                           this Agreement, as it may hereafter be amended,
                           supplemented, modified, extended, renewed, replaced
                           or restated from time to time;

                  1.1.2    "BORROWER" means, collectively, Verso Technologies,
                           Inc., NACT Telecommunications, Inc. and Telemate.net
                           Software, Inc. and any person resulting from the
                           amalgamation, merger, consolidation, reorganization,
                           continuation or other transformation of any of them;

                  1.1.3    "BUSINESS DAY" means a day on which the Holder is
                           open for business, and shall exclude a Saturday,
                           Sunday or a statutory holiday in the Province of
                           Quebec;

                  1.1.4    "CONTINUING" when used with reference to a Default or
                           an Event of Default means that the Default or Event
                           of Default has occurred and has not been either
                           waived in writing by the Holder or cured within any
                           applicable cure period;

                  1.1.5    "DEFAULT" or "DEFAULT" means any event or
                           circumstance which constitutes an Event of Default or
                           which, with the giving of notice of lapse of time or
                           both would, unless cured or waived, constitute an
                           Event of Default;

                  1.1.6    "EVENT OF DEFAULT" shall have the meaning set forth
                           in Section 7.1 hereof;

                  1.1.7    "EXIM LOAN AGREEMENT" means the Loan and Security
                           Agreement dated February 12, 2003 between the
                           Borrower, as co-borrowers, and the Holder, as lender,
                           as amended, supplemented, modified, extended,
                           renewed, replaced or restated from time to time;

                  1.1.8    "EXIM OBLIGATIONS" means "Obligations" as defined
                           under the Exim Loan Agreement;

                  1.1.9    "GRANTOR" means Clarent Canada Ltd./Clarent Canada
                           Ltee and any person resulting from the amalgamation,
                           merger, consolidation, reorganization, continuation
                           or other transformation thereof;

<PAGE>

                                       2

                  1.1.10   "GUARANTY" means the Cross-Corporate Continuing
                           Guaranty dated February 12, 2003 executed by the
                           Grantor in favour of the Holder, and all renewals,
                           extensions, replacements, supplements or amendments
                           thereto or substitution thereon or confirmations or
                           restatements thereof;

                  1.1.11   "HOLDER" means Silicon Valley Bank;

                  1.1.12   "HYPOTHECATED PROPERTY" means all property, assets
                           and undertaking of the Grantor charged pursuant to
                           Section 2.1 of this Agreement and shall include all
                           or any part thereof;

                  1.1.13   "INTELLECTUAL PROPERTY COLLATERAL" means all present
                           and future intellectual property (whether registered
                           or unregistered) including without limitation all
                           computer programs, application software,
                           hardware/software maintenance support agreements and
                           all other documents related thereto, licenses of
                           software, copyrights, patents and inventions,
                           trademarks, trade names, business names, trade styles
                           and other business identifiers, industrial designs,
                           integrated circuit topographies, trade secrets and
                           other confidential information and all know-how
                           obtained, developed or used by the Grantor or
                           contemplated at any time for use by the Grantor;

                  1.1.14   "LIEN" shall mean any mortgage, charge, pledge,
                           hypothec, lien (statutory or otherwise), prior claim,
                           priority, legal hypothec, trust, deemed trust, title
                           retention, deposit, right to distrain, landlord's
                           liens, security interest, assignment or other
                           encumbrance of any nature however arising, or any
                           other security agreement, hypothecation or
                           arrangement creating in favour of any creditor a
                           right in respect of any particular property that is
                           prior to the right of any other creditor in respect
                           of such property, and includes the right of a lessor
                           relative to a Capitalized Lease Obligation (as
                           defined in the Loan Agreement), a lease of movable
                           property, or a leasing contract and the right of a
                           vendor under a conditional (instalment) sale
                           agreement;

                  1.1.15   "LOAN AGREEMENT" means collectively the Exim Loan
                           Agreement and the Non-Exim Loan Agreement;

                  1.1.16   "NON-EXIM LOAN AGREEMENT" means the Loan and Security
                           Agreement dated December 14, 2001, between, among
                           others, the Borrower, as co-borrowers, and the
                           Holder, as lender, as amended on July 31, 2002,
                           November 11, 2002, December 13, 2002 and February 12,
                           2003, as same may be further supplemented, modified,
                           extended, renewed, replaced or restated from time to
                           time;

                  1.1.17   "NON-EXIM OBLIGATIONS" means "Obligations" as defined
                           under the Non-Exim Loan Agreement;

<PAGE>

                                       3

                  1.1.18   "PERMITTED LIENS" shall have the meaning set forth in
                           the Loan Agreement;

                  1.1.19   "PERSON" means any natural person, corporation,
                           limited liability company, trust, joint venture,
                           association, company, partnership or other entity;

                  1.1.20   "PROPERTY" the expression "property" shall include
                           property, titles and rights;

                  1.1.21   "SECURED OBLIGATIONS" means all obligations, present
                           and future, direct or indirect, absolute or
                           contingent, matured or not, whether incurred alone or
                           with any other person: i) of the Borrower towards the
                           Holder under or pursuant to the Exim Loan Agreement
                           (including the Exim Obligations) and the Non-Exim
                           Loan Agreement (including the Non-Exim Obligations),
                           and ii) of the Grantor towards the Holder under or
                           pursuant to the Guaranty and this Agreement, and all
                           interest, commissions, legal and other costs
                           (including legal fees as between a solicitor and its
                           own client), charges and expenses accruing or
                           incurred under or in connection with this Agreement;
                           and

                  1.1.22   "SECURITIES" the expression "Securities" shall
                           include shares in the capital stock of a legal
                           person, bonds, warrants, debentures, bills of
                           exchange, promissory notes, negotiable instruments
                           and other evidences of indebtedness, options or
                           rights in respect of the foregoing, and any other
                           instrument or title generally called or included as a
                           security and the expression "SECURITIES" shall mean
                           any or all Securities;

         1.2      References to a section shall refer to sections in this
                  Agreement and references to dollar amounts herein are, unless
                  expressly otherwise provided, expressed in terms of Canadian
                  Dollars.

         1.3      The headings in the Agreement are included for convenience of
                  reference only, and shall not constitute a part of this
                  Agreement for any other purpose.

         1.4      The words "GRANTOR" and "HOLDER", the personal pronoun "it" or
                  "its" and any verb relating thereto and used therewith shall
                  be read and construed as required by and in accordance with
                  the context in which such words are used. The term
                  "successors" shall include, without limiting its meaning, any
                  corporation resulting from the amalgamation of a corporation
                  with another corporation.

         1.5      If one or more of the provisions contained herein shall be
                  invalid, illegal or unenforceable in any respect, the
                  validity, legality and enforceability of the remaining
                  provisions contained herein shall not in any way be affected
                  or impaired thereby.

<PAGE>

                                       4

         1.6      If the event that any day, on or before which any action is
                  required to be taken hereunder, is not a Business Day, then
                  such action shall be required to be taken on or before the
                  specified time on the first Business Day thereafter.

         1.7      This Agreement shall be construed in accordance with and be
                  governed by the laws of the Province of Quebec and the federal
                  laws of Canada applicable therein. For the purpose of legal
                  proceedings, this Agreement shall be deemed to have been made
                  in the said Province and to be performed therein and the
                  courts of that Province shall have jurisdiction over all
                  disputes which may arise under this Agreement. The Grantor
                  hereby irrevocably and unconditionally submits to the
                  non-exclusive jurisdiction of such courts, provided always
                  that nothing herein contained shall prevent the Holder from
                  proceeding at its election against the Grantor in the courts
                  of any other province, country or jurisdiction.

2.       HYPOTHEC

         2.1      For good and valuable consideration, and as continuing and
                  collateral security for the payment and performance when due
                  of all of the Secured Obligations, the Grantor hereby
                  hypothecates in favour of the Holder (and with respect to
                  incorporeal or intangible property, and corporeal movable
                  property located outside of the Province of Quebec, hereby
                  charges, assigns, and mortgages and creates a security
                  interest in favour of the Holder in), the universality of all
                  present and future movable property of the Grantor, both
                  corporeal and incorporeal, now owned or hereafter acquired by
                  the Grantor, including without limitation the following:

                  2.1.1    all present and future machinery and equipment of the
                           Grantor, including tools, implements, furniture,
                           rolling stock, vehicles, spare parts and additions;

                  2.1.2    all present and future property in stock and
                           inventory of the Grantor whether in its possession,
                           in transit or held on its behalf, including, without
                           limitation, all movable property in reserve, raw
                           materials, goods in process, finished products,
                           packaging materials, property held by third parties
                           pursuant to a rental, leasing, franchise, licence or
                           other agreement entered into with or on behalf of the
                           Grantor, property evidenced by bill of lading,
                           animals, wares, as well as any other property held
                           for sale, lease or processing in the manufacture or
                           transformation of property intended for sale, for
                           lease, or for use in providing a service by the
                           Grantor in the ordinary course of operation of its
                           enterprise;

                  2.1.3    all present and future claims of the Grantor of any
                           nature or kind, whatever their cause, whether or not
                           evidenced by any title, and whether or not such title
                           is negotiable, bill of exchange or draft; and whether
                           or not they constitute book debts or trade accounts
                           receivable, including, without limitation, all
                           customer accounts, accounts receivable, rights of

<PAGE>
                                        5

                           action, demands, judgements, contract rights,
                           options, permits, licenses, consents, approvals,
                           orders, rulings, quotas, subsidies, franchises,
                           immunities, amounts on deposit, proceeds of sale,
                           assignment or lease of any property, rights or
                           titles, any indemnities payable under any contract of
                           insurance whether or not such insurance is on
                           property forming part of the Hypothecated Property
                           and any indemnity or proceeds of expropriation, the
                           whole which are now due or which may become due to
                           the Grantor, together with all judgments and all
                           other rights, benefits, guarantees and securities for
                           the said claims which now or may hereafter exist in
                           favour of the Grantor, and together with all books
                           and accounts, titles, letters, invoices, papers and
                           documents in any way evidencing or relating to all or
                           any of the claims;

                  2.1.4    all present and future Securities, including, without
                           limitation, all other Securities issued or received
                           in substitution, renewal, addition or replacement of
                           Securities, or issued or received on the purchase,
                           redemption, conversion, cancellation or other
                           transformation of Securities or issued or received by
                           way of dividend or otherwise to holders of
                           Securities, and all present and future instruments,
                           bills of lading, warehouse receipts, documents or
                           other evidences of title of the Grantor, and all
                           interests of the Grantor in any partnership;

                  2.1.5    all present and future Intellectual Property
                           Collateral, goodwill, other intangible property,
                           monies, agreements and rights under agreements of the
                           Grantor, as well as all rights in any action
                           pertaining to the protection, in Canada or abroad, of
                           any such Intellectual Property Collateral or rights,
                           and all its present and future undertaking;

                  2.1.6    the proceeds of any sale, assignment, lease or other
                           disposition of the Hypothecated Property any claim
                           resulting from such a sale, assignment, lease or
                           other disposition, as well as any property acquired
                           in replacement thereof;

                  2.1.7    any present and future rights attached to the
                           Hypothecated Property as well as the fruits and
                           revenues thereof; and

                  2.1.8    all present and future titles, documents, records,
                           receipts, invoices, accounts and data of the Grantor
                           evidencing or relating to any of the Hypothecated
                           Property including, without limitation, computer
                           disks, tapes and related electronic data processing
                           media, rights of the Grantor to retrieve the same
                           from third parties, delivery receipts, catalogs,
                           insurance certificates and the like;

(all such present and future property being herein called the "HYPOTHECATED
PROPERTY").

<PAGE>

                                       6

         2.2      The amount for which the hypothec in Section 2.1 is granted is
                  TWENTY-FOUR MILLION Canadian dollars ($24,000,000), with
                  interest from the date hereof at the rate of TWENTY-FIVE
                  PERCENT (25%) per annum.

         2.3      The hypothec which is granted in this Agreement constitutes a
                  pledge of such of the Hypothecated Property which is delivered
                  to or now in possession of the Holder, as well as a pledge of
                  any of the Hypothecated Property which may in the future be
                  delivered to or held by the Holder.

         2.4      The hypothec and security interest hereby created and granted
                  do not and shall not extend to, and the Hypothecated Property
                  shall not include, any contract, agreement, right, franchise,
                  licence, lease or permit (each, a "CONTRACTUAL RIGHT") to
                  which the Grantor is a party or of which the Grantor has the
                  benefit, to the extent that the creation and granting of the
                  hypothec and security interest herein would constitute a
                  breach of the terms of or permit any Person to terminate one
                  or more contractual rights, and the foregoing hypothec and
                  security interest is constituted under the suspensive
                  condition of obtaining the required authorizations or
                  consents. The Grantor shall hold such contractual rights as
                  mandatory of the Holder until such time as the suspensive
                  condition is fulfilled in respect of such contractual right.
                  The Grantor agrees that it shall, upon the request of the
                  Holder and whether before or after a default by the Grantor
                  has occurred and the security herein has become enforceable,
                  use all commercially reasonable efforts to obtain any consent
                  required to permit any material contractual rights to be
                  subjected to the hypothec and security interest hereby created
                  and granted.

3.       REPRESENTATIONS AND WARRANTIES

         The Grantor represents to and agrees with the Holder as follows:

         3.1      The Grantor is and will continue to be a corporation, duly
                  organized, validly existing and in good standing under the
                  laws of Canada. The Grantor 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 the Grantor.

         3.2      The execution, delivery and performance by the Grantor of this
                  Agreement (i) has been duly and validly authorized, (ii) is
                  enforceable against the Grantor in accordance with its terms
                  (except as enforcement may be limited by equitable principles
                  and by bankruptcy, insolvency, reorganization, moratorium or
                  similar laws relating to creditors' rights generally), and
                  (iii) does not violate the Grantor's articles or certificate
                  of incorporation, or the Grantor's by-laws, or any law or any
                  material agreement or instrument which is binding upon the
                  Grantor or its property, and (iv) does not constitute grounds
                  for acceleration of any material indebtedness or obligation
                  under any material agreement or instrument which is binding
                  upon the Grantor or its property.

<PAGE>

                                       7

         3.3      The Grantor is the sole owner of the Hypothecated Property
                  which now exists and all the Hypothecated Property is free and
                  clear of all Liens in favour of any other Person, except for
                  Permitted Liens and the Liens described in Schedule "A"
                  hereto; the Grantor is in possession of all the Hypothecated
                  Property.

         3.4      The Grantor is carrying on an enterprise and its head office
                  is situated at 4105-D Matte Boulevard, Brossard, Quebec, J4Y
                  2P4 and 4155 D-Matt Boulevard, Brossard, Quebec, JOY-2P4.

         3.5      The Grantor's only places of business are located at its head
                  office.

         3.6      The Grantor uses no business or trade name.

         3.7      None of the Hypothecated Property is incorporated in an
                  immovable property; and none of the Hypothecated Property is
                  permanently physically attached or joined to an immovable
                  property, except for Hypothecated Property which has not lost
                  its individuality and which is used for the operation of the
                  Grantor's enterprise or the pursuit of the Grantor's
                  activities.

         3.8      Grantor is not and will not become a lessee under any
                  immovable (real) property lease pursuant to which the lessor
                  may obtain any rights in any of the Hypothecated Property.

         3.9      The Grantor has complied, and will comply, in all material
                  respects, with all provisions of all foreign, federal, state
                  and local laws and regulations relating to the Grantor,
                  including, but not limited to, those relating to the Grantor's
                  ownership of property, the conduct and licensing of the
                  Grantor's business, and all environmental matters.

         3.10     There is no claim, suit, litigation, proceeding or
                  investigation pending or (to best of the Grantor's knowledge)
                  threatened by or against or affecting the Grantor in any court
                  or before any governmental agency (or any basis therefor known
                  to the Grantor) which could reasonably be expected to result,
                  either separately or in the aggregate, in any material adverse
                  change in the financial condition or business of the Grantor,
                  or in any material impairment in the ability of the Grantor to
                  carry on its business in substantially the same manner as it
                  is now being conducted.

         3.11     To the fullest extent applicable, any representations and
                  warranties in the Loan Agreement and not covered in this
                  Section 3 shall be deemed to have been made by the Grantor as
                  of the present date and shall apply, mutatis mutandis, to the
                  Grantor and the Hypothecated Property, the whole with all
                  necessary adaptations.

4.       COVENANTS

         The Grantor agrees with the Holder as follows:

<PAGE>

                                       8

         4.1      The Grantor will give to the Holder a 30 day prior written
                  notice of any change in its name, its head office, its places
                  of business (including any new place of business) or in the
                  contents or accuracy of the representations made in Section 3.

         4.2      The Grantor shall pay when due all duties, levies, taxes,
                  charges and licence and other fees it may owe at any time
                  under any fiscal law as well as those relating to the
                  Hypothecated Property and any claim which may rank prior to or
                  pari passu with the hypothec constituted by this Agreement and
                  shall submit to the Holder, on request, receipts or other
                  evidence establishing such payment.

         4.3      The Grantor shall at all times insure all of its corporeal
                  movable property and carry such other business insurance, with
                  insurers reasonably acceptable to the Holder, in such form and
                  amounts as the Holder may reasonably require, and the Grantor
                  shall provide evidence of such insurance to the Holder, so
                  that the Holder is satisfied that such insurance is, at all
                  times, in full force and effect. Within five (5) days hereof,
                  such insurance policies shall name the Holder as an additional
                  insured and loss payee, and shall contain a lender's or
                  hypothecary creditor loss payee endorsement in form reasonably
                  acceptable to the Holder. Upon receipt of the proceeds of any
                  such insurance, the Holder shall apply such proceeds in
                  reduction of the Secured Obligations as the Holder shall
                  determine in its sole discretion, except that, provided no
                  Default or Event of Default has occurred and is continuing,
                  the Holder shall release to the Grantor insurance proceeds
                  with respect to equipment totalling less than Cdn. $100,000,
                  which shall be utilized by the Grantor for the replacement of
                  the equipment with respect to which the insurance proceeds
                  were paid. The Holder may require reasonable assurance that
                  the insurance proceeds so released will be so used. The
                  Grantor shall promptly deliver to the Holder copies of all
                  reports made to insurance companies. If the Grantor fails to
                  procure or maintain any such insurance, the Holder shall have
                  the right, but not the obligation, to effect such insurance in
                  its name or in the Grantor's name, and any premiums or other
                  expenses paid or incurred by the Holder in so doing shall
                  forthwith be due and payable by the Grantor to the Holder with
                  interest as provided in Section 4.13.

         4.4      The Grantor will maintain the Hypothecated Property in good
                  working condition (ordinary wear and tear excepted), and the
                  Grantor will not use the Hypothecated Property for any
                  unlawful purpose. The Grantor will, as promptly as practical,
                  advise the Holder in writing of any material loss or damage to
                  the Hypothecated Property.

         4.5      The Grantor shall comply with the requirements of laws and
                  regulations applicable to the carrying on of its enterprise
                  and to its ownership, possession and use of the Hypothecated
                  Property, including laws and regulations in respect of the
                  environment.

         4.6      The Grantor will maintain such books and accounting records as
                  a prudent administrator would maintain in relation to its
                  enterprise and to the Hypothecated Property.

<PAGE>

                                       9

         4.7      The Grantor shall defend title to the Hypothecated Property
                  and shall not create or permit to exist any Lien in favour of
                  a third party on or which may affect the Hypothecated
                  Property, other than Permitted Liens. The Grantor shall ensure
                  that the Lien in favour of Royal Bank of Canada described in
                  Schedule "A" shall only secure obligations owing in respect of
                  a letter of credit issued to guarantee the Grantor's
                  obligations under its lease for its head office identified in
                  Section 3.3.

         4.8      Whenever any Hypothecated Property is located upon premises in
                  which any third party has an interest (whether as owner,
                  hypothecary creditor, beneficiary under a deed of trust or
                  otherwise), Grantor shall, whenever requested by the Holder,
                  use its best efforts to cause such third party to execute and
                  deliver to the Holder, in form acceptable to the Holder, such
                  waivers and subordinations as the Holder shall specify, so as
                  to ensure that the Holder's rights in the Hypothecated
                  Property are, and will continue to be, superior to the rights
                  of any such third party. Grantor will keep in full force and
                  effect, and will comply with all the terms of, any lease of
                  real property where any of the Hypothecated Property now or in
                  the future may be located.

         4.9      Except with the prior written consent of the Holder, the
                  Grantor will not change the use, destination or nature of the
                  Hypothecated Property, nor will the Grantor move the
                  Hypothecated Property to a jurisdiction in which the hypothec
                  and security interest hereby created or any security interest
                  in favour of the Holder has not been registered and perfected;
                  nor will it permit the Hypothecated Property to be
                  incorporated in an immovable property or to be permanently
                  physically attached or joined to an immovable property, unless
                  such Hypothecated Property does not lose its individuality and
                  unless such Hypothecated Property is and will continue to be
                  used for the operation of the Grantor's enterprise or the
                  pursuit of the Grantor's activities.

         4.10     The Grantor will maintain its corporate existence in good
                  standing and will not amalgamate with any other Person, nor
                  will it commence any proceedings with a view to its
                  dissolution or liquidation, nor will it sell or transfer any
                  Hypothecated Property, except for the sale of finished
                  inventory in the ordinary course of Grantor's business, except
                  for the sale of obsolete or unneeded equipment in the ordinary
                  course of business and except for the issuance of
                  non-exclusive licenses and similar arrangements for the use of
                  property of the Grantor, in the ordinary course of business,
                  nor will it sell any inventory on a sale-or-return, guaranteed
                  sale, consignment, or other contingent basis, the whole
                  without the prior written consent of the Holder, which consent
                  or denial thereof, will be determined in the Holder's good
                  faith business judgment.

         4.11     The Grantor will furnish to the Holder any information which
                  the Holder may reasonably request in respect of the Grantor's
                  operations or the Hypothecated Property or to verify if the
                  Grantor is in compliance with its covenants and obligations
                  contained in this Agreement.

<PAGE>

                                       10

         4.12     The Grantor will immediately advise the Holder in writing of
                  any fact or occurrence of such nature as may adversely affect
                  the value of the Hypothecated Property or the financial
                  situation of the Grantor or which constitutes, or with the
                  giving of notice or lapse of time or both, would constitute a
                  Default under this Agreement.

         4.13     The Grantor will reimburse the Holder promptly on demand all
                  out-of-pocket fees, costs and expenses, including reasonable
                  legal fees and expenses, incurred by the Holder relating to or
                  in connection with the execution, publication, performance,
                  interpretation, administration, enforcement and realization of
                  or in respect of this Agreement, the exercise of all rights of
                  the Holder and the preservation and protection of its
                  interests under this Agreement and the rendering of the rights
                  of the Holder opposable to all third parties, including,
                  without limitation, any fees, costs and expenses of
                  consultants, professionals, legal counsel or agents retained
                  by the Holder in connection with its rights hereunder,
                  including those for and in respect of any appraisal or
                  valuation of the Hypothecated Property whether in connection
                  with the sale of an enterprise or otherwise. The Grantor will
                  pay interest on all such amounts from the date the Holder
                  demands payment thereof from the Grantor at an annual rate
                  equal to the highest rate of interest prescribed under the
                  Loan agreement including Section 7.2 thereof. All such costs,
                  fees, expenses and charges owing by the Grantor to the Holder,
                  with interest thereon, shall form part of the Secured
                  Obligations.

         4.14     The Grantor will promptly inform the Holder in writing of any
                  claim, proceeding, litigation or investigation in the future
                  threatened or instituted by or against the Grantor involving
                  any single claim of One Hundred and Fifty Thousand Cdn.
                  Dollars (Cdn. $150,000) or more, or involving Three Hundred
                  Thousand CDN. Dollars (Cdn. $300,000) or more in the
                  aggregate.

         4.15     The Grantor will duly perform and comply with all its
                  obligations to the Holder, whether under this Agreement or any
                  other agreement, instrument or other document, including under
                  the Guaranty.

         4.16     To the fullest extent applicable, any covenants in the Loan
                  Agreement and not covered in this Section 4 shall be deemed to
                  have been made by the Grantor as of the present date and shall
                  apply, mutatis mutandis, to the Grantor and the Hypothecated
                  Property, the whole with all necessary adaptations.

5.       CERTAIN RIGHTS OF THE HOLDER

         5.1      At reasonable times, and on three (3) Business Day's notice
                  prior to any Default (and on One (1) Business Day's notice
                  after an Event of Default which is continuing), the Holder, or
                  its agents, shall have the right to inspect the Hypothecated
                  Property, and the right to audit and copy Grantor's books and
                  records.

<PAGE>

                                       11

         5.2      In the event the Grantor fails to observe or perform any of
                  its obligations or undertakings under this Agreement, the
                  Holder may, but shall not be obliged to, perform the same,
                  without waiving any rights to enforce this Agreement, and any
                  fees, costs or expenses incurred in so doing shall be
                  forthwith due and payable by the Grantor to the Holder, with
                  interest as provided in Section 4.13, and shall form part of
                  the Secured Obligations.

         5.3      The Holder may, but shall not be obliged to, cause the Holder,
                  or its nominee, to be registered as holder of Securities, in
                  which case the Holder may exercise all rights in respect of
                  such Securities, including any right to vote, any right of
                  conversion or any right of redemption, and shall be entitled
                  to receive all revenues, dividends and capital distributions
                  (but the Holder shall not be responsible for any loss
                  occasioned by the exercise of any of such rights or by failure
                  to exercise the same within the time prescribed); provided
                  however that until an Event of Default shall have occurred
                  hereunder which is continuing, the Holder hereby grants the
                  Grantor a proxy, revocable at any time, authorizing the
                  Grantor to exercise any voting rights (subject to the prior
                  written consent of the Holder) and other rights attached to
                  such Securities (subject to the prior written consent of the
                  Holder)and to receive such revenues, dividends and capital
                  distributions.

         5.4      The Grantor hereby irrevocably constitutes the Holder or any
                  officer, or representative of the Holder, its agent, with the
                  power of substitution, in order to perform any act and sign
                  any document, including any transfer or endorsement of
                  Securities, necessary or useful to the exercise of the rights
                  conferred on the Holder pursuant to this Agreement.

         5.5      The Holder may grant extensions of time and other indulgences,
                  take and give up security, accept compositions, grant releases
                  and discharges and otherwise deal with the Grantor, debtors of
                  the Grantor, sureties and others and with the Hypothecated
                  Property or other security as the Holder may see fit without
                  prejudice to the liability of the Grantor and the rights of
                  the Holder under this Agreement.

         5.6      The exercise by the Holder of any of its rights shall not
                  prevent it from exercising any other rights it may have
                  arising from this Agreement, the Loan agreement or the
                  Guaranty or by law; the rights of the Holder are cumulative
                  and not alternative. The Holder may waive any provision hereof
                  or any default, however the non-exercise by the Holder of any
                  of its rights or any such waiver shall not constitute a
                  renunciation of the exercise thereafter of such right or a
                  renunciation of any other provision or of any other default.
                  The Holder may exercise the rights arising from this Agreement
                  without having exercised its rights against any other Person
                  liable for the payment of the Secured Obligations, or any of
                  them, and without having realized any other security securing
                  the Secured Obligations.

         5.7      All rights of the Holder under this Agreement shall be
                  assignable and in any action brought by an assignee to enforce
                  such rights, the Grantor shall not assert
<PAGE>

                                       12

                  against the assignee any claim or defence which the Grantor
                  now has or may hereafter have against the Holder.

         5.8      The Holder is only required to exercise reasonable prudence
                  and diligence in the exercise of its rights or the fulfilment
                  of its obligations and, in any event, the Holder is only
                  responsible for its intentional or gross fault. The Grantor
                  shall indemnify the Holder for any losses or expenses incurred
                  by the Holder, or damages claimed against the Holder, for
                  which the Holder is not so responsible.

         5.9      The Holder may delegate to any other Person, or be represented
                  by any other Person in, the exercise of its rights or the
                  fulfilment of its obligations resulting from this Agreement;
                  the Holder may furnish to such Person any information which
                  the Holder may have concerning the Grantor or the Hypothecated
                  Property.

6.       PROVISIONS APPLICABLE TO CLAIMS

         6.1      In addition to the other provisions of this Agreement, the
                  following provisions shall apply in respect of all claims
                  forming part of the Hypothecated Property:

                  6.1.1    The Holder, subject to the terms of the Loan
                           Agreement, the Guaranty and hereof, shall have the
                           right to collect (i) the capital falling due of, and
                           any revenues of, any such claim which is or
                           represents the indemnity payable under any insurance
                           policy in respect of loss or damage to the
                           Hypothecated Property or which is or represents the
                           indemnity payable in respect of any expropriation of
                           the Hypothecated Property and (ii) the capital and
                           revenues of any proceeds of any sale or other
                           disposition of any Hypothecated Property made outside
                           the ordinary course of business of the Grantor;

                  6.1.2    The Holder authorizes the Grantor to collect when due
                           the capital falling due of, and any revenues of, any
                           other claim until the Holder shall have given the
                           Grantor a notice withdrawing such authorization,
                           whereupon the Holder shall immediately have the right
                           to collect all such capital and revenues. This notice
                           of withdrawal may be given and/or registered at any
                           time after an Event of Default shall have occurred
                           which is continuing, and may be given and/or
                           registered from time to time in respect of all or any
                           part or parts of the claims;

                  6.1.3    Upon notice by the Holder to the Grantor, which may
                           be given after an Event of Default shall have
                           occurred which is continuing or before or after the
                           notice of withdrawal referred to in Section 6.1.2,
                           the Holder may require the Grantor to immediately
                           remit to the Holder all or a specified part of
                           capital and revenues of claims received by the
                           Grantor or to deposit the same in one or more
                           designated bank accounts or otherwise to hold, deal
                           with or deliver such capital and revenues, all on
                           such terms and conditions as the Holder may specify
                           in such notice;

<PAGE>

                                       13

                  6.1.4    The Holder shall have no obligation to exercise any
                           rights in respect of any claims nor to enforce or to
                           see to payment of the same, whether by legal action
                           or otherwise. The Holder may give acquittances for
                           any sums it collects and may, but shall not be
                           obligated to, realize any of the claims, grant
                           extensions, grant releases, accept compositions,
                           renounce and generally deal with the claims, and any
                           guarantees or security therefor, and take any action
                           to preserve, protect or secure such claims, at such
                           times and in such manner as it deems advisable in its
                           sole discretion, without notice to or the consent of
                           the Grantor, and without incurring any liability
                           therefor and without any obligation to render any
                           account in respect thereof or in respect of moneys
                           collected, other than to remit to the Grantor any
                           amounts collected over and above the Secured
                           Obligations;

                  6.1.5    Any amounts collected by the Grantor or by the Holder
                           or deposited in a designated bank account shall form
                           part of the Hypothecated Property and be subject to
                           the hypothec and security hereof. The Holder may
                           apply any amounts received by it towards payment of
                           all or part of the Secured Obligations, including any
                           fees, costs or other expenses incurred by the Holder
                           and secured hereunder and may impute and apply such
                           amounts towards payment of any part or parts of the
                           Secured Obligations as the Holder in its sole
                           discretion shall decide, and may change any
                           imputation or application as it sees fit;

                  6.1.6    The Grantor waives any obligation the Holder may have
                           to inform the Grantor of any irregularity in the
                           payment of any sums exigible on any claims or rights;

                  6.1.7    The Grantor shall from time to time on request of the
                           Holder deliver to the Holder, or permit the Holder or
                           its officers, mandataries or agents access to its
                           premises for the purpose of examining and making
                           copies of, all books and accounts, letters, invoices,
                           papers, agreements, negotiable instruments, documents
                           of title, hypothecs and other documents in any way
                           evidencing or relating to all or any of the claims
                           forming part of the Hypothecated Property and shall
                           otherwise assist the Holder and furnish the Holder
                           with all information which may assist the Holder in
                           the collection thereof;

                  6.1.8    The hypothec in Section 2 on claims extends also to
                           any claim under any insurance contract on the other
                           property of the Grantor;

                  6.1.9    The Grantor represents that none of the claims which
                           now exist is itself secured by a hypothec or
                           guaranteed by a third party in favour of the Grantor,
                           and the Grantor undertakes to notify the Holder
                           immediately of any claim, present or future, which
                           hereafter is or becomes secured by a hypothec or
                           guaranteed by a third party in favour of the Grantor
                           and to

<PAGE>

                                       14

                           deliver to the Holder the agreements or other
                           documents now or hereafter constituting or evidencing
                           the same;

                  6.1.10   If any claims arises out of a contract with the
                           federal government of Canada or the government of the
                           Province of Quebec, or any of their departments,
                           agencies or instrumentalities, the Grantor agrees to,
                           at the request of the Holder, execute whatever
                           instruments and documents are required by the Holder
                           in order that such claims shall be assigned to the
                           Holder and the proper notice of such assignment shall
                           be given under any statute relating to the assignment
                           of such claims.

7.       DEFAULTS AND RECOURSES

         7.1      The Grantor will be in default under this Agreement
                  immediately upon the occurrence of any of the following events
                  (each an "EVENT OF DEFAULT"):

                  7.1.1    if any of the Secured Obligations, including any
                           payment pursuant to the Guaranty, is not paid when
                           due; or

                  7.1.2    if an "Event of Default" (as defined in each of the
                           Exim Loan Agreement and the Non-Exim Loan Agreement)
                           has occurred; or

                  7.1.3    if any of the representations made in Section 3 or in
                           any other declaration or certificate by the Grantor
                           delivered to the Holder is untrue or incorrect in a
                           material respect; or

                  7.1.4    if the Grantor does not perform or observe any of its
                           covenants or undertakings contained in this Agreement
                           or any obligation of the Grantor required by law
                           which is not cured or discharged within five (5)
                           Business Days; or

                  7.1.5    the dissolution, termination of existence or
                           insolvency of Grantor; or appointment of a receiver,
                           trustee, sequestrator 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 Grantor 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

                  7.1.6    the commencement of any proceeding against Grantor
                           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, including under the
                           Bankruptcy and Insolvency Act (Canada), which is not
                           cured by dismissal thereof within sixty (60) days
                           after the date commenced, or

<PAGE>

                                       15

                  7.1.7    any default or event of default occurs under any
                           obligation secured by a Permitted Lien, which is not
                           cured within any applicable cure period or waived in
                           writing by the holder of the Permitted Lien; or

                  7.1.8    Grantor breaches any material contract or obligation,
                           which has or may reasonably be expected to have a
                           material adverse effect on Grantor's business or
                           financial condition; or

                  7.1.9    revocation or termination of, or limitation or denial
                           of liability upon, the Guaranty or any attempt to do
                           any of the foregoing; or

                  7.1.10   Grantor shall generally not pay its debts as they
                           become due, or Grantor 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

                  7.1.11   there shall be a material adverse change in Grantor's
                           business or financial condition; or

                  7.1.12   if any creditor of the Grantor commences any action
                           or gives any notice with a view to exercising any
                           rights or remedies on or with respect to the
                           Hypothecated Property, including by way of seizure,
                           prior notice, notice of crystallization, taking
                           possession or otherwise, or if a sequestrator is
                           appointed, which is not cured or dismissed within ten
                           (10) days.

         7.2      Without limiting the Holder's right to demand payment or to
                  exercise any other right it may have under any other agreement
                  or instrument, if an Event of Default shall have occurred and
                  is continuing, the Holder may exercise any and all of the
                  rights and recourses it may have hereunder or by law and it
                  may enforce and realize its hypothec, including the exercise
                  of the hypothecary rights in virtue of the Civil Code of
                  Quebec. The Holder may exercise its hypothecary rights against
                  all or any part of the Hypothecated Property and shall not be
                  bound to exercise the same hypothecary right against all the
                  Hypothecated Property. If the Holder gives the Grantor a prior
                  notice of its intention to exercise a hypothecary right the
                  Grantor shall, and shall cause any other Person in possession
                  of Hypothecated Property to, immediately voluntarily surrender
                  it to the Holder.

         7.3      If an Event of Default shall have occurred, whichever
                  hypothecary right or rights or other recourses the Holder may
                  decide to exercise, the following provisions shall apply:

                  7.3.1    if the Hypothecated Property has been surrendered to
                           the Holder or its or agent or if the Holder or its
                           agent has possession of the Hypothecated Property,
                           neither the Holder nor its agent shall have any
                           obligation to continue to carry on the Grantor's
                           enterprise or the use, operation or exploitation of
                           the Hypothecated Property or to continue the use for

<PAGE>

                                       16

                           which it is ordinarily destined or to exercise the
                           rights pertaining to the Hypothecated Property or to
                           make it productive; and the Grantor agrees that the
                           Holder or its agent may do such acts and things, or
                           refrain from doing such acts and things, as the
                           Holder or its agent, in its sole discretion, deems
                           appropriate for the exercise of its rights and the
                           realization and enforcement of its hypothec and
                           security;

                  7.3.2    in order to protect or to realize the value of the
                           Hypothecated Property, the Holder, at the Grantor's
                           expense, may, but shall not be obliged to:

                           7.3.2.1  continue and complete the processing,
                                    manufacture and transformation of the
                                    Hypothecated Property or any work in process
                                    or unfinished goods comprised in the
                                    Hypothecated Property as well as take any
                                    other action necessary or useful in order to
                                    prepare such property for sale;

                           7.3.2.2  alienate or dispose of any Hypothecated
                                    Property which may be obsolete, may perish
                                    or is likely to deteriorate rapidly;

                           7.3.2.3  use for its benefit all information obtained
                                    in the course of the exercise of its rights;

                           7.3.2.4  perform any obligation or covenant of the
                                    Grantor and any right with respect to the
                                    Hypothecated Property;

                           7.3.2.5  take physical possession of any and all of
                                    the Hypothecated Property and anything found
                                    therein, with the right for that purpose to
                                    enter without legal process upon any
                                    premises where the Hypothecated Property may
                                    be found, and to exclude the Grantor, its
                                    employees and agents therefrom, and the
                                    right to use such premises and to maintain
                                    such possession on the Grantor's premises or
                                    to remove the Hypothecated Property or any
                                    part thereof to such other places as the
                                    Holder may desire;

                           7.3.2.6  the Holder may, directly or indirectly,
                                    purchase or acquire the Hypothecated
                                    Property;

                  7.3.3    the Holder may, in the course of exercising its
                           rights, renounce or waive any right of the Grantor,
                           with or without consideration therefor;

                  7.3.4    the Holder shall not be bound to make an inventory,
                           to take out insurance or to furnish any bond or other
                           security;

<PAGE>

                                       17

                  7.3.5    the Grantor shall, at the request of the Holder,
                           assemble the Hypothecated Property and make same
                           available at any place designated by the Holder
                           which, in its opinion, is reasonably convenient.

         7.4      Where the Holder sells the Hypothecated Property itself, it
                  shall not be required to obtain any prior appraisal or
                  evaluation by a third party.

         7.5      The Holder may choose to sell the Hypothecated Property with
                  legal warranty given by the Grantor or with complete or
                  partial exclusion of such warranty.

         7.6      The Grantor agrees that with respect to any sale by the Holder
                  of any of the Hypothecated Property in the exercise of its
                  rights, it will be commercially reasonable to sell such
                  Hypothecated Property:

                  7.6.1    together or separately;

                  7.6.2    by auction or by call for tenders by advertising such
                           sale or call for tenders once in a local daily
                           newspaper at least seven (7) days prior to such sale
                           or close of call for tenders; and

                  7.6.3    by sale by agreement after receipt by the Holder of
                           at least two (2) offers from prospective purchasers,
                           who may include Persons related to or affiliated with
                           the Grantor or other customers of the Holder.

                  Any such sale may be on such terms as to credit or otherwise
                  and as to upset price or reserve bid or price as the Holder in
                  its sole discretion may deem advantageous, and the Grantor
                  agrees that the price received at any such sale shall
                  constitute a commercial reasonable price.

                  The foregoing shall not preclude the Holder from agreeing to
                  or making any sale in any other manner not prohibited by law
                  nor shall it be interpreted to mean that only a sale made in
                  conformity with the foregoing is commercially reasonable or
                  that only the price received at a sale made in conformity with
                  the foregoing shall constitute a commercially reasonable
                  price.

8.       GENERAL PROVISIONS

         8.1      The hypothec and security interest constituted by this
                  Agreement is in addition to and not in substitution for any
                  other hypothec or security held by the Holder.

         8.2      This hypothec constitutes continuing security which shall
                  continue in effect notwithstanding any payment from time to
                  time in whole or in part of the Secured Obligations and shall
                  subsist until cancelled by the Holder. This hypothec may, by
                  agreement between the Holder and the Grantor from time to
                  time, secure obligations in addition to or in substitution of
                  the Secured Obligations.

         8.3      The mere lapse of the time provided for the Grantor to perform
                  any obligation or the arrival of any term shall automatically
                  put the Grantor in default, without any

<PAGE>

                                       18

                  notice putting the Grantor in default being required except as
                  may be required by applicable law.

         8.4      The rights conferred on the Holder by this Agreement shall
                  inure to the benefit of each successor of the Holder. The
                  Holder shall have the right to assign all or any part of the
                  Secured Obligations to any other Person and this Agreement
                  shall inure to the benefit of any such assignee in respect of
                  all, or such part, of the Secured Obligations which have been
                  so assigned. This Agreement shall bind any successor and
                  permitted assigns of the Grantor.

         8.5      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.

         8.6      The terms and provisions of this Agreement may not be waived
                  or amended, except in a writing executed by Grantor and a duly
                  authorized officer of Holder.

         8.7      All notices, demands and other communications to the Grantor
                  may be given to it in accordance with the Guaranty at the
                  address indicated on the signature page hereof.

         8.8      The Grantor hereby:

                  8.8.1    waives the benefit of discussion and the benefit of
                           division and agrees that the Holder shall not be
                           obliged to exhaust its recourses against the Borrower
                           or the Grantor or any other Person or against any
                           other security or securities it may hold before
                           enforcing or realizing on or otherwise dealing with
                           the Hypothecated Property in such manner as the
                           Holder considers desirable;

                  8.8.2    agrees that the Holder may grant time, renewals,
                           extensions, indulgences, releases and discharges to,
                           may take security from and release any security, may
                           abstain from taking security or publishing or
                           perfecting security, make accept compositions from,
                           may otherwise change the terms of the obligations or
                           any security or guarantees therefor and my otherwise
                           deal with the Borrower and any other Persons and any
                           securities as the Holder sees fit, without in any
                           manner affecting or reducing the hypothec hereof; and

                  8.8.3    agrees that all obligations of the Borrower to the
                           Grantor or any of them, if more than one, are hereby
                           postponed to the obligations of the Borrower to the
                           Holder and all moneys received thereon by the Grantor
                           or any of them, if more than one, shall be received
                           on behalf of the Holder and shall be immediately paid
                           over to the Holder.

         8.9      If the Grantor amalgamates with any corporation or
                  corporations, the Secured Obligations and the hypothec and
                  security interest created hereby shall continue and shall
                  extend to the present and future undertaking, property and
                  assets of the

<PAGE>

                                       19

                  amalgamated corporation, as if the amalgamated corporation had
                  executed this Agreement as the Grantor.

         8.10     Subject to any restrictions on transfer contained in the Loan
                  Agreement or the Guaranty, the Secured Obligations shall be
                  paid and this Agreement shall be transferable without regard
                  to any set-off, compensation or counterclaim between the
                  Grantor and any Holder.

         8.11     The Grantor shall sign, acknowledge or deliver all such
                  further instruments and shall do such other things as the
                  Holder may reasonably require to give effect to or to confirm
                  or protect the hypothec hereby constituted, including
                  necessary inscriptions for the registration, renewal, carrying
                  over or conservation of the hypothec and notices to third
                  parties.

         8.12     The Grantor acknowledges receipt of an executed copy of the
                  Loan Agreement.

         8.13     The parties hereby confirm their express wish that this
                  Agreement and all documents, agreements or notices directly or
                  indirectly related hereto be drawn up in the English language.
                  Les parties reconnaissent leur volonte expresse que le present
                  contrat ainsi que tous les documents, conventions ou avis s'y
                  rattachant directement ou indirectement soient rediges en
                  langue anglaise.

SIGNED AT Montreal this twentieth (20th) day of February, 2003

                                          Grantor: CLARENT CANADA LTD./CLARENT
                                                   CANADA LTEE

                                          by: /s/ Juliet M. Reising
                                             ----------------------------------

                                          by: /s/ Steven A. Odom
                                             ----------------------------------

                                          Address of Grantor:

                                          4105-D Matte Boulevard,
                                          Brossard, Quebec, J4Y 2P4

Accepted and agreed, as of the
date above-written

Holder:  SILICON VALLEY BANK

by: /s/ Peter M. Bendoris
   --------------------------------

<PAGE>

                                       20

                                  SCHEDULE "A"

                                 PERMITTED LIENS

1.       Leasing Contract in favour of CitiCorp Vendor Finance, Ltd. in respect
         of a Sharp Photocopier AR-337 registered at the Register of Personal
         and Movable Real Rights ("MOVABLE REGISTER") on April 27, 2001 under
         number 01-0137064-0019; and

2.       Movable Hypothec without delivery in favour of Royal Bank of Canada in
         respect of a Guaranteed Investment Certificate in the amount of Cdn.
         $353,300 (number 00730047632-0002) registered at the Movable Register
         on December 21, 2001 under number 01-0478381-0007.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00050-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00050-of-00352.parquet"}]]