Document:

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                                                                    EXHIBIT 4.42

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.

                                     WARRANT

                 TO PURCHASE _________ SHARES OF COMMON STOCK OF

                            VERSO TECHNOLOGIES, INC.

No. _________                                                  November 16, 2001

         THIS CERTIFIES THAT, for value received, ___________________ or
(subject to the restrictions on transfer contained herein) its registered
assigns (the "Holder") is entitled to purchase from Verso Technologies, Inc., a
Minnesota corporation (the "Company"), at any time or from time to time after
9:00 a.m., Atlanta, Georgia time, on the date hereof and prior to 5:00 p.m.,
Atlanta, Georgia time, on November 16, 2004 (the "Expiration Date"), at the
place where the Warrant Agency (as hereinafter defined) is located, at the
Exercise Price (as hereinafter defined), the number of shares of common stock,
$1.00 par value (the "Common Stock"), of the Company specified above, all
subject to adjustment and upon the terms and conditions as hereinafter provided.

         Capitalized terms used and not otherwise defined in this Warrant shall
have the meanings set forth in Article VI hereof.

                                    ARTICLE I

                              EXERCISE OF WARRANTS

         1.1.     Method of Exercise. To exercise this Warrant in whole or in
part, the Holder shall deliver to the Company at the Warrant Agency: (a) this
Warrant; (b) a written notice, substantially in the form of the subscription
notice attached hereto as Annex 1, of such Holder's election to exercise this
Warrant, which notice shall specify the number of shares of Common Stock to be
purchased, the denominations of the share certificate or certificates desired
and the name or names of the Eligible Holder(s) in which such certificates are
to be registered; and (c) payment of the Exercise Price with respect to such
shares of Common Stock. Such payment may be made, at the option of the Holder,
by cash, money order, certified or bank cashier's check or wire transfer.
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         The Company shall, as promptly as practicable and in any event within
five (5) Business Days thereafter, execute and deliver or cause to be executed
and delivered, in accordance with such subscription notice, a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in said notice. The share certificate or certificates so delivered
shall be in such denominations as may be specified in such notice (or, if such
notice shall not specify denominations, one certificate shall be issued) and
shall be issued in the name of the Holder or such other name or names of
Eligible Holder(s) as shall be designated in such notice. Such certificate or
certificates shall be deemed to have been issued, and such Holder or any other
person so designated to be named therein shall be deemed for all purposes to
have become holders of record of such shares, as of the date the aforementioned
notice is received by the Company. If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of the certificate or
certificates, deliver to the Holder a new Warrant evidencing the right to
purchase the remaining shares of Common Stock called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant. The
Company shall pay all expenses payable in connection with the preparation,
issuance and delivery of share certificates and new Warrants as contemplated by
Section 2.6 below (other than transfer or similar taxes in connection with the
transfer of securities), except that, if share certificates or new Warrants
shall be registered in a name or names other than the name of the Holder, funds
sufficient to pay all transfer taxes payable as a result of such transfer shall
be paid by the Holder at the time of delivering the aforementioned notice or
promptly upon receipt of a written request of the Company for payment.

         If this Warrant shall be surrendered for exercise within any period
during which the transfer books for shares of the Common Stock of the Company or
other securities purchasable upon the exercise of this Warrant are closed for
any purpose, the Company shall not be required to make delivery of certificates
for the securities purchasable upon such exercise until the date of the
reopening of said transfer books.

         1.2.     Shares To Be Fully Paid and Nonassessable. All shares of
Common Stock issued upon the exercise of this Warrant shall be validly issued,
fully paid and nonassessable.

         1.3.     No Fractional Shares To Be Issued. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to the same fraction of the
Average Closing Price per share of outstanding shares of Common Stock on the
Business Day immediately prior to the date of such exercise.

         1.4.     Securities Laws; Share Legend. The Holder, by acceptance of
this Warrant, agrees that this Warrant and all shares of Common Stock issuable
upon exercise of this Warrant will be disposed of only in accordance with the
Securities Act of 1933, as amended (the "Securities Act") and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
promulgated thereunder. In addition to any other legend which the Company may
deem advisable under the Securities Act and applicable state securities laws,
all certificates representing shares of Common Stock (as well as any other
securities issued hereunder in respect of any such shares) issued upon exercise
of this Warrant shall be endorsed as follows:

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         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE
         STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OFFERED FOR SALE OR
         OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
         STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
         OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH
         REGISTRATION IS NOT REQUIRED.

         Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
(in form and substance reasonably satisfactory to the Company) selected by the
Holder of such certificate and reasonably acceptable to the Company, the
securities represented thereby need no longer be subject to restrictions on
resale under the Securities Act.

                                   ARTICLE II

                     WARRANT AGENCY; TRANSFER, EXCHANGE AND
                             REPLACEMENT OF WARRANT

         2.1.     Warrant Agency. Until such time, if any, as an independent
agency shall be appointed by the Company to perform services described herein
with respect to this Warrant (the "Warrant Agency"), the Company shall perform
the obligations of the Warrant Agency provided herein at its principal office
address or such other address as the Company shall specify by prior written
notice to the Holder.

         2.2.     Ownership of Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Article II.

         2.3.     Transfer of Warrant. This Warrant may only be transferred to a
purchaser subject to and in accordance with this Section 2.3, and any attempted
transfer which is not in accordance with this Section 2.3 shall be null and void
and the transferee shall not be entitled to exercise any of the rights of the
holder of this Warrant. The Company agrees to maintain at the Warrant Agency
books for the registration of such transfers of Warrants, and transfer of this
Warrant and all rights hereunder shall be registered, in whole or in part, on
such books, upon surrender of this Warrant at the Warrant Agency in accordance
with this Section 2.3, together with a written assignment of this Warrant,
substantially in the form of the assignment attached hereto as Annex 2, duly
executed by the Holder or its duly authorized agent or attorney-in-fact, with
signatures guaranteed by a bank or trust company or a broker or dealer
registered with the NASD, and funds sufficient to pay any transfer taxes payable
upon such transfer. Upon surrender of this Warrant in accordance with this
Section 2.3, the Company (subject to being satisfied that such transfer is in
compliance with Section 1.4) shall execute and deliver a new Warrant or Warrants
of like tenor and representing in the aggregate the right to purchase the same
number of shares of

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Common Stock in the name of the assignee or assignees and in the denominations
specified in the instrument of assignment, and this Warrant shall promptly be
canceled. Notwithstanding the foregoing, a Warrant may be exercised by a new
holder without having a new Warrant issued. The Company shall not be required to
pay any Federal or state transfer tax or charge that may be payable in respect
of any transfer of this Warrant or the issuance or delivery of certificates for
Common Stock in a name other than that of the registered holder of this Warrant.

         2.4.     Division or Combination of Warrants. This Warrant may be
divided or combined with other Warrants, in connection with the partial exercise
of this Warrant, upon surrender hereof and of any Warrant or Warrants with which
this Warrant is to be combined at the Warrant Agency, together with a written
notice specifying the names and denominations in which the new Warrant or
Warrants are to be issued, signed by the holders hereof and thereof or their
respective duly authorized agents or attorneys-in-fact. Subject to compliance
with Section 2.3 as to any transfer which may be involved in the division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.

         2.5.     Loss, Theft, Destruction of Warrant Certificates. Upon receipt
by the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security (in customary
form) reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant and upon
reimbursement of the Company's reasonable incidental expenses, the Company will
make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant,
a new Warrant of like tenor and representing the right to purchase the same
aggregate number of shares of Common Stock.

         2.6.     Expenses of Delivery of Warrants. Except as otherwise
expressly provided herein, the Company shall pay all expenses (other than
transfer taxes as described in Section 2.3) and other charges payable in
connection with the preparation, issuance and delivery of Warrants hereunder and
shares of Common Stock upon the exercise hereof.

                                   ARTICLE III

                              ADJUSTMENT PROVISIONS

         3.1.     Adjustments Generally. The Exercise Price and the number of
shares of Common Stock (or other securities or property) issuable upon exercise
of this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events, as provided in this Article III.

         3.2.     Common Share Reorganization and Stock Dividend Payments. If
the Company, at any time this Warrant is outstanding, (a) shall subdivide its
outstanding shares of Common Stock into a greater number of shares or
consolidate its outstanding shares of Common Stock into a smaller number of
shares (any such event being called a "Common Share Reorganization"), or (b) pay
a stock dividend (except scheduled dividends paid on preferred stock which
contain a stated dividend rate) or otherwise make a distribution or
distributions on shares of its Common Stock or on any other class of capital
stock payable in shares of Common

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Stock (any such event being called a "Stock Dividend Payment"), then (i) the
Exercise Price shall be adjusted, effective immediately after the record date at
which the holders of shares of Common Stock are determined for purposes of a
Common Share Reorganization or at which the holders of shares of Common Stock or
any other class of capital stock are determined for purposes of a Stock Dividend
Payment, as the case may be, to a price determined by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date before giving effect to such Common Share Reorganization or
Stock Dividend Payment, as the case may be, and the denominator of which shall
be the number of shares of Common Stock outstanding after giving effect to such
Common Share Reorganization or Stock Dividend Payment, as the case may be, and
(ii) the number of shares of Common Stock subject to purchase upon exercise of
this Warrant shall be adjusted, effective at such time, to a number determined
by multiplying the number of shares of Common Stock subject to purchase
immediately before such Common Share Reorganization or Stock Dividend Payment,
as the case may be, by a fraction, the numerator of which shall be the number of
shares outstanding after giving effect to such Common Share Reorganization or
Stock Dividend Payment, as the case may be, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately before such
Common Share Reorganization or Stock Dividend Payment, as the case may be.

         3.3.     Capital Reorganization. If, at any time this Warrant is
outstanding, there shall be any consolidation or merger to which the Company is
a party, other than a consolidation or a merger in which the Company is a
continuing corporation and which does not result in any reclassification of, or
change (other than a Common Share Reorganization, Stock Dividend Payment or a
change in par value) in, outstanding shares of Common Stock, or any sale or
conveyance of the property of the Company as an entirety or substantially as an
entirety (any such event being called a "Capital Reorganization"), then,
effective upon the effective date of such Capital Reorganization, the Holder
shall have the right to purchase, upon exercise of this Warrant, the kind and
amount of shares of stock and other securities and property (including cash)
which the Holder would have owned or have been entitled to receive after such
Capital Reorganization if this Warrant had been exercised immediately prior to
such Capital Reorganization. As a condition to effecting any Capital
Reorganization, the Company or the successor or surviving corporation, as the
case may be, shall execute and deliver to the Holder and to the Warrant Agency
an agreement as to the Holder's rights in accordance with this Section 3.3,
providing for subsequent adjustments as nearly equivalent as may be practicable
to the adjustments provided for in this Article III. The provisions of this
Section 3.3 shall similarly apply to successive Capital Reorganizations.

         3.4.     Adjustment Rules. (a) Any adjustments pursuant to this Article
III shall be made successively whenever an event referred to herein shall occur.

                  (b)      If the Company shall set a record date to determine
the holders of shares of Common Stock or any other class of capital stock, as
the case may be, for purposes of a Common Share Reorganization, Stock Dividend
Payment or Capital Reorganization and shall legally abandon such action prior to
effecting such action, then no adjustment shall be made pursuant to this Article
III in respect of such action.

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         3.5.     Notice of Adjustments. The Company shall give notice to the
Holder prior to any record date or effective date, as the case may be, in
respect of any Common Share Reorganization, Stock Dividend Payment or Capital
Reorganization describing, in each case, such event in reasonable detail and
specifying such record date or effective date, as the case may be. In addition,
after the record date or effective date, as the case may be, of any Common Share
Reorganization, Stock Dividend Payment or Capital Reorganization, the Company
shall promptly give notice to the Holder of such event, describing such event in
reasonable detail and specifying the record date or effective date, as the case
may be, and, if determinable, the required adjustment and the computation
thereof. If the required adjustment is not determinable at the time of such
notice, the Company shall give notice to the Holder of such adjustment and
computation promptly after such adjustment becomes determinable.

         3.6.     Adjustment by Board of Directors. If any event occurs as to
which, in the opinion of the Board of Directors of the Company, the provisions
of this Article III are not strictly applicable or if strictly applicable would
not fairly protect the rights of the holder of this Warrant in accordance with
the essential intent and principles of such provisions, then the Board of
Directors may make, in its discretion, an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such rights as aforesaid, but in no event shall any adjustment have the
effect of increasing the Exercise Price or decreasing the number of shares of
Common Stock into which the Warrant is exercisable as otherwise determined
pursuant to any of the provisions of this Article III except in the case of a
combination of shares of a type contemplated in Section 3.2 and then in no event
to an amount larger than the Exercise Price as adjusted pursuant to Section 3.2.

                                   ARTICLE IV

                                   CALL OPTION

         4.1.     Company Right to Purchase. The Holder hereby grants to the
Company the right to purchase this Warrant (in whole only and not in part) for
cash (the "Call Option") at a purchase price equal to the product of $0.01
multiplied by the number of shares of Common Stock for which this Warrant is
then exercisable (the "Call Price"); provided, however, that the Call Option
shall only be exercisable (i) if the closing bid price of the Common Stock for
ten (10) consecutive trading days exceeds two (2) times the then-effective
Exercise Price, and (ii) if a registration statement under the Securities Act is
effective on the Call Date that registers for resale all the Common Stock
issuable upon the exercise of this Warrant (the "Registrable Stock"). The
Company agrees (i) to prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than one hundred twenty (120) days from the Call Date (or
such lesser time as necessary to permit each seller of Registrable Stock to
complete the distribution described in such registration statement), and (ii) to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of distribution by the sellers thereof set
forth in such registration statement. In connection therewith, the Company will
as expeditiously as possible;

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                  (i)      furnish to each seller of Registrable Stock such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Stock owned by
such seller;

                  (ii)     use its reasonable best efforts to register or
qualify such Registrable Stock under the securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable Stock
owned by such seller, provided that the Company will not be required (A) to
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (B) to subject
itself to taxation in any such jurisdiction or (C) to consent to general service
of process in any such jurisdiction;

                  (iii)    notify each seller of such Registrable Stock, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Stock, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein not misleading;

                  (iv)     cause all such Registrable Stock to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and to be qualified for trading on each system on which similar
securities issued by the Company are from time to time qualified;

                  (v)      provide a transfer agent and registrar for all such
Registrable Stock not later than the effective date of such registration
statement and thereafter maintain such a transfer agent and registrar; and

                  (vi)     use its reasonable best efforts promptly to obtain
the withdrawal of any stop order that is issued suspending the effectiveness of
such registration statement, or of any order suspending or preventing the use of
any related prospectus or suspending the qualification of any Registrable Stock
included in such registration statement for sale in any jurisdiction.

         4.2      Notice to Holder. If the Company elects to exercise its Call
Option pursuant to this Article IV, then at least fifteen (15) Business Days but
not more than sixty (60) Business Days before the Call Date, the Company shall
mail or cause to be mailed a redemption notice (the "Notice") by first-class
mail to Holder at Holder's address as it appears on the books maintained by the
Warrant Agency. The Notice shall state: (i) the Call Date; (ii) the Call Price;
(iii) the then current Exercise Price; (iv) that this Warrant must be presented
and surrendered to the Warrant Agency to collect the Call Price; (v) that this
Warrant may be exercised at any time before the close of business on the fifth
(5th) Business Day immediately preceding the Call Date (the "Exercise
Termination Date"); (vi) that, if the Holder wishes to exercise this Warrant,
the

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Holder must satisfy the requirements of Article I hereof prior to the Exercise
Termination Date; and (vii) that, unless the Company defaults in making the
payment of the Call Price, the only remaining right of Holder after the Exercise
Termination Date shall be to receive payment of the Call Price upon presentation
and surrender of this Warrant to the Warrant Agency.

         4.3      Payment upon Surrender of Warrant. If the Company elects to
exercise its Call Option pursuant to this Article IV, and the Holder does not
exercise this Warrant prior to the Exercise Termination Date, the Company shall
pay the Call Price to the Holder in accordance with the Notice upon presentation
and surrender by the Holder of this Warrant to the Warrant Agency.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         5.1      Representations and Warranties of Holder. The Holder
represents and warrants to the Company as follows:

                  (a)      Purchase for Own Account. This Warrant and the shares
of Common Stock to be acquired upon exercise of this Warrant by the Holder will
be acquired for investment for the Holder's account, not as a nominee or agent,
and not with a view to the public resale or distribution within the meaning of
the Securities Act, and the Holder has no present intention of selling, granting
any participation in, or otherwise distributing the same. If not an individual,
the Holder also represents that the Holder has not been formed for the specific
purpose of acquiring this Warrant or the shares of Common Stock to be acquired
upon exercise of this Warrant.

                  (b)      Disclosure of Information. The Holder has received or
has had full access to all the information it considers necessary or appropriate
to make an informed investment decision with respect to the acquisition of this
Warrant and the underlying shares of Common Stock. The Holder further has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions to the offering of this Warrant and its underlying shares
of Common Stock and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify any information furnished to the Holder or to which
the Holder has access.

                  (c)      Investment Experience. The Holder understands that
the purchase of this Warrant and its underlying shares of Common Stock involves
substantial risk. The Holder: (i) has experience as an investor in securities
and acknowledges that the Holder is able to fend for itself, can bear the
economic risk of such Holder's investment in this Warrant and its underlying
shares of Common Stock and has such knowledge and experience in financial or
business matters that the Holder is capable of evaluating the merits and risks
of its investment in this Warrant and its underlying shares of Common Stock
and/or (ii) has a preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of a nature and
duration that enables the Holder to be aware of the character, business acumen
and financial circumstances of such persons.

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                  (d)      Accredited Investor Status. The Holder is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act.

                                   ARTICLE VI

                                   DEFINITIONS

         The following terms, as used in this Warrant, have the following
respective meanings:

         "Average Closing Price" means, as of any date, (i) if shares of Common
Stock are listed on a national securities exchange, the average of the closing
sale prices per share therefor on the largest securities exchange on which such
shares are traded on the last ten (10) trading days before such date; (ii) if
such shares are listed on The Nasdaq National Market but not on any national
securities exchange, the average of the average of the closing bid and asked
prices per share therefor on The Nasdaq National Market on the last ten (10)
trading days before such date; (iii) if such shares are not listed on either a
national securities exchange or The Nasdaq National Market, the average of the
average of the closing bid and asked prices per share therefor in the over the
counter market on the last twenty (20) trading days before such date; or (iv) if
no such sales prices are available, the Fair Market Value of the Company per
share of outstanding Common Stock as of such date.

         "Business Days" means each day in which banking institutions in
Atlanta, Georgia are not required or authorized by law or executive order to
close.

         "Call Date" means the Business Day fixed by the Company upon which this
Warrant shall be called in accordance with Article IV.

         "Call Option" has the meaning set forth in Section 4.1.

         "Call Price" has the meaning set forth in Section 4.1.

         "Capital Reorganization" has the meaning set forth in Section 3.3.

         "Commission" has the meaning set forth in Section 1.4.

         "Common Share Reorganization" has the meaning set forth in Section 3.2.

         "Common Stock" has the meaning set forth in the first paragraph of this
Warrant.

         "Company" has the meaning set forth in the first paragraph of this
Warrant.

         "Eligible Holder" means the Holder and any permitted transferee of the
Holder pursuant to and in accordance with this Warrant.

         "Exercise Price" means US $1.00 per share of Common Stock, subject to
adjustment pursuant to Article III.

         "Exercise Termination Date" has the meaning set forth in Section 4.2.

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         "Expiration Date" has the meaning set forth in the first paragraph of
this Warrant.

         "Fair Market Value" means the fair market value of the business,
property or assets in question as determined in good faith by the Board of
Directors of the Company and unless waived by a majority in interest of the
Holders of the Warrants issued as of this date confirmed by an independent
nationally recognized financial advisor with expertise in valuing companies of
this type, or determined as otherwise specifically provided herein.

         "Holder" has the meaning set forth in the first paragraph of this
Warrant.

         "NASD" means The National Association of Securities Dealers, Inc.

         "Notice" has the meaning set forth in Section 4.2.

         "Securities Act" means the Securities Act of 1933, as amended, and any
successor Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or its successor) thereunder, all as the same shall be in
effect from time to time.

         "Stock Dividend Payment" has the meaning set forth in Section 3.2.

         "Warrant Agency" has the meaning set forth in Section 2.1.

         "Warrants" means this Warrant and all other Warrants of like tenor
issued by the Company on November 16, 2001.

                                   ARTICLE VII

                                  MISCELLANEOUS

         7.1.     Governing Law. This Warrant shall be governed in all respects
by the laws of the State of Georgia, without reference to its conflicts of law
principles.

         7.2.     Covenants To Bind Successor and Assigns. All covenants,
stipulations, promises and agreements contained in this Warrant by or on behalf
of the Company shall bind its successors and assigns, whether or not so
expressed.

         7.3.     Entire Agreement. This Warrant constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations, or covenant except as specifically
set forth herein or therein.

         7.4.     Waivers and Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of such right or power, or any abandonment
or discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may be
amended, modified or waived with (and only with) the written consent of the
Company and the Holders of a majority in

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interest of the Warrants then outstanding; provided, however, that no such
amendment, modification or waiver shall, without the written consent of the
Holders of any Warrant, (a) change the number of shares of Common Stock subject
to purchase upon exercise of such Warrant, the Exercise Price or provisions for
payment thereof or (b) amend, modify or waive the provisions of Section 7.4 or
Article III of such Warrant.

         Any such amendment, modification or waiver effected pursuant to this
Section shall be binding upon the Holders of all Warrants and upon the Company,
except as provided in the proviso to the last sentence of the preceding
paragraph. In the event of any such amendment, modification or waiver the
Company shall give prompt notice thereof to all holders of Warrants and, if
appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.

         7.5.     Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be mailed by express,
registered or certified mail, postage prepaid, return receipt requested, sent by
telecopy, or by courier service guaranteeing overnight delivery with charges
prepaid, or otherwise delivered by hand or by messenger, and shall be
conclusively deemed to have been received by a party hereto and to be effective
on the day on which delivered or telecopied to such party at its address set
forth below (or at such other address as such party shall specify to the other
parties hereto in writing), or, if sent by registered or certified mail, on the
third business day after the day on which mailed, addressed to such party at
such address.

         In the case of the Holder, such notices and communications shall be
addressed to its address set forth under its signature below, which shall be the
address shown on the books maintained by the Warrant Agency, until the Holder
shall notify the Company and the Warrant Agency in writing that notices and
communications should be sent to a different address, in which case such notices
and communications shall be sent to the address specified by the Holder. In the
case of the Company, such notices and communications shall be addressed as
follows: Attention: Chief Financial Officer, Verso Technologies, Inc., 400
Galleria Parkway, Suite 300, Atlanta, Georgia 30339.

         7.6.     Survival of Agreements; Representations and Warranties, etc.
All warranties, representations and covenants made by the Company herein shall
be considered to have been relied upon by the Holder and shall survive the
issuance and delivery of the Warrant, regardless of any investigation made by
the Holder, and shall continue in full force and effect so long as this Warrant
is outstanding.

         7.7.     Severability. In case any one or more of the provisions
contained in this Warrant shall be held to 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. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

                                       11
<PAGE>

         7.8.     Section Headings. The section headings used herein are for
convenience of reference only, do not constitute a part of this Warrant and
shall not affect the construction of or be taken into consideration in
interpreting this Warrant.

         7.9.     No Rights as Shareholder; No Limitations on Company Action.
This Warrant shall not entitle the Holder to any rights as a shareholder of the
Company. No provision of this Warrant and no right or option granted or
conferred hereunder shall in any way limit, affect or abridge the exercise by
the Company of any of its corporate rights or powers to recapitalize, amend its
certificate of incorporation, reorganize, consolidate or merge with or into
another corporation or to transfer all or any part of its property or assets, or
the exercise of any other of its corporate rights or powers.

         IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized representative.

                                VERSO TECHNOLOGIES, INC.

                                By:
                                   --------------------------------------------
                                      Name:  Steven A. Odom
                                      Title: Chief Executive Officer

                                HOLDER

                                -----------------------------------------------

                                ADDRESS:
                                               --------------------------------

                                               --------------------------------

                                               --------------------------------

                                               --------------------------------

                                FACSIMILE NO.:
                                              ---------------------------------

                                       12
<PAGE>

                                                                         Annex 1

                               SUBSCRIPTION NOTICE

                                                      Dated:
                                                            -------------------

         The undersigned hereby irrevocably elects to exercise the right of
purchase evidenced by the attached Warrant for, and to purchase thereunder,
__________ shares of Common Stock of Verso Technologies, Inc. as provided for
therein. The undersigned tenders herewith payment of the Exercise Price (as
defined in the attached Warrant) for such shares in the form of cash, money
order, certified or bank cashier's check or wire transfer.

                  Instructions for Registration of Common Stock

         Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:

Name:
     -----------------------------------------------------
         (Please typewrite or print in block letters.)

Address:
         -------------------------------------------------

Denomination:
             ---------------------------------------------

                         Representations and Warranties

         In connection with the exercise of the attached Warrant, the
undersigned hereby represents and warrants that:

         (i)      it recognizes that the shares of Common Stock issuable
pursuant to the attached Warrant have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or any applicable state
securities laws, and may not transferred, sold, or offered for sale unless
registered pursuant to the Securities Act and all applicable state securities
laws or unless an exemption from such registration in available and the Company
has received an opinion to that effect from counsel reasonably satisfactory to
the Company;

         (ii)     it recognizes that the shares of Common Stock issuable
pursuant to the attached Warrant are subject to, and are transferable only upon
compliance with, the provisions of the Warrant;

                                       13
<PAGE>

         (iii)    if the undersigned is an individual, the undersigned is an
"accredited investor" as that term is defined in Rule 501(a)(5) or (6) of
Regulation D promulgated under the Securities Act by reason that the undersigned
is an individual (i) having an individual net worth, or a joint net worth with
the undersigned's spouse, at the time of the purchase that exceeds $1,000,000,
or (ii) who had an individual income in excess of $200,000 in each of the two
most recent years or joint income with the undersigned's spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching the
same income level in the current year; or if the undersigned is a corporation or
other entity, the undersigned is an "accredited investor" as that term is
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the
Securities Act; and

         (iv)     it is purchasing the shares of Common Stock for investment and
not with a view to resale or distribution or any present intention to resell or
distribute, except in compliance with the Securities Act and all applicable
state securities laws.

                             Issuance of New Warrant

         If said number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.

Signature:
           ---------------------------------------------------------------------
           Note:  The above signature should correspond exactly with the name on
                  the face of the attached Warrant or with the name of the
                  assignee appearing in the assignment form below.

                               Page 2 of Annex 1
<PAGE>

                                                                         Annex 2

                                   Assignment

         For value received, the undersigned hereby sells, assigns and transfers
unto:

Name:
     ----------------------------------------------
         (Please type or print in block letters)

Address:
        --------------------------------------------

the right to purchase Common Stock (as defined in the attached Warrant)
represented by the attached Warrant to the extent of _______________ shares as
to which such right is exercisable and does hereby irrevocably constitute and
appoint ________________________________________________, attorney-in-fact, to
transfer said Warrant on the books of Verso Technologies, Inc., with full power
of substitution in the premises.

Dated:
      ----------------------------

Signature:
          ---------------------------------------------------------------------
          Note:  The above signature should correspond exactly with the name on
                 the face of the attached Warrant.<PAGE>
                                                                   EXHIBIT 10.35

SILICON VALLEY BANK

                           LOAN AND SECURITY AGREEMENT

BORROWER:    VERSO TECHNOLOGIES, INC.
             NACT TELECOMMUNICATIONS, INC.
             TELEMATE.NET SOFTWARE, INC.

ADDRESS:     400 GALLERIA PARKWAY, SUITE 300
             ATLANTA, GEORGIA  30339

DATE:        DECEMBER 14, 2001

THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement (the
"Schedule") shall for all purposes be deemed to be a part of this Agreement, and
the same is an integral part of this Agreement. (Definitions of certain terms
used in this Agreement are set forth in Section 8 below.)

1.   LOANS.

   1.1 LOANS. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon* up to the amounts (the "Credit Limit") shown on the
Schedule, provided no Default or Event of Default has occurred and is
continuing, and subject to deduction of any Reserves for accrued interest and
such other Reserves as Silicon deems proper from time to time*.

   *IN ITS GOOD FAITH BUSINESS JUDGMENT

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

   1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.

   1.4 FEES. Borrower shall pay Silicon the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Silicon and are not
refundable.

   1.5 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in its*,
issue or arrange for the issuance of letters of credit for the account of
Borrower, in each case in form and substance satisfactory to Silicon in its sole
discretion (collectively, "Letters of Credit"). The aggregate face amount of all
outstanding Letters of Credit from time to time shall not exceed the amount
shown on the Schedule (the "Letter of Credit Sublimit"), and shall be reserved
against Loans which would otherwise be available hereunder, and in the event at
any time there are insufficient Loans available to Borrower for such reserve,
Borrower shall deposit and maintain with Silicon cash collateral in an amount at
all times equal to such deficiency, which shall be held as Collateral for all
purposes of this Agreement. Borrower shall pay all bank charges (including**
charges of Silicon) for the issuance of Letters of Credit, together with such
additional fee as Silicon's letter of credit department shall charge in
connection with the issuance of the Letters of Credit. Any payment by Silicon
under or in connection with a Letter of Credit shall constitute a Loan hereunder
on the date such payment is made. Each Letter of Credit shall have an expiry
date no later than thirty days prior to the Maturity Date. Borrower hereby
agrees to indemnify, save, and hold Silicon harmless from any loss, cost,
expense, or liability, including payments made by Silicon, expenses, and
reasonable attorneys' fees incurred by Silicon arising out of or in connection
with any Letters of Credit. Borrower agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Silicon and
opened for Borrower's account or by Silicon's interpretations of any Letter of
Credit issued by Silicon for Borrower's account, and Borrower

                                      -1-
<PAGE>
SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

understands and agrees that Silicon shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrower's instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto***. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other present or future documents or agreements between Borrower and Silicon
relating to Letters of Credit are cumulative.

*GOOD FAITH BUSINESS JUDGMENT

**CUSTOMARY

***BUT NOTHING HEREIN SHALL RELIEVE SILICON FROM LIABILITY FOR ITS OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT

2.  SECURITY INTEREST.

   2.1 SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located: All Inventory, Equipment, Receivables, and
General Intangibles, including, without limitation, all of Borrower's Deposit
Accounts, and all money, and all property now or at any time in the future in
Silicon's possession (including claims and credit balances), and all proceeds
(including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties), all products and all books and records related to any of
the foregoing (all of the foregoing, together with all other property in which
Silicon may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral").

3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

   In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:

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

   3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.

   3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Silicon at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.*

   *NOTWITHSTANDING THE FOREGOING, EXCEPT AS OTHERWISE PERMITTED BY SECTION 5.5
BELOW, SO LONG AS THIS AGREEMENT IS IN EFFECT, BORROWER SHALL NOT TRANSFER ANY
ASSETS OR COLLATERAL TO ANY PARENT, SUBSIDIARY OR AFFILIATE OF BORROWER (UNLESS
SUCH ENTITY IS A CO-BORROWER UNDER THIS AGREEMENT) NOR SHALL BORROWER TRANSFER
ANY ASSETS OR COLLATERAL TO ANY LOCATION LOCATED OUTSIDE OF THE UNITED STATES
REGARDLESS OF WHETHER OR NOT SUCH LOCATION IS SET FORTH ON THE SCHEDULE.

   3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Silicon now has, and will
continue to have, a first-priority perfected and enforceable security interest
in all of the Collateral, subject only to the Permitted Liens, and Borrower will
at all times defend Silicon and the Collateral against all claims of others.
None of the Collateral now is or will be affixed to any real property in such a
manner, or with such intent, as to become a fixture. Borrower is not and will
not become a lessee under any real property lease pursuant to which the lessor
may obtain any rights in any of the Collateral and no such lease now prohibits,
restrains, impairs or will prohibit, restrain or impair Borrower's right to
remove any Collateral from the leased premises. Whenever any Collateral is
located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Silicon, use its best efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon shall specify, so as to
ensure that Silicon's rights in the Collateral are,

                                      -2-
<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

and will continue to be, superior to the rights of any such third party.
Borrower will keep in full force and effect, and will comply with all the terms
of, any lease of real property where any of the Collateral now or in the future
may be located.

   3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in good
working condition*, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will** advise Silicon in writing of any material loss or
damage to the Collateral.***

   *(ORDINARY WEAR AND TEAR EXCEPTED)

   **AS PROMPTLY AS PRACTICAL

   *** NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, BORROWER MAY
CANCEL THAT CERTAIN PROMISSORY NOTE MADE PAYABLE TO VERSO TECHNOLOGIES, INC. BY
SS & CO., INC. ("SS") DATED JANUARY 12, 2001 IN THE PRINCIPAL AMOUNT OF $250,000
IN EXCHANGE FOR THE RECEIPT BY BORROWER IN CASH OF THE SUM OF $125,000, AND
VERSO MAY RELEASE ITS SECURITY INTEREST AND GUARANTY ASSOCIATED THEREWITH, ALL
ON SUBSTANTIALLY THE TERMS SET FORTH IN THAT CERTAIN SETTLEMENT AND RELEASE
AGREEMENT TO BE ENTERED INTO BETWEEN VERSO, SS AND LARRY GOMEZ, A DRAFT OF WHICH
HAS BEEN PROVIDED TO SILICON.

   3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.

   3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements now
or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect* the financial condition of
Borrower, at the times and for the periods therein stated. Between the last date
covered by any such statement provided to Silicon and the date hereof, there has
been no material adverse change in the financial condition or business of
Borrower. Borrower is now and will continue to be solvent.

   *IN ALL MATERIAL RESPECTS

   3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower*. Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. **Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not*** from participation
in, permit partial or complete termination of, or permit the occurrence of any
other event with respect to, any such plan which could result in any liability
of Borrower, including any liability to the Pension Benefit Guaranty Corporation
or its successors or any other governmental agency. Borrower shall, at all
times, utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.

   *; PROVIDED, HOWEVER, BORROWER MAY DEFER PAYMENT OF ANY CONTESTED TAXES IF

   **EXCEPT AS SET FORTH IN THE SCHEDULE,

   ***WITHDRAWN, AND WILL NOT WITHDRAW,

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

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

   *COULD REASONABLY BE EXPECTED TO

   **$150,000

   ***$300,000

   3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."

4. RECEIVABLES.

   4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and warrants
to Silicon as follows: Each Receivable with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made, (i) represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services in the ordinary course of Borrower's business,

                                      -3-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

and (ii) meet the Minimum Eligibility Requirements set forth in Section 8 below.

   4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
*signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine**, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.

   *OF BORROWER'S

   **(AND THE SIGNATURES AND ENDORSEMENTS OF OTHERS ON ALL DOCUMENTS,
INSTRUMENTS AND AGREEMENTS RELATING TO ALL RECEIVABLES ARE AND SHALL BE, TO THE
BEST OF BORROWER'S KNOWLEDGE, GENUINE)

   4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver
to Silicon transaction reports and loan requests, schedules and assignments of
all Receivables, and schedules of collections, all on Silicon's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Silicon's security interest and other rights in all of
Borrower's Receivables, nor shall Silicon's failure to advance or lend against a
specific Receivable affect or limit Silicon's security interest and other rights
therein. Loan requests received after 12:00 Noon* will not be considered by
Silicon until the next Business Day. Together with each such schedule and
assignment, or later if requested by Silicon, Borrower shall furnish Silicon
with copies (or, at Silicon's request, originals) of all contracts, orders,
invoices, and other similar documents, and all original shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any
goods the sale or disposition of which gave rise to such Receivables, and
Borrower warrants the genuineness of all of the foregoing. Borrower shall also
furnish to Silicon an aged accounts receivable trial balance in such form and at
such intervals as Silicon shall request. In addition, Borrower shall deliver to
Silicon the originals of all instruments, chattel paper, security agreements,
guarantees and other documents and property evidencing or securing any
Receivables, immediately upon receipt thereof and in the same form as received,
with all necessary indorsements, all of which shall be with recourse. **Borrower
shall also provide Silicon with copies of all credit memos within two days after
the date issued.

   *PACIFIC STANDARD TIME

   **UPON SILICON'S REQUEST,

   4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect all
Receivables, unless and until a Default or an Event of Default has occurred*.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed in blank, to be applied to the
Obligations in such order as Silicon shall determine. Silicon may, in its
discretion, require that all proceeds of Collateral be deposited by Borrower
into a lockbox account, or such other "blocked account" as Silicon may specify,
pursuant to a blocked account agreement in such form as Silicon may specify.
**Silicon or its designee may, at any time, notify Account Debtors that the
Receivables have been assigned to Silicon.

   *AND IS CONTINUING

   **UPON THE OCCURRENCE AND DURING THE CONTINUATION OF A DEFAULT OR EVENT
   OF DEFAULT,

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

   *AND IS CONTINUING

   **$50,000

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

   *, AND DURING THE CONTINUATION,

   4.7 RETURNS. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its

                                      -4-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon). In the event any attempted return occurs
after the occurrence* of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.

   *, AND DURING THE CONTINUATION,

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

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

5.  ADDITIONAL DUTIES OF BORROWER.

   5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.

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

   *WITHIN FIVE (5) DAYS OF THE DATE HEREOF, ALL

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

   5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on*
Business Day's notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's books and records**.
Silicon shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but Silicon shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $750 per person per day (or such higher amount as shall represent
Silicon's then current standard charge for the same), plus reasonable out of
pocket expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining Silicon's
written consent, which may be conditioned upon such accounting firm, service
bureau or other third party agreeing to give Silicon the same rights with
respect to access to books and records and related rights as Silicon has under
this Loan Agreement. ***Borrower waives the benefit of any accountant-client
privilege or other evidentiary privilege precluding or limiting the disclosure,
divulgence or delivery of any of its books and records (except that Borrower
does not waive any attorney-client privilege).

   *THREE

   **;PROVIDED, HOWEVER, UPON THE OCCURRENCE OF A DEFAULT OR EVENT OF DEFAULT,
SILICON, OR ITS AGENTS, SHALL HAVE THE RIGHT TO CONDUCT SUCH INSPECTIONS AND/OR
AUDITS ON ONE BUSINESS DAY'S NOTICE

   ***WITH RESPECT TO SILICON,

   5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule, Borrower
shall not, without Silicon's prior written consent*, do any of the following:
(i) merge or consolidate with another corporation or entity; (ii) acquire any
assets, except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business**; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower's business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business***; (v) store any Inventory or other
Collateral with any warehouseman or other third party****; (vi) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis; (vii) make any loans of any money or other assets*****; (viii) incur any
debts, outside the ordinary course of business, which would have a material,
adverse effect on Borrower or on

                                      -5-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

the prospect of repayment of the Obligations; (ix) guarantee or otherwise become
liable with respect to the obligations of another****** (x) pay or declare any
dividends on Borrower's stock (except for dividends payable solely in stock of
BORROWER*******); (xi) redeem, retire, purchase or otherwise acquire, directly
or indirectly, any of Borrower's stock********; (xii) make any change in
Borrower's capital structure which would have a material adverse effect on
Borrower or on the prospect of repayment of the Obligations; or (xiv) dissolve
or elect to dissolve. Transactions permitted by the foregoing provisions of this
Section are only permitted if no Default or Event of Default would occur as a
result of such transaction.

*which consent, or denial thereof, will be determined in silicon's good faith
business judgment

**, except as otherwise permitted by other provisions of this agreement

***, and except for the issuance of non-exclusive licenses and similar
arrangements for the use of the property of borrower in the ordinary course of
business

   ****, except for such warehousemen or third parties for which a notice of
security interest to bailee, or similar agreement, in form satisfactory to
silicon, has been executed by such warehouseman or bailee and provided further
that the amount of inventory or other collateral stored in such locations does
not exceed $350,000 in the aggregate, and except for inventory that borrower, in
the ordinary course of its business, has loaned to its customers or is held by
its customers pending the exchange of such inventory, provided that the
aggregate value of such inventory does not exceed $1,000,000 at anytime while
this agreement is in effect

   *****, except (a) loans outstanding as of the date hereof and described on
the schedule and (b) loans consisting of (1) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, provided the aggregate amount of such loans under this subclause
(vii)(b)(1) do not exceed $100,000 at any one time outstanding, and (2) loans to
employees, officers or directors relating to the purchase of equity securities
of borrower pursuant to employee stock purchase plans or agreements approved by
borrower's board of directors, provided the aggregate amount of such loans under
this subclause (vii)(b)(2) do not exceed $100,000 at any one time outstanding

   ******person

   *******or dividends or distributions made in respect of a borrower to the
parent of such borrower, provided that such parent is also a borrower hereunder

   ********, except for the repurchases of stock from the cancellation of
indebtedness and from former employees or directors of borrower under the terms
of applicable repurchase or similar agreements between borrower and such
employees or directors all in an aggregate amount not to exceed $100,000 while
this agreement is in effect

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

   5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.

6. TERM.

   6.1 MATURITY DATE. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"), subject to Section 6.3
below.

   6.2 EARLY TERMINATION. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written
notice of termination is given to Silicon; or (ii) by Silicon at any time after
the occurrence* of an Event of Default, without notice, effective immediately.
If this Agreement is terminated by Borrower or by Silicon under this Section
6.2, Borrower shall pay to Silicon a termination fee in an amount equal to** of
the Maximum Credit Limit, provided that no termination fee shall be charged if
the credit facility hereunder is replaced with a new facility from another
division of Silicon Valley Bank. The termination fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.

   *, AND DURING THE CONTINUATION,

   **ONE PERCENT (1.0%)

   6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all

                                      -6-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

of the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full; provided that, without limiting the fact that Loans are
subject to the discretion of Silicon, Silicon may, in its sole discretion,
refuse to make any further Loans after termination. No termination shall in any
way affect or impair any right or remedy of Silicon, nor shall any such
termination relieve Borrower of any Obligation to Silicon, until all of the
Obligations have been paid and performed in full. Upon payment and performance
in full of all the Obligations and termination of this Agreement, Silicon shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be required to fully terminate Silicon's
security interests.

7.  EVENTS OF DEFAULT AND REMEDIES.

   7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit*; or (d) Borrower shall fail to comply with any of the
financial covenants set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or (e) Borrower
shall fail to perform any other non-monetary Obligation, which failure is not
cured within 5 Business Days after the date due; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) 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 (h)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) Dissolution, termination of existence** , of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within*** days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or (n) there shall be a change in the record or
beneficial ownership of an aggregate of more than**** 20% of the outstanding
shares of stock of Borrower, in one or more TRANSACTIONS*****, compared to the
ownership of outstanding shares of stock of Borrower in effect on the date
hereof, without the prior written consent of Silicon; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or (p) there shall be a material adverse change in Borrower's business or
financial condition;. Silicon may cease making any Loans hereunder during any of
the above cure periods, and thereafter if an Event of Default has
occurred******.

   *AND SUCH OVERADVANCE IS NOT IMMEDIATELY REPAID IN ACCORDANCE WITH THE TERMS
OF SECTION 1.3 HEREOF

   **OR INSOLVENCY

   ***60

   ****35%

   *****HELD BY ANY ONE PERSON

   ******AND IS CONTINUING

   7.2 REMEDIES. Upon the occurrence of any Event of Default, and at any time
thereafter*, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it

                                      -7-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

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

   *DURING THE CONTINUATION THEREOF

   **AND DURING THE CONTINUATION THEREOF

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

   *10

   **AND

   7.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default*, without
limiting Silicon's other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but Silicon agrees to exercise the following
powers in a commercially reasonable manner: (a) Execute on behalf of Borrower
any documents that Silicon may, in its sole discretion, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon's
possession; (e) Endorse all checks and other forms of remittances received by
Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any

                                      -8-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

judgment based thereon, or otherwise take any action to terminate or discharge
the same; (g) Grant extensions of time to pay, compromise claims and settle
Receivables and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (h) Pay any sums required
on account of Borrower's taxes or to secure the release of any liens therefor,
or both; (i) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (j) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other rights
with respect thereto as Silicon has under this Agreement; and (k) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other present or future agreements. Any and all reasonable sums paid and any and
all reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.

   *AND DURING THE CONTINUATION THEREOF

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

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

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

   "Account Debtor" means the obligor on a Receivable.

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

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

   "Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.

   "Collateral" has the meaning set forth in Section 2.1 above.

   "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 Silicon or cured within any applicable cure period.

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

   "Deposit Account" has the meaning set forth in Section 9102(a) of the Code.

   "Eligible Inventory" means Inventory which Silicon, in its* deems eligible
for borrowing, based on such considerations as Silicon may from time to time
deem appropriate. Without limiting the fact that the determination of which
Inventory is eligible for borrowing is a matter of Silicon's* Inventory which
does not meet the following requirements will not be deemed to be Eligible
Inventory: Inventory which (i) consists of finished goods, in good, new and
salable condition which is not perishable, not obsolete or unmerchantable, and
is not comprised of raw materials, work in process, packaging materials or
supplies; (ii) meets all applicable governmental standards; (iii) has been
manufactured in compliance with the Fair Labor Standards Act; (iv) conforms in
all respects to the warranties and representations set forth in this Agreement;
(v) is at all times subject to Silicon's duly perfected, first priority security
interest; and (vi) is situated at a one of the locations set forth on the
Schedule.

   *GOOD FAITH BUSINESS JUDGMENT

   "Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its* shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's* the following (the "Minimum
Eligibility Requirements") are the minimum requirements for a Receivable to be
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable must not represent progress
billings, or be due under a fulfillment or requirements contract with the

                                      -9-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

Account Debtor, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional),
(iv) the Receivable must not be owing from an Account Debtor with whom Borrower
has any dispute (whether or not relating to the particular Receivable), (v) the
Receivable must not be owing from an Affiliate of Borrower, (vi) the Receivable
must not be owing from an Account Debtor which is subject to any insolvency or
bankruptcy proceeding, or whose financial condition is not acceptable to
Silicon, or which, fails or goes out of a material portion of its business,
(vii) the Receivable must not be owing from the United States or any department,
agency or instrumentality thereof (unless there has been compliance, to
Silicon's satisfaction, with the United States Assignment of Claims Act), (viii)
the Receivable must not be owing from an Account Debtor located outside the
United States or Canada (unless pre-approved by Silicon in its discretion in
writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Receivable must not be owing from an
Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise. Receivables owing from one Account Debtor will
not be deemed Eligible Receivables to the extent they exceed 25% of the total
Receivables outstanding. In addition, if more than 50% of the Receivables owing
from an Account Debtor are outstanding more than 90 days from their invoice date
(without regard to unapplied credits) or are otherwise not eligible Receivables,
then all Receivables owing from that Account Debtor will be deemed ineligible
for borrowing. Silicon may, from time to time, in ITS* revise the Minimum
Eligibility Requirements, upon written notice to Borrower.

   *GOOD FAITH BUSINESS JUDGMENT

   "Equipment" means all of Borrower's present and hereafter acquired machinery,
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.

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

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

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

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

   "Permitted Liens" means the following: (i) purchase money security interests
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable*; (iv) additional security interests and
liens consented to in writing by Silicon, which consent shall not be
unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods**. Silicon will have
the

                                      -10-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agrees that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.

   *OR LIENS FOR TAXES BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS
FOR WHICH ADEQUATE RESERVES HAVE BEEN ESTABLISHED AND ARE MAINTAINED PROVIDED
SUCH LIENS DO NOT HAVE PRIORITY OVER ANY SECURITY INTEREST OF SILICON

   **AND (IX) LIENS ON ASSETS ACQUIRED BY BORROWER IN ACCORDANCE WITH SECTION
5.5 HEREOF, PROVIDED SUCH LIENS WOULD OTHERWISE BE PERMITTED PURSUANT TO CLAUSES
(I) OR (II) OF THE DEFINITION OF PERMITTED LIENS

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

   *LIMITED LIABILITY COMPANY

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

   "Reserves" means, as of any date of determination, such amounts as Silicon
may from time to time establish* and revise in good faith reducing the amount of
Loans, Letters of Credit and other financial accommodations which would
otherwise be available to Borrower under the lending formula(s) provided in the
Schedule: (a) to reflect events, conditions, contingencies or risks which, as
determined by Silicon in good faith, do or may affect (i) the Collateral or any
other property which is security for the Obligations or its value (including
without limitation any increase in delinquencies of Receivables), (ii) the
assets, business or prospects of Borrower or any Guarantor, or (iii) the
security interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon's
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.

   *IN ITS GOOD FAITH BUSINESS JUDGMENT

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

9.   GENERAL PROVISIONS.

   9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, and other items of payment received by Silicon (including proceeds of
Receivables and payment of the Obligations in full) shall be deemed applied by
Silicon on account of the Obligations two Business Days after receipt by Silicon
of immediately available funds*, and, for purposes of the foregoing, any such
funds received after 12:00 Noon on any day shall be deemed received on the next
Business Day. Silicon shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to Silicon
in its sole discretion, and Silicon may charge Borrower's loan account for the
amount of any item of payment which is returned to Silicon unpaid.

   *(EXCEPT WITH RESPECT TO WIRE TRANSFERS WHICH SHALL BE DEEMED APPLIED BY
SILICON ON ACCOUNT OF THE OBLIGATIONS THE SAME BUSINESS DAY AS DEEMED RECEIVED
BY SILICON)

   9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations may
be applied, and in Silicon's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Silicon shall determine in its sole
discretion.

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

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

   9.5 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Silicon or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in

                                      -11-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

the case of notices personally delivered, or at the expiration of one Business
Day following delivery to the private delivery service, or* Business Days
following the deposit thereof in the United States mail, with postage prepaid.

   *THREE

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

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

   9.8 WAIVERS. The failure of Silicon at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Silicon shall not waive or
diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.

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

   *NOR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY
OTHER PERSON AFFILIATED WITH OR REPRESENTING SILICON

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

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

   9.12 ATTORNEYS FEES AND COSTS. *Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas,
but Borrower acknowledges and agrees that Levy, Small & Lallas is representing
only Silicon and not Borrower in connection with this Agreement. If either
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Silicon may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.

   *EXCEPT AS EXPRESSLY PROVIDED BY THE PENULTIMATE SENTENCE OF THIS SECTION
9.12,

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

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

                                      -12-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

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

   *TWO YEARS

   **TWO-YEAR

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

   9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.

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

   BORROWER:

         VERSO TECHNOLOGIES, INC.

         BY /s/ Juliet M. Reising
           ---------------------------------------
                  VICE PRESIDENT

         BY  /s/ David Ryan
           ----------------------------------------
                  SECRETARY OR ASS'T SECRETARY

   BORROWER:

         NACT TELECOMMUNICATIONS, INC.

         BY   /s/ Juliet M. Reising
            ----------------------------------------
                  VICE PRESIDENT

         BY  /s/ David Ryan
            ----------------------------------------
                  SECRETARY OR ASS'T SECRETARY

                                      -13-

<PAGE>

SILICON VALLEY BANK                                 LOAN AND SECURITY AGREEMENT

   BORROWER:

         TELEMATE.NET SOFTWARE, INC.

         BY /s/ Juliet M. Reising
           -------------------------------------
                VICE PRESIDENT

         BY /s/ David Ryan
            -------------------------------------
                SECRETARY OR ASS'T SECRETARY

   SILICON:

         SILICON VALLEY BANK

         BY   /s/ Peter Bendoris
            -----------------------------------------

         TITLE  Vice President
               --------------------------------------

                                      -14-

<PAGE>

SILICON VALLEY BANK
                                   SCHEDULE TO

                           LOAN AND SECURITY AGREEMENT

BORROWER:         VERSO TECHNOLOGIES, INC.
                  NACT TELECOMMUNICATIONS, INC.
                  TELEMATE.NET SOFTWARE, INC.

ADDRESS:          400 GALLERIA PARKWAY, SUITE 300
                  ATLANTA, GEORGIA  30339

DATE:             DECEMBER 14, 2001

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

===============================================================================

1.  CREDIT LIMIT
     (Section 1.1):        An amount not to exceed the lesser of a total of
                           $5,000,000 at any one time  outstanding (the
                           "Maximum Credit Limit"), or the sum of (a) and (b)
                           below:

                                    (a) 50% of the amount of Borrower's Eligible
                                    Receivables (as defined in Section 8 above)
                                    (the foregoing advance rate is typically
                                    based upon the quality of the Borrower's
                                    Receivables and attendant dilution. The
                                    quality of Borrower's Receivables (and other
                                    Collateral) is determined by the results of
                                    Silicon's initial field examination and
                                    on-going periodic examinations and audits.
                                    The foregoing advance rate will be reviewed
                                    by Silicon, after its receipt and review of
                                    the the results of the next two audits
                                    conducted, after the date hereof, by
                                    Silicon, or its agents, to determine whether
                                    or not such advance rate should be
                                    modified), plus

                                    (b) an amount (the "Inventory Sublimit") not
                                    to exceed the lesser of:

                                           (1) 30% of the value of Borrower's
                                           Eligible Inventory (as defined in
                                           Section 8 above), which advance rate
                                           must be equal to at least 80% of the
                                           appraisal value of the Inventory as
                                           determined below; or

                                           (2) 20% of total outstanding Loans;
                                           or

                                           (3) $1,000,000.

                                           The foregoing Inventory Sublimit is
                                           subject to an appraisal conducted by
                                           appraisers acceptable to Silicon,
                                           which appraisal will be conducted on
                                           the basis of forced liquidation
                                           value.

                                      -1-

<PAGE>

SILICON VALLEY BANK                     SCHEDULE TO LOAN AND SECURITY AGREEMENT

                                           Loans will be made to each Borrower
                                           based on the Eligible Receivables and
                                           Eligible Inventory of each Borrower,
                                           subject to the Maximum Credit Limit
                                           set forth above for all Loans to all
                                           Borrowers combined.

LETTER OF CREDIT SUBLIMIT
(Section 1.5):               $500,000, provided that the total Letter of
                             Credit Sublimit and the Foreign Exchange Contract
                             Sublimit shall not, at any time, exceed $500,000.

FOREIGN EXCHANGE
CONTRACT SUBLIMIT            $500,000. Borrower may enter into foreign exchange
                             forward contracts with Silicon, on its standard
                             forms, under which Borrower commits to purchase
                             from or sell to Silicon a set amount of foreign
                             currency more than one business day after the
                             contract date (the "FX Forward Contracts");
                             provided that (1) at the time the FX Forward
                             Contract is entered into Borrower has Loans
                             available to it under this Agreement in an amount
                             at least equal to 10% of the amount of the FX
                             Forward Contract; and (2) the total FX Forward
                             Contracts at any one time outstanding may not
                             exceed 10 times the amount of the Foreign Exchange
                             Contract Sublimit set forth above; and (3) the
                             total Letter of Credit Sublimit and the Foreign
                             Exchange Contract Sublimit shall not, at any time,
                             exceed $500,000. Silicon shall have the right to
                             withhold, from the Loans otherwise available to
                             Borrower under this Agreement, a reserve (which
                             shall be in addition to all other reserves) in an
                             amount equal to 10% of the total FX Forward
                             Contracts from time to time outstanding, and in the
                             event at any time there are insufficient Loans
                             available to Borrower for such reserve, Borrower
                             shall deposit and maintain with Silicon cash
                             collateral in an amount at all times equal to such
                             deficiency, which shall be held as Collateral for
                             all purposes of this Agreement. Silicon may, in its
                             discretion, terminate the FX Forward Contracts at
                             any time that an Event of Default occurs and is
                             continuing. Borrower shall execute all standard
                             form applications and agreements of Silicon in
                             connection with the FX Forward Contracts, and
                             without limiting any of the terms of such
                             applications and agreements, Borrower shall pay all
                             standard fees and charges of Silicon in connection
                             with the FX Forward Contracts.

================================================================================

2. INTEREST.

     INTEREST RATE (Section 1.2):

                             A rate equal to the "Prime Rate" in effect from
                             time to time, plus 2.0% per annum; provided,
                             however, that the interest rate shall be reduced to
                             a rate equal to the "Prime Rate" in effect from
                             time to time, plus 1.50% per annum at such time as
                             Borrower has received at least $10,000,000 in cash
                             consideration for the issuance, after the date
                             hereof, of equity securities of Borrower. Any such
                             rate reduction shall

                                      -2-

<PAGE>

SILICON VALLEY BANK                     SCHEDULE TO LOAN AND SECURITY AGREEMENT

                             go into effect following Silicon's review of
                             Borrower's financial statements showing Borrower is
                             entitled to such rate reduction.

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

MINIMUM MONTHLY
INTEREST (Section 1.2):      Not Applicable.

================================================================================

3. FEES (Section 1.4):

  Loan Fee:                  $50,000, payable concurrently herewith, which fee
                             Silicon acknowledges has been paid by Borrower and
                             received by Silicon.

  Renewal Fee:               $25,000, payable on or before the first anniversary
                             of this Agreement if this Agreement is renewed
                             beyond the Maturity Date by Silicon, in its sole
                             discretion, and Borrower accepts such renewal. Such
                             fee shall be non-refundable and in addition to all
                             interest and other fees payable to Silicon under
                             this Agreement.

  Collateral Monitoring
  Fee:                       $2,000, per month, payable in arrears (prorated
                             for any partial month at the beginning and at
                             termination of this Agreement); provided, however,
                             whenever Borrower's aging reports (as provided for
                             herein) are consolidated, such fee shall be $1,000
                             per month, payable in arrears (prorated for any
                             partial month at the beginning and at termination
                             of this Agreement).

  Unused Line Fee:           In the event, in any calendar month (or portion
                             thereof at the beginning and end of the term
                             hereof), the average daily principal balance of the
                             Loans outstanding during the month is less than the
                             amount of the Maximum Credit Limit, Borrower shall
                             pay Silicon an unused line fee in an amount equal
                             to 0.25% per annum on the difference between the
                             amount of the Maximum Credit Limit and the average
                             daily principal balance of the Loans outstanding
                             during the month, which unused line fee shall be
                             computed and paid monthly, in arrears, on the first
                             day of the following month.

================================================================================

4.  MATURITY DATE
     (Section 6.1):          One year from the date of this Agreement.

                                      -3-
<PAGE>

SILICON VALLEY BANK                     SCHEDULE TO LOAN AND SECURITY AGREEMENT

===============================================================================

5.  FINANCIAL COVENANTS
     (Section 5.1):          Borrower shall comply with each of the following
                             covenant(s). Compliance shall be determined as of
                             the end of each month, except as otherwise
                             specifically provided below:

      MINIMUM CASH
      ON HAND/MINIMUM
      EXCESS AVAILABILITY:   Borrower shall at all times maintain a combination
                             of a minimum of unrestricted cash (and cash
                             equivalents) in accounts maintained at Silicon, and
                             Minimum Excess Availability, in an amount of not
                             less than $1,000,000.

      MINIMUM TANGIBLE
      NET WORTH:             Borrower shall maintain a Tangible Net Worth of not
                             less than the following:

                             For each fiscal quarter ending after the date
                             hereof $3,000,000 plus 50% of Borrower's current
                             year to date quarterly earnings for any fiscal
                             quarter ending after the date hereof.

                             The foregoing Minimum Tangible Net Worth
                             calculation may be revised by Silicon, in its good
                             faith business judgment, after its review of the
                             final purchase accounting associated with Verso
                             Technologies, Inc.'s acquisition of NACT
                             Telecommunications, Inc. and Telemate.net Software,
                             Inc. and Silicon's receipt of the necessary
                             internal committee approvals.

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

                             "Current assets", "current liabilities" and
                             "liabilities" shall have the meaning ascribed
                             thereto by generally accepted accounting
                             principles.

                             "Minimum Excess Availability" shall mean the amount
                             equal to the Credit Limit less the principal amount
                             of outstanding Loans.

                             "Tangible Net Worth" shall mean the excess of total
                             assets over total liabilities, determined in
                             accordance with generally accepted accounting
                             principles, with the following adjustments:

                                    (A) there shall be excluded from assets: (i)
                                    notes, accounts receivable and other
                                    obligations owing to Borrower from its
                                    officers or other Affiliates, and (ii) all
                                    assets which would be classified as
                                    intangible assets under generally accepted
                                    accounting principles, including without
                                    limitation goodwill, licenses, patents,
                                    trademarks, trade names, copyrights,
                                    capitalized software and organizational
                                    costs, licenses and franchises

                                    (B) there shall be excluded from
                                    liabilities: all indebtedness which is
                                    subordinated to the Obligations under a
                                    subordination agreement in form specified by
                                    Silicon or by language in the instrument
                                    evidencing the indebtedness which is
                                    acceptable to Silicon in its

                                      -4-

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SILICON VALLEY BANK                     SCHEDULE TO LOAN AND SECURITY AGREEMENT

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                                    discretion ("Subordinated Debt") and, to the
                                    extent not subordinated as provided for
                                    above, the deferred purchase price (and the
                                    accrued interest thereon) due WA Telcom
                                    Products Co., Inc. by Verso Technologies,
                                    Inc. ("Verso") for Verso's acquisition of
                                    NACT Telecommunications, Inc., which
                                    deferred purchase price is in the amount of
                                    approximately $5,340,000.

================================================================================

6.  REPORTING.
      (Section 5.3):

                             Borrower shall provide Silicon with the following:

                             1.  Monthly Receivable agings, aged by invoice
                                 date, within twenty days after the end of each
                                 month.

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

                             3.  Monthly reconciliations of Receivable agings
                                 (aged by invoice date), transaction reports,
                                 and general ledger, within twenty days after
                                 the end of each month.

                             4.  Monthly perpetual inventory reports for the
                                 Inventory valued on a first-in, first-out basis
                                 at the lower of cost or market (in accordance
                                 with generally accepted accounting principles)
                                 or such other inventory reports as are
                                 reasonably requested by Silicon, all within
                                 twenty days after the end of each month.

                             5.  Monthly unaudited financial statements, as soon
                                 as available, and in any event within thirty
                                 days after the end of each month; provided,
                                 however, for the months ending March 31, June
                                 30 and September 30 of each fiscal year, within
                                 40 days after the end of such month, and for
                                 the month ending December 31 of each fiscal
                                 year, 50 after the end of such month.

                             6.  Monthly Compliance Certificates, within thirty
                                 days after the end of each month (provided,
                                 however, for the months ending March 31, June
                                 30 and September 30 of each fiscal year, within
                                 40 days after the end of such month, and for
                                 the month ending December 31 of each fiscal
                                 year, 50 after the end of such month), in such
                                 form as Silicon shall reasonably specify,
                                 signed by the Chief Financial Officer of
                                 Borrower, certifying that as of the end of such
                                 month Borrower was in full compliance with all
                                 of the terms and conditions of this Agreement,
                                 and setting forth calculations showing
                                 compliance with the financial covenants set
                                 forth in this Agreement and such other
                                 information as Silicon shall reasonably
                                 request, including, without limitation, a
                                 statement that at the end of such month there
                                 were no held checks.

                             7.  Quarterly unaudited financial statements, as
                                 soon as available, and in any event within
                                 forty-five days after the end of each fiscal
                                 quarter of Borrower.

                                      -5-

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SILICON VALLEY BANK                     SCHEDULE TO LOAN AND SECURITY AGREEMENT

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

                             9.  Annual financial statements, as soon as
                                 available, and in any event within 90 days
                                 following the end of Borrower's fiscal year,
                                 certified by independent certified public
                                 accountants acceptable to Silicon.

================================================================================

7.  COMPENSATION
       (Section 5.5):            Not Applicable.

================================================================================

8.  BORROWER INFORMATION:

         PRIOR NAMES OF
         BORROWER
         (Section 3.2):                As set forth in the Borrower's
                                       Representations and Warranties dated
                                       December 14, 2001.

         PRIOR TRADE
         NAMES OF BORROWER
         (Section 3.2):                As set forth in the Borrower's
                                       Representations and Warranties dated
                                       December 14, 2001.

         EXISTING TRADE
         NAMES OF BORROWER
         (Section 3.2):                As set forth in the Borrower's
                                       Representations and Warranties dated
                                       December 14, 2001.

         OTHER LOCATIONS AND
         ADDRESSES (Section 3.3):      As set forth in the Borrower's
                                       Representations and Warranties dated
                                       December 14, 2001.

         TAX MATTERS (Section 3.8):    Verso Technologies, Inc. received a
                                       "Notice of Audit Assessment Sales, Use
                                       and Hotel Occupancy Tax" from the
                                       Commonwealth of Pennsylvania. The
                                       assessment in the amount of $722,341 was
                                       based on an audit performed at Verso
                                       through the period ended June 30, 2000.
                                       KPMG LLP, Verso's representative in this
                                       matter, has filed an appeal with the
                                       Commonwealth of Pennsylvania, which
                                       should result in a substantial reduction
                                       in the assessment. No response has been
                                       received from the Commonwealth of
                                       Pennsylvania. Verso has an accrued sales
                                       tax liability of $500,000 on its balance
                                       sheet at 10-31-01.

         MATERIAL ADVERSE
         LITIGATION (Section 3.10):    John M. Good v. Verso Technologies, Inc.,
                                       et al., Case No. 439482, State of Ohio,
                                       Cuyahoga County Court of Common Pleas.

         OUTSTANDING
         LOANS (Section 5.5):          As set forth in the Borrower's
                                       Representations and Warranties dated
                                       December 14, 2001.

                                      -6-

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SILICON VALLEY BANK                     SCHEDULE TO LOAN AND SECURITY AGREEMENT

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         INTELLECTUAL
         PROPERTY CLAIMS:     As set forth on the attached Appendix A.

================================================================================

9.  OTHER COVENANTS
       (Section 5.1):      Borrower shall at all times comply with all of the
                           following additional covenants:

                           (1)      BANKING RELATIONSHIP. Borrower shall at all
                                    times maintain its primary banking
                                    relationship with Silicon.

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

                           (3)      [Intentionally omitted.]

                           (4)      SUBORDINATION AGREEMENTS. Borrower shall use
                                    its commercially reasonable best efforts to
                                    cause each holder of Verso Technologies,
                                    Inc.'s 7.50% Convertible Debentures Due
                                    November 22, 2005 (the "November 2005
                                    Debentures") to execute and deliver to
                                    Silicon within 60 days after the date hereof
                                    Subordination Agreements, or such other
                                    documents as are satisfactory to Silicon in
                                    its sole discretion, all in such form as
                                    Silicon shall specify, subordinating to the
                                    Obligations the indebtedness of Borrower to
                                    such persons, and Borrower shall cause said
                                    Subordination Agreements (or other
                                    documents) to continue in full force and
                                    effect at all times during the term of this
                                    Agreement.

                           (5)      COPYRIGHT FILINGS. Concurrently, Borrower is
                                    executing and delivering to Silicon an
                                    Intellectual Property Security Agreement

                                      -7-
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SILICON VALLEY BANK                     SCHEDULE TO LOAN AND SECURITY AGREEMENT

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                                    (the "Intellectual Property Agreement").
                                    Within 60 days after the date hereof,
                                    Borrower shall (i) cause all of its computer
                                    software, the licensing of which results in
                                    Receivables, or which is material to its
                                    business to be registered with the United
                                    States Copyright Office, (ii) complete the
                                    Exhibits to the Intellectual Property
                                    Agreement with all of the information called
                                    for with respect to such software, (iii)
                                    cause the Intellectual Property Agreement to
                                    be recorded in the United States Copyright
                                    Office, and (iv) provide evidence of such
                                    recordation to Silicon.

                           (6)      CONTROL AGREEMENT. As to any Deposit
                                    Accounts and investment accounts maintained
                                    with another institution, Borrower shall
                                    cause such institution, within 30 days after
                                    the date of this Loan Agreement, to enter
                                    into a control agreement in form acceptable
                                    to Silicon in its good faith business
                                    judgment in order to perfect Silicon's
                                    security interest in said Deposit Accounts
                                    and investment accounts.

                           (7)      BAILEE AGREEMENT. Within 30 days after the
                                    date hereof, Borrower shall cause Bailey
                                    Moving & Storage, Team Air and any other
                                    bailee or warehouseman at which Borrower
                                    maintains any Collateral to execute and
                                    deliver to Silicon, on Silicon's standard
                                    form (with such changes as shall be
                                    acceptable to Silicon in its discretion), a
                                    Notice to Bailee of Security Interest with
                                    respect to all Collateral maintained by
                                    Borrower at such bailee or warehouseman.

                           (8)      INACTIVE SUBSIDIARIES. The following are
                                    subsidiaries of Borrower, but the same are,
                                    and will remain throughout the term of this
                                    Agreement, inactive, with assets having an
                                    aggregate value of less than $350,000 (in
                                    the aggregate for all such subsidiaries):
                                    (a) MessageClick, Inc.; (b) Eltrax
                                    International, Inc.; (c) Eltrax Hospitality
                                    Technologies PTE Ltd.; (d) Eltrax (Malaysia)
                                    SBD. BHD.; (e) Eltrax Hospitality
                                    Scandinavia, AS; (f) Eltrax (Australia) Pty.
                                    Ltd.; (g) Eltrax Hospitality Ltd.; (h)
                                    Eltrax Holdings AG; (i) Eltrax AG; (j)
                                    Eltrax Hospitality U.K. Ltd., and (k) World
                                    Access (U.K.), Ltd.

                           (9)      DISSOLVING SUBSIDIARIES. Borrower represents
                                    and warrants to Silicon that the following
                                    are wholly owned subsidiaries of Borrower
                                    that Borrower intends to dissolve within
                                    thirty (30) days of the date hereof, or,
                                    alternatively, merge into Eltrax
                                    International, Inc.: (a) Eltrax ASP Group,
                                    LLC; (b) Cereus Bandwidth, LLC; (c) Cereus
                                    Technology, Inc.; (d) MessageClick.com,
                                    Inc.; (e) Victory Fax Communications, Inc.;
                                    (f) American Internet Media, Inc.; (g)
                                    Cereus Technology Partners, Inc.; (h) Eltrax
                                    Customer Care Group, Inc.; (i) Eltrax
                                    Technology Services Group, Inc.; (j) Eltrax
                                    Hospitality Group, Inc.; and (k) Eltrax
                                    Group, Inc. Borrower covenants and agrees
                                    that while this Agreement is in effect,
                                    Borrower shall not transfer any assets or
                                    Collateral to such subsidiaries.

                           (10)     LANDLORD WAIVERS. Within 30 days after the
                                    date hereof, Borrower shall cause the record
                                    owners (other than Borrower) of

                                      -8-
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SILICON VALLEY BANK                     SCHEDULE TO LOAN AND SECURITY AGREEMENT

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                                    all real property upon which Borrower
                                    maintains inventory to execute and deliver
                                    to Silicon, on Silicon's standard form (with
                                    such changes as shall be acceptable to
                                    Silicon in its discretion), a landlord
                                    waiver containing such other terms and
                                    conditions as Silicon may require.

Borrower:                                     Silicon:

   Verso Technologies, Inc.                   SILICON VALLEY BANK

   By /s/ Juliet M. Reising                   By /s/ Peter Bendoris
     --------------------------------           --------------------------------
         Vice President                       Title Vice President
                                                   -----------------------------

   By /s/ David Ryan
     ----------------------------------
         Secretary or Ass't Secretary

Borrower:

   NACT TELECOMMUNICATIONS, INC.

   By /s/ Juliet M. Reising
     ----------------------------------
         Vice President

   By /s/ David Ryan
     ----------------------------------
         Secretary or Ass't Secretary

Borrower:

   TELEMATE.NET SOFTWARE, INC.

   By /s/ Juliet M. Reising
     ----------------------------------
         Vice President

   By /s/ David Ryan
     ----------------------------------
         Secretary or Ass't Secretary

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