SECURED NON-CONVERTIBLE
TRANCHE B REVOLVING NOTE
FOR VALUE
RECEIVED, each of VERSO TECHNOLOGIES, INC., a Minnesota corporation
(the “ Parent ”), and the other companies listed
on Exhibit A attached hereto (such other companies
together with the Parent, each a “ Company ” and
collectively, the “ Companies ”), jointly and
severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Ugland House, South
Church Street, George Town, Grand Cayman, Cayman Islands, Fax:
345-949-8080 (the “ Holder ”) or its registered
assigns or successors in interest, the sum of Six Million Dollars
($6,000,000) or, if different, such lesser amount as shall be equal
to the unpaid balance of the Tranche B Loans (as defined in the
Security Agreement referred to below), together with any accrued
and unpaid interest hereon, on September 20, 2009 (the “
Maturity Date ”) if not sooner indefeasibly paid in
full.
The Companies may
borrow up to the Term B Availability Amount by delivering to the
Holder a notice requesting such loans in the form of
Exhibit B hereto.
Capitalized terms
used herein without definition shall have the meanings ascribed to
such terms in the Security Agreement among the Companies and the
Holder dated as of the date hereof (as amended, modified and/or
supplemented from time to time, the “ Security
Agreement ”).
The following
terms shall apply to this Secured Non-Convertible Tranche B
Revolving Note (this “ Note ”):
1.1 Contract
Rate . Subject to Sections 2.2 and 3.9, interest payable
on the outstanding principal amount of this Note (the “
Principal Amount ”) shall accrue at a rate per annum
equal to fifteen percent (15%) (the “ Contract Rate
”). Interest shall be (i) calculated on the basis of a
360 day year, and (ii) payable monthly, in arrears,
commencing on October 1, 2006 on the first business day of
each consecutive calendar month thereafter through and including
the Maturity Date, and on the Maturity Date, whether by
acceleration or otherwise.
1.2 Contract
Rate Payments . The Contract Rate shall be calculated on the
last business day of each calendar month hereafter until the
Maturity Date (each a “ Determination Date
”).
ARTICLE II
EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS
2.1 Events of
Default . The occurrence of an Event of Default under the
Security Agreement shall constitute an event of default (“
Event of Default ”) hereunder.
Secured
Non-Convertible Revolving Note
2.2 Default
Interest . Following the occurrence and during the continuance
of an Event of Default, upon written notice from the Holder of such
Event of Default, the Companies shall, jointly and severally, pay
additional interest on the outstanding principal balance of this
Note in an amount equal to one percent (1%) per month, and all
outstanding Obligations, including unpaid interest, shall continue
to accrue interest at such additional interest rate from the date
of such Event of Default until the date such Event of Default is
cured or waived.
2.3 Default
Payment . Following the occurrence and during the continuance
of an Event of Default, the Holder, at its option, may elect, in
addition to all rights and remedies of the Holder under the
Security Agreement and the other Ancillary Agreements and all
obligations and liabilities of each Company under the Security
Agreement and the other Ancillary Agreements, to require the
Companies, jointly and severally, to make a Default Payment
(“ Default Payment ”). The Default Payment shall
be 105% of the outstanding principal amount of the Note, plus
accrued but unpaid interest, all other fees then remaining unpaid,
and all other amounts payable hereunder. The Default Payment shall
be applied first to any fees due and payable to the Holder pursuant
to the Notes, the Security Agreement and/or the Ancillary
Agreements, then to accrued and unpaid interest due on the Notes
and then to the outstanding principal balance of the Notes. The
Default Payment shall be due and payable immediately on the date
that the Holder has exercised its rights pursuant to this
Section 2.3.
ARTICLE III
MISCELLANEOUS
3.1 Cumulative
Remedies . The remedies under this Note shall be
cumulative.
3.2 Failure or
Indulgence Not Waiver . No failure or delay on the part of the
Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies
otherwise available.
3.3 Notices
. Any notice herein required or permitted to be given shall be in
writing and shall be deemed effective given (a) upon personal
delivery to the party notified, (b) when sent by confirmed
telex or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, (c) five
days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after
deposit with a nationally recognized overnight courier, specifying
next day delivery, wi
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