----

| BETWEEN: | VERSO TECHNOLOGIES, INC.,      a legal person duly incorporated and subsisting under the laws of      Minnesota, having      its principal office at 400 Galleria Parkway, Suite 200, in the City of      Atlanta, State of Georgia, 30339, herein acting and represented by Martin      D. Kidder, its Chief Financial Officer, duly authorized in virtue of a      Resolution of its Board of Directors duly enacted on December 20,      2007; |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|     | (hereinafter      referred to as the “Grantor”)                                                                                                                                                                                                                                                                                                                                                                                       |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| AND:     | VALENS U.S. SPV I, LLC,      a limited liability company duly incorporated and subsisting under the      laws of Delaware, having its principal place of business c/o Valens      Capital Management, LLC, 335 Madison Avenue, 10th      Floor, in the City of New York, U.S.A. 10017, herein acting and      represented by Scott Bluestein, its authorized representative, duly      authorized for the purposes hereof as declared,            |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|     | (hereinafter      referred to as the “Creditor”)                                                                                                                                                                                                                                                                                                                                                                                      |

| 1.   | PREAMBLE |
|----------------|----------|

| 1.1.   | The      preamble forms part hereof as if recited at length  herein. |
|------------------|----------------------------------------------------------------------|

| 2.   | DEFINITIONS |
|----------------|-------------|

| 2.1.   | Unless      the context otherwise requires, the following expressions will have the      respective meanings hereinafter setforth: |
|------------------|------------------------------------------------------------------------------------------------------------------------------------|

----

3.1

|  | (i)                  | all      costs and expenses (including, without limitation, all costs and expenses      referred to herein and/or in the Security Agreement) which may hereafter      be incurred, in any manner and under any circumstances, by and/or on      behalf of the Creditor in and/or relating to (i) the enforcement of the      Hypothec, (ii) the sale and/or disposal of any of the Charged Property      forming the object of the Hypothec, and/or (iii) dealing with the Charged      Property forming the object of theHypothec; |
|--|-----------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii)                | any      and all fees, disbursements and applicable sales taxes incurred by any      professionals (including, without limitation, any attorneys, receivers,      trustees, monitors and/or consultants) which may hereafter be engaged by      and/or on behalf of the Creditor or for which the Creditor may hereafter      become obliged for and/or pertaining to (i) the enforcement of the      Hypothec, (ii) the sale and/or disposal of any of the Charged Property      forming the object of the Hypothec, and/or (iii) dealing with the Charged      Property forming the object of the Hypothec;and |
|--|------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | (iii)          | any      and all other costs and expenses, of any nature or form whatsoever, which      may hereafter be incurred by and/or on behalf of the Creditor or for which      the Creditor may hereafter become obliged, under any circumstances      whatsoever, for and/or pertaining to (i) the enforcement of the Hypothec,      (ii) the sale and/or disposal of any of the Charged Property forming the      object of the Hypothec, and/or (iii) dealing with the Charged Property      forming the object of the Hypothec, |
|--|-------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

3.1
3.2

----

----

|  | (i)                 | identifiable      or traceable personal or movable property that is derived directly or      indirectly with any dealing with the Charged Property or proceeds of the      Charged Property and in which the Grantor acquires an      interest; |
|--|-----------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii)                 | an      insurance or other payment that represents indemnity or compensation for      loss of or damage to the Charged Property or proceeds of the Charged      Property or a right to such a payment;and |
|--|------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iii)                | a      payment made in total or partial discharge or redemption of chattel paper,      a security, an instrument, an intangible or incorporeal      property; |
|--|-------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.              | HYPOTHEC AND      ADDITIONAL HYPOTHEC |
|----------------------------------------------------------------------------------|---------------------------------------|

| 3.1.           | Hypothec |
|------------------------------------------------------------------|----------|

----

| 3.2.           | Additional      Hypothec |
|------------------------------------------------------------------|--------------------------|

| 3.3.   | Dealings with Charged      Property |
|------------------|-------------------------------------|

6

| 3.4.           | Voting and Other      Rights |
|------------------------------------------------------------------|------------------------------|

----

5

| 4.1   | The      occurrence of any “Event of Default” under and as defined in the Security      Agreement shall ipso      facto and automatically constitute and is hereafter defined as an      “Event of Default” hereunder. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | REMEDIES IN CASE OF      DEFAULT |
|----------------|----------------------------------|

| 5.1   | Upon      the occurrence and during the continuance of an Event of Default, the      Creditor, without the necessity of any notice or formality (other than      those strictly required under the Law) shall immediately be entitled      to: |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 5.1.1            | exercise      all available rights and recourses against the Grantor and/or the Charged      Property including, without limitation, any and all of the hypothecary      rights in respect of the whole or any portion of the Charged Property in      accordance with Law; and/or |
|-------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.1.2            | exercise      different and separate hypothecary rights and/or other rights and      recourses against different portions (or components of portions) of the      Charged Property as the Creditor sees fit and the Creditor shall at all      times be entitled, subject only to such notification or formalities as      strictly required by Law, to change or substitute any hypothecary rights      and/or other rights and recourses for other hypothecary rights and/or      other rights and recourses as it seesfit. |
|-------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.2   | Additional      Rights |
|-----------------|------------------------|

| 5.2.1            | Administration after      Surrender |
|-------------------------------------------|-------------------------------------|

----

(b)

| 5.2.2            | Taking in      payment |
|-------------------------------------------|------------------------|

----

| 5.2.3            | Sale of Charged      Property |
|-------------------------------------------|-------------------------------|

| 6.   | CLAIMS |
|----------------|--------|

| 6.1.   | The      Creditor may, in the event of the occurrence and during the continuance of      an Event of Default, withdraw the authorization of the Grantor to collect      the Claims as they fall due and, thereafter, the following will      apply: |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 6.2.   | All      amounts collected or received by the Grantor in respect of the Claims      (after the occurrence and during the continuance of an Event of Default)      will be deemed to have been collected or received by the Grantor as      mandatary of the Creditor and will be deposited into such bank accounts as      are acceptable from time to time to the Creditor.  At all times      after the Creditor has withdrawn the right of the Grantor to collect the      Claims in accordance with Clause 6.1 hereof,      all amounts collected or received by the Grantor in respect of the Claims      will be received by the Grantor as mandatary for the Creditor and will be      remitted to the Creditor in identical form as  received. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.   | APPLICATION AND      IMPUTATION OF PROCEEDS |
|----------------|---------------------------------------------|

| 7.1.   | Notwithstanding      any provisions of Law to the contrary, the proceeds of enforcement of any      rights of the Creditor with respect to the Charged Property, including,      without limitation, proceeds of any sale of the Charged Property by the      Creditor and collections of any Claims, will be applied in accordance with      the Security Agreement. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.2.   | The      Creditor shall have the right to impute any amounts or proceeds received      by it from or for the account of the Grantor, whether pursuant to the      terms hereof or as a result of a judicial or other sale, or as an      inducement to grant mainlevée or discharge hereof or otherwise, against      any portion of the Obligations which it, in its sole discretion,      determines and from time to time to vary such determination, the whole      notwithstanding any pretended contrary imputation by the Grantor or by any      other party. |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.3.   | If      the proceeds of the realization of the Charged Property are insufficient      to pay the entire Obligations, the Grantor shall remain liable and      forthwith pay such deficiency to theCreditor. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | COSTS |
|----------------|-------|

| 8.1.   | In      addition to its obligation to pay and/or reimburse to the Creditor all      costs and expenses referred to herein (in general and under Clause 5.2.1 hereof in particular) and referred to in      the Security Agreement, the Grantor hereby agrees and undertakes to pay      and/or reimburse to the Creditor the full amount of the Costs upon the      Creditor’s simple demand therefore. |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 9.   | REMEDIES      CUMULATIVE |
|----------------|--------------------------|

| 9.1.   | The      different recourses of the Creditor hereunder are cumulative and not      alternative.  The rights and remedies of the Creditor hereunder      are in addition to every other right and remedy now or hereafter existing      in favour of the Creditor, whether by law or  otherwise. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.   | WAIVERS |
|-----------------|---------|

| 10.1.   | No      delay or failure on the part of the Creditor in exercising any right or      remedy hereunder shall affect such right or remedy, nor shall any single      or partial exercise hereof preclude any further exercise thereof or the      exercise of any other right or remedy.  Any waiver by the      Creditor of any of its rights or remedies hereunder will be valid only if      express and in writing. No waiver shall be deemed to be or constitute a      waiver of any other rights or remedies of the Creditor.  In no      event will the Creditor's acceptance, after the full payment of the      Obligations may have become due and payable, of any partial payment, be      deemed to alter or affect the Creditor's rights with respect to any      subsequent payment or default thereon.  Moreover, should the      Creditor grant or tolerate any extension or delay for payment or      performance of any obligations of the Grantor, such extension, delay,      indulgence or tolerance will not be deemed an acquiescence by the Creditor      in such default or waiver of any of the Creditor's rights and remedies      hereunder or in respect of any futuredefault. |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11.   | CREDITOR NOT      LIABLE |
|-----------------|--------------------------|

| 11.1.   | The      Creditor shall not be liable or accountable for any failure to seize,      collect, realize, dispose of, enforce or otherwise deal with the Charged      Property, shall not be bound to institute proceedings for any such      purposes or for the purpose of preserving any rights of the Creditor, the      Grantor or any other person, firm or corporation in respect of the Charged      Property and shall not be liable or responsible for any loss, cost or      damage whatsoever which may arise in respect of any such failure      including, without limitation, resulting from the negligence of the      Creditor or any of its officers, servants, agents, solicitors, attorneys,      Administrators, receivers or otherwise, except for the intentional or      gross fault of the Creditor.  Neither the Creditor nor its      officers, servants, agents, Administrators or receivers shall be liable by      reason of any entry into possession of the Charged Property or any part      thereof, to account as a mortgagee in possession, for anything except      actual receipts, for any loss on realization, for any act or omission for      which a mortgagee in possession might be liable, for any negligence in the      carrying on or occupation of the business or undertaking of the Grantor as      provided herein or for any loss, cost, damage or expense whatsoever which      may arise in respect of any such actions, omissions or negligence, except      for the actual bad faith, intentional or gross fault of the      Creditor. |
|-------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 12.   | NATURE OF OBLIGATIONS      AND SECURITY |
|-----------------|-----------------------------------------|

| 12.1.   | The      Security secures and will continue to secure the Obligations on a      continuing and fluctuating basis and is and will be valid notwithstanding      that the whole or any portion of the prestations in consideration of which      the Grantor has undertaken its obligations towards the Creditor have not      yet been received and notwithstanding that the whole or any portion of the      Obligations may not yet exist. |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12.2.   | The      Security shall remain in full force and effect (for the full Hypothec      Amount and additional hypothec amount) unless and until no amounts      whatsoever are owing (absolutely or contingently) under the Obligations      and the Creditor is not, in any manner whatsoever, obliged (absolutely or      contingently) to extend any credit under the Obligations. The Security      will not be extinguished, reduced, novated or otherwise affected by any      payments made to or amounts received by the Creditor, directly or      indirectly, from the Grantor or any other party or as a result of any      insurance indemnities arising from loss or damage to any of the Charged      Property or by reason of the collection of any  Claims. |
|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12.3.   | Should      the Obligations at any time be fully extinguished without an express      discharge of the Security, and should new Obligations arise, the Security      will secure the new Obligations in the same manner and to the same extent      as if there had never occurred an extinction of the old Obligations and      the Grantor is and will be obligated under the provisions      hereof.  The Grantor will be deemed to have obligated itself for      the new Obligations pursuant to the provisions hereof and the Security      will secure such new Obligations. |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.   | NO      NOVATION |
|-----------------|------------------|

| 13.1.   | Neither      the taking of any judgment nor the exercise of any of the rights available      to the Creditor hereunder shall operate to novate or otherwise extinguish      the liability of the Grantor to make payment of or satisfy the      Obligations. |
|-------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.   | OTHER      SECURITY |
|-----------------|---------------------|

| 14.1.   | The      Security is in addition to and not in substitution for nor deemed to be      substituted by any other security now or hereafter held by or for the      benefit of the Creditor and shall not be diminished or novated or      otherwise affected by any other security or any promissory note or other      evidence of indebtedness which the Creditor or any party for the benefit      of the Creditor may have or obtain from the Grantor or any other person,      nor shall any other security or note or evidence of indebtedness be      diminished or novated or otherwise affected  hereby. |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 15.   | GOVERNING      LAW |
|-----------------|--------------------|

| 15.1.   | This      agreement shall be governed by and interpreted in accordance with the laws      of the Province of Quebec and the laws of Canada in  force. |
|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| 16.   | INTERPRETATION |
|-----------------|----------------|

| 16.1.   | Any      word herein contained in the singular number will include the plural; any      word importing any gender will include the masculine, feminine and neuter      genders; any word importing a person will include a corporation, a      partnership and any other entity and vice-versa.  The headings      of this agreement are for convenience of reference only and shall not      affect in any manner any of the terms and conditions hereof or the      construction or interpretation of this  agreement. |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 17.   | OTHER      DOCUMENTS |
|-----------------|----------------------|

| 17.1.   | The      Grantor undertakes to perform all acts and enter into all documentation      which may be useful or necessary or required by the Creditor for purposes      of giving full force and effect to the provisions hereof or to perfect the      rights of the Creditor hereunder including, without limitation, the right      to recover and collect the Claims and to exercise all rights, recourses      and remedies as herein set forth. |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 18.   | SEVERABILITY |
|-----------------|--------------|

| 18.1.   | This      agreement shall not be considered as an indivisible whole and every      provision of this agreement is and shall be independent of the      other.  In the event that any part of this agreement is declared      invalid, illegal or unenforceable, then the remaining terms, clauses and      provisions of this agreement shall not be affected by such declaration and      all of the remaining clauses of this agreement shall remain valid, binding      and enforceable. |
|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 19.   | PARAMOUNTCY |
|-----------------|-------------|

| 19.1.   | In      the event of any inconsistency between the terms hereof and those      contained in the Security Agreement (except in respect of terms governing      the constitution of the Hypothec in virtue hereof), the terms of the      Security Agreement shall prevail. Nothing herein contained shall be      construed as limiting any rights of the Creditor or obligations of the      Grantor under the Security Agreement or any other agreements or documents      presently or in the future existing between the Creditor and the      Grantor. |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 20.   | NOTICE |
|-----------------|--------|

| 20.1.   | All      notices, requests and demands hereunder shall be given in accordance with      the terms of the SecurityAgreement. |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------|

----

| 21.   | COUNTERPARTS |
|-----------------|--------------|

| 21.1.   | These      presents may be executed in one or more counterparts and by facsimile,      each of which shall be deemed an original and all of which together shall      constitute one and the samedocument. |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 22.   | LANGUAGE |
|-----------------|----------|

| 22.1.   | The      parties acknowledge that they have required that this agreement and all      related documents be prepared in English./Les parties reconnaissent avoir      exigé que la présente convention et tous les documents connexes soient      rédigés en anglais. |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | VERSO      TECHNOLOGIES, INC.         |   |
|--------|--------|---------------------------------------|--------|
|   |   | Per:                                  |   |
|   |   |                                  |   |
|   |   | /s/      Martin D. Kidder             |   |
|   |   | Name:      Martin D. Kidder           |   |
|   |   | Title:      Chief Financial Officer   |   |
|   |   |                                  |   |
|   |   |                                  |   |
|   |   |                                  |   |
|   |   | VALENS U.S. SPV I,      LLC           |   |
|   |   | Per:                                  |   |
|   |   |                                  |   |
|   |   | /s/      Scott Bluestein              |   |
|   |   | Name:      Scott Bluestein            |   |
|   |   | Title:      Authorized Representative |   |