EX-4.1 SECURED NON-CONVERTIBLE TRANCHE A REV. NOTE



 





Exhibit 4.1




SECURED NON-CONVERTIBLE TRANCHE A 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 Eight Million
Dollars ($8,000,000), or, if different, the aggregate principal amount of all Tranche A 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.



     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 A Export-Related
Revolving Note (this “Note”):



ARTICLE I

CONTRACT RATE




     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 the “prime rate” published in The Wall Street Journal from time to time (the
“Prime Rate”), plus two percent (2.0%) (the “Contract Rate”). The Contract Rate shall be increased
or decreased as the case may be for each increase or decrease in the Prime Rate in an amount equal
to such increase or decrease in the Prime Rate; each change to be effective as of the day of the
change in the Prime Rate. The Contract Rate shall not at any time be less than nine percent
(9.0%). 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 (other than for increases or decreases in the Prime
Rate which shall be calculated and become effective in accordance with the terms of Section 1.1)
until the Maturity Date (each a “Determination Date”).



Secured Non-Convertible Revolving Note



 









 





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.



     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, with written verification of receipt.
All communications shall be sent to the respective Company at the address provided for such Company
in the Security Agreement executed in connection herewith, and to the Holder at



      



					
	Secured Non-Convertible Revolving Note
	 	 
	 	 






2









 





the address provided in the Security Agreement for the Holder, with a copy to John E. Tucker,
Esq., 825 Third Avenue, 14th Floor, New York, New York 10022, facsimile number (212)
541-4434, or at such other address as the respective Company or the Holder may designate by ten
days advance written notice to the other parties hereto.




     3.4 Amendment Provision. The term “Note” and all references thereto, as used
throughout this instrument, shall mean this instrument as originally executed, or if later amended
or supplemented, then as so amended or supplemented, and any successor instrument as such successor
instrument may be amended or supplemented.



     3.5 Assignability. This Note shall be binding upon each Company and its successors
and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may
be assigned by the Holder in accordance with the requirements of the Security Agreement. No
Company may assign any of its obligations under this Note without the prior written consent of the
Holder, any such purported assignment without such consent being null and void.



     3.6 Cost of Collection. In case of any Event of Default under this Note, the
Companies shall, jointly and severally, pay the Holder the Holder’s reasonable costs of collection,
including reasonable attorneys’ fees.



     3.7 Governing Law, Jurisdiction and Waiver of Jury Trial.



          (a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.




          (b) EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND,
PERTAINING TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY
AGREEMENTS; PROVIDED, THAT, EACH COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW
YORK; AND FURTHER PROVIDED, THAT, NOTHING IN THIS NOTE SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. EACH COMPANY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON 




           




					
	Secured Non-Convertible Revolving Note
	 	 
	 	 






3









 




CONVENIENS. EACH COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT
AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE
ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID




          (c) EACH COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE HOLDER, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY AGREEMENT, ANY
OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.




     3.8 Severability. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision of this Note.



     3.9 Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum
rate shall be credited against amounts owed by the Companies to the Holder and thus refunded to the
Companies.



     3.10 Security Interest. The Holder has been granted a security interest (i) in
certain assets of the Companies as more fully described in the Security Agreement and (ii) pursuant
to the Stock Pledge Agreement dated as of the date hereof.



     3.11 Construction. Each party acknowledges that its legal counsel participated in the
preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities
are to be resolved against the drafting party shall not be applied in the interpretation of this
Note to favor any party against the other.



     3.12 Registered Obligation. This Note is intended to be a registered obligation within
the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Companies (or their agent)
shall register the Note (and thereafter shall maintain such registration) as to both principal and
any stated interest. Notwithstanding any document, instrument or agreement relating to this



      



					
	Secured Non-Convertible Revolving Note
	 	 
	 	 






4









 




Note to the contrary, transfer of this Note (or the right to any payments of principal or
stated interest thereunder) may only be effected by (i) surrender of this Note and either the
reissuance by the Companies of this Note to the new holder or the issuance by the Companies of a
new instrument to the new holder, or (ii) transfer through a book entry system maintained by the
Companies (or their agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).




[Balance of page intentionally left blank; signature page follows]




 




					
	Secured Non-Convertible Revolving Note
	 	 
	 	 






5









 





     IN WITNESS WHEREOF, each Company has caused this Secured Non-Convertible Revolving Note to be
signed in its name effective as of this 20th day of September 2006.



	 	 	 	 	 
	 	VERSO TECHNOLOGIES, INC.

 	 
	 	By:  	/s/
Juliet M. Reising	 
	 	 	Name:  	Juliet M. Reising	 
	 	 	Title:  	EVP & CFO	 
	 



	 	 	 
	WITNESS:
/s/ Angie W. Grant

	 	 
	 	 	 





	 	 	 	 	 
	 	TELEMATE.NET SOFTWARE, INC.

 	 
	 	By:  	/s/
Juliet M. Reising	 
	 	 	Name:  	Juliet M. Reising	 
	 	 	Title:  	VP	 
	 



	 	 	 
	WITNESS:
/s/ Angie W. Grant

	 	 
	 	 	 





	 	 	 	 	 
	 	VERSO VERILINK, LLC

 	 
	 	By:  	/s/
Juliet M. Reising	 
	 	 	Name:  	Juliet M. Reising	 
	 	 	Title:  	VP	 
	 



	 	 	 
	WITNESS:
/s/ Angie W. Grant

	 	 
	 	 	 
	 
	 	 





					
	Secured Non-Convertible Revolving Note
	 	
	 	 






6 









 





EXHIBIT A




OTHER COMPANIES




TELEMATE.NET SOFTWARE, INC.




VERSO VERILINK, LLC




 




			
	Secured Non-Convertible Revolving Note