AMENDED & RESTATED
------------------
DEMAND PROMISSORY NOTE
----------------------
(OF THE ORIGINAL DEMAND PROMISSORY NOTE DATED
NOVEMBER 17, 1998 IN THE AMOUNT OF $1,650,000)
$1,400,000 ATLANTA, GEORGIA
OCTOBER 1ST, 1999
FOR VALUE RECEIVED, the undersigned (herein referred to as "Debtor")
promises to pay on demand to the order of Emergent Asset Based Lending, L.L.C.
(assignee of Emergent Business Capital Asset Based Lending, Inc fka Emergent
Financial Corp.), a Maryland Limited Liability Company (herein referred to as
"Secured Party"), at its office at 6100 Lake Forrest Drive, Suite 240, Atlanta,
GA 30328, or at such other place as the holder hereof may designate, the
principal sum of ONE MILLION FOUR HUNDRED THOUSAND DOLLARS ($ 1,400,000) or so
much thereof as shall have been advanced hereagainst and shall be outstanding,
together with interest, calculated on the basis of a 360-day year, on so much of
the principal balance of this Amended and Restated Demand Promissory Note
(herein "Note") as may be outstanding and unpaid from time to time, at the rate
per annum of TWO PERCENT (2.00%) above the Prime Rate as defined in that certain
Loan and Security Agreement executed by Debtor on NOVEMBER 17, 1998, as may have
been amended from time to time, (the applicable rate per annum at any given time
being hereinafter referred to as the "Interest Rate").
The Interest Rate shall be TEN AND ONE-QUARTER PERCENT (10.25%) unless and
until adjusted hereunder.
Unless demand for payment is earlier made, accrued interest shall be
payable monthly on the first day of the calendar month following the month in
which it accrues with payments thereof commencing on the first day of OCTOBER
1999, and continuing to be due on the same day of each succeeding calendar month
thereafter until principal and interest are paid in full.
For purposes of calculating interest hereunder, the Prime Rate shall be
adjusted daily. The Prime Rate as announced by the Bank ("Bank" as defined in
that certain Loan and Security Agreement executed by Debtor on NOVEMBER 17,
1998, as may have been amended from time to time) on each business day shall be
the Prime Rate for that day and all immediately succeeding non-business days of
Bank. In the event the Prime Rate as announced by Bank is discontinued as a
standard, the holder hereof shall a comparable reference rate as a substitute
thereof. Any overdue payment of principal or interest on this Note shall bear
interest at the interest rate until paid, but only to the extent that payment of
such interest on overdue principal or interest enforceable under applicable law.
The rate of interest charged to the undersigned hereunder shall in no event
be higher than that allowed by law. All payments received will applied in the
manner defined in that certain Loan and Security Agreement executed by Debtor on
the same date NOVEMBER 17, 1998, as may have been amended from time to time.
The undersigned entered into a Loan and Security Agreement and other
related agreements as of November 17, 1998, as may have been amended from time
to time, (the "Transaction Documents"), pursuant to which a Demand Promissory
Note was made and delivered to Secured Party for which this Amended and Restated
Demand Promissory Note modifies and replaces but in no way to be construed as a
novation of the indebtedness thereto. Any act of default by the undersigned
under any of the Transaction Documents shall constitute a default under this
Note. The undersigned and Secured Party contemplate that the original principal
sum evidenced by this Note may be reduced from time to time and that additional
loans may be made by Secured Party to the undersigned in the future. Such
additional loan, as so designated, shall be evidenced by this Note and subject
to its terms; provided, however, that the principal amount evidenced by this
Note shall not exceed the principal amount shown above.
If any proceedings be instituted by or against Debtor alleging that Debtor
is insolvent, unable to pay his debts as they mature, or not generally paying
his debts as such debts become due; or if any proceedings be instituted by or
against Debtor under the Federal Bankruptcy Code or any successor statute; or if
any proceeding be instituted seeking the appointment of a receiver or trustee
for all of any portion of Debtor's property; or if any proceedings
<PAGE>
affecting the rights of creditors generally be instituted by or against Debtor,
this Note, without demand or notice of any kind, immediately shall become due
and payable. This paragraph is in addition to and in no way is a limitation upon
the other rights of Secured Party under this Note, any other instrument, or any
of the Transaction Documents between Secured Party and Debtor, or applicable
law.
In case this Note is collected by or through an attorney-at-law, all costs
of collection, including reasonable attorney's fees, shall be paid by Debtor.
Time is of essence.
Demand, presentment, notice, notice of demand, notice of payment, protest
and notice of dishonor are hereby waived by each and every maker, guarantor,
surety and other person or entity primarily or secondarily liable on this Note.
Secured Party shall not be deemed to waive any of its rights unless such
waiver be in writing and signed by Secured Party. No delay or omission by
Secured Party in exercising any of its rights shall operate as a waiver of such
rights and a waiver in writing on one occasion shall not be construed as a
consent to or a waiver of any right or remedy on any future occasion.
This note shall be governed by an construed and enforced in accordance with
the laws of the State of Georgia. Wherever possible, each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision of this Note. The word "Secured Party" as used herein shall
include transferees, successors and assigns of Secured Party, and all rights of
Secured Party hereunder shall inure to the benefit of its transferees,
successors and assigns. All obligations of Debtor shall bind his heirs, legal
representatives, successors and assigns.
Words importing the singular number hereunder shall include the plural
number and vice versa, and any pronoun used herein shall be deemed to cover all
genders. Without limiting the generality of the foregoing, should more than one
person execute this Note as maker, the words "Debtor," "he," "his," and "its" as
used herein shall include all such persons collectively and each person
individually, and each maker shall be jointly and severally liable hereunder.
"Person" as used herein means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated association or
government or any agency or political subdivision thereof.
IN WITNESS WHEREOF, the undersigned has caused this Amended and
Restated Demand Promissory Note to be duly executed and its seal affixed by its
duly authorized officers, or has signed and sealed this Note as the case may be,
and has delivered this Note to Secured Party, the day and year first written
above.
Debtor: COMPUTONE CORPORATION
BY: /s/ Perry Pickerign
-------------------
PERRY PICKERIGN, PRESIDENT
ATTEST: /s/ Greg Roseberrry
---------------------
GREG ROSEBERRY, CORPORATE SECRETARY
(CORPORATE SEAL)
<PAGE>
AMENDMENT #1
TO
THE LOAN AND SECURITY AGREEMENT AND RELATED FINANCING DOCUMENTS DATED NOVEMBER
17, 1998 BETWEEN EMERGENT BUSINESS CAPITAL ASSET BASED LENDING, INC. FKA.
EMERGENT FINANCIAL CORP. AND ASSIGNED TO EMERGENT ASSET BASED LENDING, L.L.C. AS
OF 12/03/98 (HEREIN REFERRED TO AS "SECURED PARTY") AND COMPUTONE CORPORATION
(HEREIN REFERRED TO AS "DEBTOR")
For and in consideration of the premises, the mutual agreements, warranties and
representations herein made, and other and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Debtor and Secured Party
agree to as follows; that the Loan and Security Agreement, Shareholders Consent,
Certificate of Board Resolutions and Incumbency, Disclosure Statement Regarding
Interest and Other Charges, Demand Promissory Note executed November 17, 1998
and other related Transaction Documents as defined in that certain Loan and
Security Agreement between Debtor and Secured Party dated November 17, 1998 as
may have been amended from time to time are herein amended as follows:
1. As evidenced by the Loan and Security Agreement dated November 17, 1998,
between Debtor and Secured Party, the Schedule to the Loan and Security
Agreement dated November 17, 1998 is herein amended and restated in
accordance to the Amended and Restated Schedule #1 to the Loan and Security
Agreement executed in conjunction with this Amendment #1 and made a part of
this document as Exhibit "A".
2. The Demand Promissory Note shall be amended and restated in its entirety by
an Amended and Restated Demand Promissory Note. The Amended and Restated
Demand Promissory Note shall be in the amount of $1,400,000.
3. The Amendment to the Loan and Security Agreement, the Amended and Restated
Schedule to the Loan and Security Agreement and/or the Amended and Restated
Demand Promissory Notes represents modifications to the agreements and
shall not be construed as a novation.
DEBTOR ACKNOWLEDGES THAT IT HAS READ THIS AMENDMENT TO THE LOAN AND SECURITY
AGREEMENT ALONG WITH THE AMENDED AND RESTATED SCHEDULE #1, ATTACHED HERETO AS
EXHIBIT "A", AND IS AWARE OF ALL OF THE TERMS THEREOF, THAT THEY MERELY
CONSTITUTE AN OFFER BY DEBTOR TO SECURED PARTY UNTIL AND UNLESS ACCEPTED BY
SECURED PARTY IN WRITING AT ITS PRINCIPAL PLACE OF BUSINESS.
ACCEPTED THIS 1st DAY OF October, 1999.
--- -------
ATTEST: DEBTOR: COMPUTONE CORPORATION
/s/ Greg Roseberry /s/ Perry Pickerign
------------------ --------------------------
Perry Pickerign, PRESIDENT
Accepted and agreed to this 1st day of October, 1999
--- -------
Witness: Emergent Asset Based Lending, L.L.C.,
assignee of Emergent Business Capital Asset
Based Lending, Inc. fka. Emergent
Financial Corp.
/s/ Charlie Liles /s/ Connie Warne
-------------------------
Connie Warne, Senior Manager
<PAGE>
EXHIBIT "A"
#1 AMENDED AND RESTATED SCHEDULE
TO THE LOAN AND SECURITY AGREEMENT DATED NOVEMBER 17, 1998
This Amended and Restated Schedule is a part of a Loan and Security
Agreement, dated November 17, 1998, between Computone Corporation and Emergent
Asset Based Lending, L.L.C., Assignee of EMERGENT BUSINESS CAPITAL ASSET BASED
LENDING, INC. fka Emergent Financial Corp. and succeeds the original Schedule
dated November 17, 1998 and any amended Schedules heretofore. The amended
schedule items covered under this Amended and Restated Schedule pertains to
Schedule Item #1(A) & (B); 19 & 35.
1. Borrowing Capacity (SS 1.1(c))
------------------------------
Borrowing Capacity at any time shall be the net amount determined by taking
the lesser of the following amounts:
(A) $ 1,400,000
or
(B) the amount equal to the sum of:
(i) 80% of the Receivable Borrowing Base;
and (ii) the lessor of $200,000.00 or the amount of the Inventory
Borrowing Base and subtracting from the lessor of (A) or (B)
above, the sum of (a) banker's acceptances, plus (b) letters of
guaranty, plus (c) standby letters of credit.
2. Inventory Borrowing Base Percentages (SS 1.1(r))
------------------------------------------------
The following percentages of dollar value (calculated at the lower of
actual cost or market value) are applicable to the following categories of
Eligible Inventory:
( X ) FINISHED GOODS, TO THE EXTENT OF 20.00%;
( X ) RAW MATERIALS, TO THE EXTENT OF 20.00 %;
(n/a) work in process to the extent of ___%.
3. Cash Discount (SS 1.1(g) & 10.3)
--------------------------------
MAXIMUM CASH DISCOUNT OF 2.00%, 10 DAYS
4. Receivable--Age (SS 1.1(o)(i))
------------------------------
90 DAYS AFTER ( X ) INVOICE DATE
( ) due date (not to exceed ___ days
after invoice date) shown on the
Invoice evidencing the applicable
Receivable.
5. Receivable Disqualification Percentage (SS 1.1(o) (vi))
-------------------------------------------------------
25% OR MORE
6. Permissible Foreign Account Debtors (SS 1.1(o)(vii))
----------------------------------------------------
NONE
7. Inventory Accounting (SS 1.1(r))
--------------------------------
( X ) FIRST-IN, FIRST-OUT (FIFO)
( ) Last-in, first-out (LIFO)
( ) Other as specified below
8. Payment Account (SS 1.1(t))
---------------------------
THERE IS ( X ) A PAYMENT ACCOUNT
is not ( )
Name and address of depository bank: NationsBank, N.A.
9. State of Incorporation (SS 4.2(b), 5.1)
---------------------------------------
Debtor: DELAWARE
Consolidated Subsidiary N/A
10. Location(s) of Inventory and Equipment (SS 5.4(c), 5.7, 5.8(a) & 11.1)
----------------------------------------------------------------------
Inventory Locations: 1060 WINDWARD RIDGE PARKWAY,
SUITE 100, ALPHARETTA, GA 30005
Equipment Locations (including names and addresses of owners or real
property and mortgages):
1060 WINDWARD RIDGE PARKWAY,
SUITE 100, ALPHARETTA, GA 30005
11. Permitted Encumbrances (SS 5.5(a), 5.5(c) & 11.3)
-------------------------------------------------
NONE, OTHER THAN (I) THAT OF SECURED PARTY, (II) ANY PURCHASE MONEY
SECURITY INTEREST UNDER CAPITAL EXPENDITURES ALLOWANCE AS OUTLINED UNDER
SCHEDULE ITEM #31 AS IT PERTAINS TO SPECIFIC EQUIPMENT ONLY, AND (III)
THOSE AGAINST SPECIFIC EQUIPMENT IN EXISTENCE AT THE TIME OF THE CLOSING OF
THIS LOAN AND SECURITY AGREEMENT AS DISCLOSED IN EXHIBIT A-1 TO THIS
SCHEDULE TO THE LOAN AND SECURITY AGREEMENT.
12. Business Records Location (SS 5.7(a), 5.7(c) & 11.1)
----------------------------------------------------
1060 WINDWARD RIDGE PARKWAY, SUITE 100, ALPHARETTA, GA 30005
13. Trademarks and Patents (SS 5.17)
--------------------------------
DEBTOR: NONE
Consolidated Subsidiary: N/A
14. Margin Stock: (SS 5.22)
---------------------------
NONE
15. Labor Contracts (SS 5.24)
-------------------------
DEBTOR: NONE
Consolidated Subsidiary: N/A
16. Authorized Shares (SS 5.27)
---------------------------
No. of authorized common shares: ________
Par Value of common shares: $.01
No. of issued and outstanding shares: 7,455,044
17. Required Documents (SS 6.1, 6.4, 6.7, 9.2(b)
--------------------------------------------
<TABLE>
<CAPTION>
Check if Required Frequency Due
----------------- -------------
<S> <C> <C>
Borrowing Base Certificate ( X ) Daily
Receivable Schedule (Aging) ( X ) Monthly, for the end of the
month, due by the 10th of
the following month.
Inventory Reports
(a) Value Reports ( X ) Upon Request
(b) Periodic Summary Reports ( X ) Upon Request
(c) Dispute Report ( X ) Upon Request
Credits & Extension Reports ( X ) Same as Receivable Aging
Copies of billing documents relating to the Receivables ( X ) Upon Request
List of names and addresses of Account Debtors ( X ) At closing and upon request.
Reconciliation report, in form satisfactory to ( X ) Monthly, for the end of the
Secured Party, showing all Receivables, collections, month, due by the 10th of
payments, Credits, & Extensions since the proceeding report the following month.
Payable aging report, showing the amounts due and ( X ) Monthly, for the end of the
owing on all of Debtor's payable according to Debtor's month, due by the 10th of
records as of the close of such periods as shall be the following month.
specified by Secured Party.
Payroll tax returns ( X ) Quarterly
Payroll tax calculations and deposit information ( X ) Monthly
Invoice and Credit registers ( X ) Daily or with each Advance
Request
</TABLE>
18. Interest Rate (SS 8.2)
----------------------
TWO PERCENT (2.00% ) PLUS THE GREATER OF (I) THE PRIME RATE OR (II) SEVEN
AND ONE-HALF PERCENT ( 7.50%)
19. Fees and Due Dates (SS 8.3)
---------------------------
<TABLE>
<CAPTION>
Type Amount Due Date(s)
---- ------ -----------
<S> <C> <C>
Monthly Service Fee The greater of .45% of the Due and payable on the first day of each
Average Daily Balance of the month for the preceding month.
loan outstanding
Facility Fee 1.00% of the total credit facility At renewal date and at each anniversary
defined under Schedule Item #1(A) date of the Loan and Security Agreement
in the event of renewal.
Overline Fee .50% per daily occurrence of Due and payable on the first day of each
the excess of indebtedness over month for the preceding month.
the borrowing capacity defined
in Schedule Item 1(A).
Overcollateral Fee .50% per daily occurrence of Due and payable on the first day of each month
the excess of indebtedness over for the preceding month.
the borrowing capacity defined
in Schedule Item 1(A).
Audit Fee $500 per day plus out of Due on the first day of each calendar quarter.
pocket travel expenses.
</TABLE>
20. Uncollected Funds Adjustment (SS 8.6)
-------------------------------------
( ) ________________ calendar days; or
( X ) THREE (3) BUSINESS DAYS .
( ) for each Item, the number of days estimated by Secured party as
necessary for collection of funds.
21. Additional Covenants (SS 10 & 11)
---------------------------------
22. Annual Financial Statements -- Timing (SS 10.1(a))
--------------------------------------------------
23. Annual Financial Statements -- Form (SS 10.1(a))
------------------------------------------------
The following prepared by independent certified public accountants
satisfactory to Secured Party
( ) a compilation
( ) a review or
( X ) AUDITED
24. Interim Financial Statements (SS 10.1(b)
----------------------------------------
25. Terms of Sale (SS 10.3)
-----------------------
Due dates of no more than 30 calendar days from date of Invoice, except in
regard to transactions specified below under "Datings."
Datings: NONE
26. Net Working Capital; Consolidated Tangible Net Worth (SS 10.13)
---------------------------------------------------------------
Minimum net working capital NOT TO DETERIORATE MORE THAN
$100,000 FROM COMPUTED LEVELS
FROM THE 4/2/99 AUDITED
BALANCE SHEET.
Minimum consolidated tangible net worth: NOT TO DETERIORATE MORE THAN
$100,000 FROM COMPUTED LEVELS
FROM THE 4/2/99 AUDITED
BALANCE SHEET.
27. Permitted Borrowing (SS 11.2)
-----------------------------
Debtor: NONE, OTHER THAN (I) THE INDEBTEDNESS OWED TO SECURED PARTY; (II)
THE PERMITTED PURCHASE MONEY SECURITY INTEREST UNDER THE CAPITAL
EXPENDITURES ALLOWED PURSUANT TO SCHEDULE ON ITEM #31; AND (III) THOSE IN
EXISTENCE AT THE TIME OF THE CLOSING OF THIS LOAN AND SECURITY AGREEMENT AS
DISCLOSED IN EXHIBIT A-2 TO THIS SCHEDULE TO THE LOAN AND SECURITY
AGREEMENT.
Consolidated Subsidiary: N/A
28. Permitted Investments and Advances (SS 11.9(d))
-----------------------------------------------
Debtor: NONE
Consolidated Subsidiary: N/A
29. Permitted Guaranties (SS 5.18, 11.10)
-------------------------------------
Debtor: NONE
Consolidated Subsidiary: N/A
30. Maximum Annual Lease Rentals (SS 11.11)
---------------------------------------
Debtor: NONE, EXCEPT FOR NEW INDEBTEDNESS ALLOWED IN CONJUNCTION WITH
PERMITTED CAPITAL EXPENDITURES UNDER SCHEDULE ITEM #31.
Consolidated Subsidiary: N/A
31. Permitted Capital Expenditures (SS 11.12)
-----------------------------------------
Debtor: $125,000 ANNUALLY
Consolidated Subsidiary: N/A
32. Maximum Aggregate Compensation (SS 11.13(a))
--------------------------------------------
Debtor: $
Consolidated Subsidiary: $
33. Maximum Annual Compensation for Certain Individuals (SS 11.13(b))
-----------------------------------------------------------------
Name Amount
Debtor:
Consolidated Subsidiary:
<PAGE>
34. State (SS 1.1(ff))
------------------
GEORGIA
35. Initial Term and Renewal Term (SS 14.13)
----------------------------------------
Initial Term: ONE YEAR
Renewal Term: ANNUALLY
36. Percentage of Stock Ownership of Consolidated Subsidiaries (SS 5.25, SS
---------------------------------------------------------------------------
10.24))
-------
Consolidated Subsidiary Debtor's Percentage of ownership
37. Prepayment Premium (SS 14.13)
-----------------------------
1.00% of the Borrowing Capacity defined in Schedule 1.
38. Other Provisions (SS 14.9)
--------------------------
- Reference to Section 1.1 of Loan and Security Agreement: "Obligations"
shall mean and include all loans, advances, debts, liabilities, obligations
and covenants and duties owing, arising, due or payable from Debtor to
Secured Party of any kind or nature, present of future, whether or not
evidenced by any note, guaranty or other instrument, whether arising under
this Agreement, the Demand Promissory Note or under the other Transaction
Documents or otherwise, whether direct to indirect (including those
acquired by assignment), absolute or contingent, primary or secondary, due
or to become due, now existing or hereafter arising and however acquired.
The term includes, without limitation, all interest, charges, expenses,
fees, attorneys' and paralegals' fees and any other sums chargeable to
Debtor by Secured Party under this Agreement or the other Transaction
Documents.
- Each account debtor will be notified to direct payment to Secured
Party. Secured Party will review the notification requirement and may allow
for a lockbox arrangement should Debtor be successful in raising additional
equity. The requirement will be based on actual cash infusion of $1,500,000
in equity; provided that no events of default are present in the credit
facility at that time.
- Reference is made to Section 14.13 (b) - This paragraph is amended to
read "Prepayment Premium. If Debtor pays in full all or substantially all
of the principal balance of Advances prior to the end of the initial term
or any renewal term of this Agreement as set forth in Item 37 of the
Schedule, other than temporarily from funds internally generated in the
ordinary course of business, at the time of any such payment Debtor shall
also pay to Secured Party the prepayment premium set forth in Item 37 of
the Schedule."
- Reference is made to Section 12.1(g) "Events of Default - Judgements"
The occurrence of an event of Default will take place should any single
judgement against Debtor be granted in excess of $100,000, or collectively
judgements in excess of $250,000, in any of the pending suites described
herein.
- Capella Worldwide Networking, Inc. versus Debtor
- Comercia Bank versus Debtor
- United States Security and Exchange Commission versus Debtor
- Marshall Industries, Inc. versus Debtor
- Edward T. Lack, Jr. versus Debtor
<PAGE>
39. Bank or Financial Institution (SS 1.1(w))
-----------------------------------------
NationsBank, N.A.
The undersigned have executed this Schedule on the 1st DAY OF October , 1999.
Secured Party: EMERGENT ASSET BASED Debtor: COMPUTONE CORPORATION
LENDING, LLC
By: /s/ Connie Warne By: /s/ Perry Pickerign
--------------------------------- -------------------
PERRY PICKERIGN, PRESIDENT
Attest: /s/ Charlie Liles Attest: /s/ Greg Roseberry
---------------------------- ------------------
GREG ROSEBERRY,
ASST. CORPORATE SECRETARY
(Corporate Seal) (Corporate Seal)
