DEMAND NOTE AND SECURITY AGREEMENT
$147,422.00 Alexandria, Virginia
April 10, 1997
FOR VALUE RECEIVED, the undersigned (the "Borrower")
promises to pay to the order of C.W. Gilluly, a resident of the
District of Columbia (the "Lender," which term shall include any
holder of this Note) without offset, at the Lender's domicile
located at 415 First Street, S.E., Washington, D.C. (or at such
other address as the Lender shall designate), upon demand, but in
no event later than April 9, 1998 (the "Date of Maturity") the
principal sum of One Hundred Forty Seven Thousand Four Hundred
and Twenty Two Dollars ($147,422.00) (the "Principal Sum"),
together with interest on the principal balance outstanding from
time to time at the rate provided in this Note.
INTEREST RATE. This Note shall bear interest on the
principal balance outstanding from time to time, from the date of
this Note until paid in full, at a fixed rate per annum equal, at
all times, to eleven-and-one-half (11.5%) Any amount of overdue
principal shall bear interest, payable on demand, for each day
until paid at a fixed rate per annum of fifteen percent (15.0%).
Interest shall be computed on the basis of a 360 day year,
counting the actual number of days elapsed.
PAYMENT OF INTEREST. Interest accrued shall be payable
beginning May 10, 1997, and on the same day of each consecutive
month thereafter until this Note is paid in full.
PREPAYMENT. The Borrower may pay the whole or any part
of the outstanding indebtedness evidenced by this Note at any
time without penalty by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment.
SECURITY AGREEMENT. To secure the due and punctual
payment of this Note and to secure the due and punctual
performance of all of the obligations of the Borrower contained
in this Note and in any other Loan Documents, the Borrower hereby
grants to the Lender a security interest in all of the Borrower's
right, title and interest in, to and under the Borrower's
accounts receivable now existing and in the future arising, and
all proceeds of those accounts (all of which are herein
collectively called the "Collateral").
REPRESENTATIONS AND WARRANTIES. The Borrower
represents and warrants that the execution, delivery and
performance of this Note and the creation of the security
interests provided for herein (i) are within the Borrower's
corporate power, (ii) have been duly authorized by all necessary
corporate action on behalf of the Borrower, (iii) are not in
contravention of any provision of the Borrower's articles of
incorporation or bylaws, (iv) do not violate any law or
regulation or any order or decree of any court or governmental
instrumentality applicable to the Borrower, (v) do not result in
the creation or imposition of any lien upon any property of the
Borrower other than in favor of the Lender and (vi) do not
require the consent or approval of any governmental body, agency
or official or other person other than those that have been
obtained. This Note has been duly executed and delivered by the
Borrower and constitutes the legal, valid and binding obligation
of the Borrower, enforceable against it in accordance with its
terms.
COVENANTS. The Borrower covenants and agrees with the
Lender that until the payment in full of this Note, the Borrower
will, promptly upon the Lender's request and at its expense,
cause all filings and recordings and other actions required by
the Lender to perfect the Lender's security interest in the
Collateral to have been completed; and
DEFAULT. Each of the following events or conditions
shall constitute a default ("Default") under this Note:
(a) the failure to make any payment of principal,
interest or any other amount due under this Note when such
payment is due;
(b) any default under the terms of any of the Loan
Documents, or the failure to perform or observe any warranty,
covenant, or other condition of any of the Loan Documents;
(c) the death, incompetence, merger, consolidation,
reorganization, dissolution, or termination of existence of any
Party; or the pledge, lease or other disposition of all or
substantially all of the assets of any Party;
(d) the determination by the Lender that any warranty,
representation, certificate, statement or information provided by
any Party or any Person on behalf of a Party to the Lender in
connection with any of the Loan Documents, or to induce the
Lender to make or extend or modify the terms of the loan
evidenced by this Note, was false or misleading, or that any
Party or any Person on behalf of a Party failed to provide or
disclose any facts or information, which failure rendered such
warranty, representation, certificate, statement or information
misleading;
(e) the inability of any Party to pay its debts as
they mature, the insolvency of any Party, the filing of a
petition by or against any Party under the provisions of any
bankruptcy, reorganization, arrangement, insolvency, liquidation
or similar law for relief of debtors, the appointment or
application for appointment of any receiver for any Party or the
property of any Party, the issuance or service of any attachment,
levy, garnishment, tax lien or similar process against any Party
or the property of any Party, the entry of a judgment against any
Party, or an assignment for the benefit of creditors by any
Party; or
(f) any indorsement or guaranty of the payment of this
Note shall cease for any reason to be in full force and effect,
or any indorser or guarantor shall contest the validity or
enforceability of the indorsement or guaranty or deny that it has
any further liability or obligation under the indorsement or
guaranty.
ACCELERATION. At the option of the Lender, upon the
occurrence of a Default as defined above, the full amount
remaining unpaid on this Note shall become immediately due and
payable without presentment, demand or notice of any kind; and
the Lender may exercise any or all remedies available to it under
applicable law and the Loan Documents. In addition, upon the
occurrence of a Default, in addition to all other remedies
available to the Lender, the Lender may exercise any and all of
the rights and remedies available upon default to a secured party
under the UCC. Any requirements for reasonable notice shall be
met if such notice is mailed, postage prepaid, to the Borrower at
the Borrower's address as indicated in this Note or at such other
address of which the Lender shall have received notice, at least
five (5) days prior to the time of sale, disposition or other
event or thing giving rise to the requirement of notice.
IMMEDIATELY AVAILABLE FUNDS. The principal of and
interest on this Note shall be payable in immediately available
funds in lawful money of the United States which shall be legal
tender for public and private debts at the time of payment. The
making of any payment in other than immediately available funds
which the Lender, at its option, elects to accept shall be
subject to collection, and interest shall continue to accrue
until the funds by which payment is made are available to the
Lender for its use.
WAIVER. The Borrower and any indorser of this Note (i)
waive presentment, demand, protest and notice of dishonor and
protest, (ii) waive the benefit of their homestead exemptions as
to this debt, (iii) waive any right which they may have to
require the Lender to proceed against any other Party or any
collateral given to secure the payment of this Note, and (iv)
agree that, without notice to the Borrower or any indorser and
without affecting the liability of the Borrower or any indorser,
the Lender, at any time or times, may grant extensions of the
time for any payment due on this Note or any other indulgence or
forbearance, release any Party from the obligation to make
payments on this Note, permit the renewal of this Note, or permit
the substitution, exchange or release of any security for this
Note.
LATE CHARGE; ATTORNEYS' FEES. If the Borrower fails to
pay any amount due under this Note within 10 days of the date
due, the Borrower shall pay to the Lender on demand a late charge
equal to five percent (5%) of the amount due. The Borrower shall
pay to the Lender on demand all costs incurred by the Lender, and
reasonable attorneys' fees, in the collection or enfocement of
this Note in the event of Default, whether or not suit is
brought. The Borrower stipulates that, to the extent evidence of
the reasonableness of the Lender's attorneys' fees may be
required, an affidavit of the Lender setting forth the Lender's
attorneys' fees shall be conclusive evidence of such
reasonableness, and the Borrower waives the right to a hearing or
other proceeding to establish such reasonableness.
DEFINITIONS. The uncapitalized terms "account",
"chattel paper", "contract right", "document", "bill of lading",
"document of title", "instrument", "inventory", "equipment"
"general intangible", "money" and "proceeds" have the meanings of
such terms as defined in the UCC, and the following terms, as
used in this Note, have the following meanings:
"Loan Documents" means this Note and any other
instrument or agreement which now or hereafter evidences,
governs, secures or guaranties the indebtedness evidenced by this
Note, including any loan agreement, deed of trust, security
agreement or guaranty, and all renewals, extensions and
modifications thereof and substitutions therefor.
"Party" means the Borrower, any indorser or
guarantor of this Note, any grantor or debtor giving security for
this Note, and any other obligor on any of the Loan Documents.
"Person" means an individual, a corporation, a
partnership, an association, a limited liability company, a trust
or any other entity or organization.
"Subsidiary" means any corporation or other entity
of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time
directly or indirectly owned by the Borrower.
"UCC" means at any time the Uniform Commercial
Code as the same may from time to time be in effect in the
Commonwealth of Virginia, provided that, if, by reason of
mandatory provisions of law, the validity or perfection of any
security interest granted herein is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than
Virginia then, as to the validity or perfection of such security
interest, "UCC" shall mean the Uniform Commercial Code in effect
in such other jurisdiction.
ADDITIONAL TERMS. The Borrower agrees to furnish the
Lender, in form acceptable to the Lender, a signed current
financial statement at any time upon request.
The proceeds of this Note shall be used to acquire or
carry on a business, professional, investment, or commercial
enterprise or activity.
The rights and remedies of the Lender under this Note,
the other Loan Documents, and applicable law shall be cumulative
and concurrent, and the exercise of any one or more of them shall
not preclude the simultaneous or later exercise by the Lender of
any or all such other rights or remedies. In the event any
provision of this Note is held to be invalid, illegal, or
unenforceable for any reason, then such provision only shall be
deemed null and void and shall not affect any other provisions of
this Note, which shall remain effective. No modification or
waiver of any provision of this Note shall be effective unless it
is in writing and signed by the Lender, and any such waiver shall
be effective only in the specific instance and for the specific
purpose for which it is given. The failure of the Lender to
exercise its option to accelerate this Note as provided above, or
to exercise any other option, right or remedy, in any one or more
instances, or the acceptance by the Lender of partial payments or
partial performance, shall not constitute a waiver of any
Default, or the right to exercise any option, right or remedy at
any time. The nouns, pronouns, and verbs used in this Note shall
be construed as being of such number and gender as the context
may require. This Note shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.
WITNESS the following signature and seal:
Comtex Scientific Corporation
By: /S/ CHARLES W. TERRY
Name: Charles W. Terry
Title: President
4900 Seminary Road, Suite 800
Alexandria, Virginia 22311