Exhibit 10.9

 

Baltimore, Maryland

   $ 3,000,000.00

October 22, 2004

      

 

SECOND AMENDED AND RESTATED

DEMAND PROMISSORY NOTE

 

FOR VALUE RECEIVED, the undersigned, AVATECH SOLUTIONS SUBSIDIARY, INC., a
Delaware corporation (“BORROWER”), promises to pay to the order of K BANK,
formerly known as KEY BANK AND TRUST (“LENDER”), at the LENDER’S offices at 7F
Gwynns Mill Court, Owings Mills, Maryland 21117, or at such other places as the
holder of this Promissory Note may from time to time designate, the principal
sum of Three Million Dollars ($3,000,000.00), or so much as may have been
advanced to the BORROWER as proceeds of the “LOAN,” as such term is defined and
described in the Loan And Security Agreement (“AGREEMENT”) dated September 11,
2003 the LENDER and the BORROWER, together with interest thereon at the rate or
rates hereafter specified until paid in full and any and all other sums which
may be owing to the holder of this Promissory Note by the BORROWER pursuant to
this Promissory Note. The following terms shall apply to this Promissory Note.

 

1. Interest Rate. Interest shall accrue on the unpaid principal balance of this
Promissory Note until paid in full at the higher of: (a) seven and one-half
percent (7.5%); or (b) the annual fluctuating rate of interest which shall equal
the rate obtained by adding two percent (2.0%) to the “PRIME RATE OF INTEREST”
of the LENDER in effect from time to time. The term “PRIME RATE OF INTEREST”
means the highest prime rate of interest on corporate loans at large U.S. Money
Center Banks as presently published by The Wall Street Journal (Eastern Edition)
under the heading or column entitled “Money Rates” or in a future substitute
heading, column, or subheading published by The Wall Street Journal, or
succeeding nationally recognized publication selected by the LENDER. Changes in
the applicable interest rate shall be made as of, and immediately upon, the
occurrence of changes in the PRIME RATE OF INTEREST.

 

2. Calculation Of Interest. Interest shall be calculated on the basis of a three
hundred sixty (360) days per year factor applied to the actual days on which
there exists an unpaid balance hereunder.

 

3. Repayment. Accrued and unpaid interest, plus any then due applicable late
payment charges or default interest, shall be paid in consecutive monthly
payments beginning on the fifteenth calendar day of the first month immediately
following the date of this Promissory Note and continuing on the fifteenth
calendar day of each succeeding month. ALL SUMS OUTSTANDING HEREUNDER, INCLUDING
PRINCIPAL, INTEREST, CHARGES AND FEES, ARE PAYABLE IN FULL ON THAT DAY OCCURRING
SIXTY (60) CALENDAR DAYS AFTER THE DEMAND OF THE HOLDER OF THIS PROMISSORY NOTE;
PROVIDED, HOWEVER, THAT IF THERE IS AN “EVENT OF DEFAULT” (AS SUCH TERM IS
DEFINED IN THE AGREEMENT) ALL SUMS OUTSTANDING HEREUNDER ARE PAYABLE IN FULL
IMMEDIATELY UPON THE DEMAND OF THE LENDER. DEMAND FOR PAYMENT IN FULL OF ALL
SUMS DUE HEREUNDER MAY BE MADE AT ANY TIME BY THE HOLDER OF THIS PROMISSORY
NOTE, WITHOUT PRIOR NOTICE AND WITHOUT REGARD AS TO WHETHER OR NOT A DEFAULT OR
VIOLATION OF ANY OF THE BORROWER’S OBLIGATIONS UNDER THIS PROMISSORY NOTE IS
THEN EXISTING OR CONTINUING.

 

4. Late Payment Charge. If any payment due hereunder, other than any principal
payment due on acceleration or demand, is not received by the holder within
fifteen (15)

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calendar days after its due date, the BORROWER shall pay a late payment charge
equal to five percent (5%) of the amount (excluding any principal due as a
result of acceleration or demand) then due and payable. The late payment charge
shall be due whether or not the holder declares this Promissory Note in default
or accelerates and demands immediate payment of the sums due hereunder. The
existence of the right by the holder to receive a late payment charge shall not
constitute a grace period or provide any right in the BORROWER to make a payment
other than on its due date.

 

5. Application Of Payments. All payments made hereunder shall be applied first
to late payment charges or other sums owed to the holder, next to accrued
interest, and then to principal, or in such other order or proportion as the
holder, in the holder’s sole discretion, may elect from time to time.

 

6. Prepayment. The BORROWER may prepay this Promissory Note in whole or in part
at any time without premium or additional interest. All prepayments made upon
the unpaid principal balance of this Promissory Note shall be applied to the
unpaid principal balance in the inverse order of scheduled maturities.

 

7. Rights Upon Occurrence Of An Event Of Default. Upon the occurrence of an
“EVENT OF DEFAULT,” as such term is defined in the AGREEMENT, the holder of this
Promissory Note shall have the following rights in addition to such other rights
and remedies as are authorized by the AGREEMENT or otherwise available to the
holder under applicable laws:

 

7.1. Acceleration. The holder of this Promissory Note, in the holder’s sole
discretion and without notice or demand, may accelerate and declare due and
immediately owing the entire unpaid principal balance plus accrued interest and
all other sums payable to the holder in accordance with the terms of any of the
“LOAN DOCUMENTS,” as such term is defined in the AGREEMENT.

 

7.2. Default Interest Rate. The holder of this Promissory Note, in the holder’s
sole discretion and without notice or demand, may raise the rate of interest
accruing on the unpaid principal balance by two (2) percentage points above the
rate of interest otherwise applicable, independent of whether the holder elects
to accelerate the unpaid principal balance as a result of such default, unless
prior to the imposition of the default rate of interest, the BORROWER cures such
event to the satisfaction of the holder hereof. Any individual waiver of the
holder’s right to impose the default rate of interest shall not be considered a
waiver of this section or any future right of the holder to impose the default
rate of interest pursuant to this Section.

 

7.3. Confession Of Judgment. The BORROWER authorizes any attorney admitted to
practice before any court of record in the United States to appear on its behalf
in any court in one or more proceedings, or before any clerk thereof or
prothonotary or other court official, and to confess judgment against the
BORROWER in favor of the holder of this Promissory Note in the full amount due
on this Promissory Note (including principal, accrued interest and any and all
charges, fees and costs) plus attorneys’ fees equal to fifteen percent (15%) of
the amount due, plus court costs, all without prior notice or opportunity of the
BORROWER for prior hearing. The BORROWER agrees and consents that venue and
jurisdiction shall be proper in the Circuit Court of any County of the State of
Maryland or of Baltimore City, Maryland, or in the United States District Court
for the District of Maryland. The BORROWER waives the benefit of any and every
statute, ordinance, or rule of court which may be lawfully waived conferring
upon it any right or privilege of exemption, homestead rights, stay of
execution, or supplementary proceedings, or other relief from the enforcement or
immediate

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enforcement of a judgment or related proceedings on a judgment. The authority
and power to appear for and enter judgment against the BORROWER shall not be
exhausted by one or more exercises thereof, or by any imperfect exercise
thereof, and shall not be extinguished by any judgment entered pursuant thereto;
such authority and power may be exercised on one or more occasions from time to
time, in the same or different jurisdictions, as often as the holder shall deem
necessary, convenient, or proper. In the event that the holder receives, as a
result of execution on a judgment confessed hereunder, attorneys’ fees which
exceed the actual legal fees incurred by the holder in connection with the
unpaid balance due to the holder pursuant to this Promissory Note, then, upon
full and final payment of all other sums due and owing to the holder pursuant to
this Promissory Note and payment of the actual attorneys’ fees incurred by the
holder, the holder shall remit such excess amount of attorneys’ fees to the
BORROWER.

 

8. Expenses Of Collection And Attorneys’ Fees. Should this Promissory Note be
referred to an attorney for collection, whether or not judgment has been
confessed or suit has been filed, the BORROWER shall pay all of the holder’s
reasonable costs, fees and expenses, including reasonable attorneys’ fees,
resulting from such referral.

 

9. Waiver Of Defenses. In the event any one or more holders of this Promissory
Note transfer this Promissory Note for value, the BORROWER agrees that all
subsequent holders of this Promissory Note who take for value and without actual
knowledge of a claim or defense of the BORROWER against a prior holder shall not
be subject to any claims or defenses which the BORROWER may have against a prior
holder, all of which are waived as to the subsequent holder, and that all such
subsequent holders shall have all rights of a holder in due course with respect
to the BORROWER even though the subsequent holder may not qualify, under
applicable law, absent this section, as a holder in due course. The BORROWER
shall retain all rights and claims which the BORROWER may have against prior
holders despite any such transfers and the waiver of defenses provided in this
section as to subsequent holders.

 

10. Waiver Of Protest. The BORROWER, and all other parties to this Promissory
Note, whether maker, indorser, or guarantor, waive presentment, notice of
dishonor and protest.

 

11. Extensions Of Maturity. All parties to this Promissory Note, whether maker,
indorser, or guarantor, agree that the maturity of this Promissory Note, or any
payment due hereunder, may be extended at any time or from time to time without
releasing, discharging, or affecting the liability of such party.

 

12. Manner And Method Of Payment. All payments called for in this Promissory
Note shall be made in lawful money of the United States of America. If made by
check, draft, or other payment instrument, such check, draft, or other payment
instrument shall represent immediately available funds. In the holder’s
discretion, any payment made by a check, draft, or other payment instrument
shall not be considered to have been made until such time as the funds
represented thereby have been collected by the holder. Should any payment date
fall on a non-banking day, the BORROWER shall make the payment on the next
succeeding banking day.

 

13. Maximum Rate Of Interest. Any provision contained in any of the LOAN
DOCUMENTS to the contrary notwithstanding, the holder of this Promissory Note
shall not be entitled to receive or collect, nor shall the BORROWER be obligated
to pay, interest hereunder in excess of the maximum rate of interest permitted
by the laws of any state determined to be applicable thereto or the laws of the
United States of America applicable to loans in such applicable state or states,
and if any provisions of this Promissory Note or of any of the other LOAN
DOCUMENTS shall ever be construed or held to permit or require the charging,

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collection or payment of any amount of interest in excess of that permitted by
such laws applicable thereto, the provisions of this paragraph shall control and
shall override any contrary or inconsistent provision. The intention of the
parties is to at all times conform strictly with all applicable usury laws, and
other applicable laws regulating the rates of interest which may be lawfully
charged upon the credit facility evidenced by this Promissory Note. The interest
to be paid in accordance with the terms of this Promissory Note shall be held
subject to reduction to the amount allowed under any usury or other laws as now
or hereafter construed by the courts having jurisdiction, and any sums of money
paid in excess of the interest rate allowed by law shall be applied in reduction
of the principal amounts owing under this Promissory Note.

 

14. Notices. Any notice or demand required or permitted by or in connection with
this Promissory Note shall be given in the manner specified in the AGREEMENT for
the giving of notices under the AGREEMENT. Notwithstanding anything to the
contrary, all notices and demands for payment from the holder actually received
in writing by the BORROWER shall be considered to be effective upon the receipt
thereof by the BORROWER regardless of the procedure or method utilized to
accomplish delivery thereof to the BORROWER.

 

15. Assignability. This Promissory Note may be assigned by the LENDER or any
holder at any time or from time to time without notice to or consent from the
BORROWER.

 

16. Binding Nature. This Promissory Note shall inure to the benefit of and be
enforceable by the LENDER and the LENDER’S successors and assigns and any other
person to whom the LENDER or any holder may grant an interest in the BORROWER’S
obligations hereunder, and shall be binding and enforceable against the BORROWER
and the BORROWER’S successors and assigns.

 

17. Invalidity Of Any Part. If any provision or part of any provision of this
Promissory Note shall for any reason be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Promissory Note and this Promissory Note shall be
construed as if such invalid, illegal or unenforceable provision or part thereof
had never been contained herein, but only to the extent of its invalidity,
illegality, or unenforceability.

 

18. Choice Of Law. The laws of the State of Maryland (excluding, however,
conflict of law principles) shall govern and be applied to determine all issues
relating to this Promissory Note and the rights and obligations of the parties
hereto, including the validity, construction, interpretation, and enforceability
of this Promissory Note and its various provisions and the consequences and
legal effect of all transactions and events which resulted in the issuance of
this Promissory Note or which occurred or were to occur as a direct or indirect
result of this Promissory Note having been executed.

 

19. Consent To Jurisdiction; Agreement As To Venue. The BORROWER irrevocably
consents to the non-exclusive jurisdiction of the courts of the State of
Maryland and of the United States District Court for the District of Maryland,
if a basis for federal jurisdiction exists. The BORROWER agrees that venue shall
be proper in any circuit court of the State of Maryland selected by the LENDER
or in the United States District Court for the District of Maryland if a basis
for federal jurisdiction exists and waives any right to object to the
maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of forum.

 

20. Unconditional Obligations. The BORROWER’S obligations under this Promissory
Note shall be the unconditional duty and obligation of the BORROWER and shall be

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independent of any rights of set-off, recoupment or counterclaim which the
BORROWER might otherwise have against the holder of this Promissory Note. The
BORROWER shall pay absolutely the payments of principal, interest, fees and
expenses required hereunder, free of any deductions and without abatement,
diminution or set-off.

 

21. Seal And Effective Date. This Promissory Note is an instrument executed
under seal and is to be considered effective and enforceable as of the date set
forth on the first page hereof, independent of the date of actual execution and
delivery.

 

22. Tense; Gender; Defined Terms; Section Headings. As used herein, the singular
includes the plural and the plural includes the singular. A reference to any
gender also applies to any other gender. Defined terms are entirely capitalized
throughout. The section headings are for convenience only and are not part of
this Promissory Note.

 

23. Actions Against Lender. Any action brought by the BORROWER against the
LENDER which is based, directly or indirectly, on this Promissory Note or any
matter in or related to this Promissory Note, including but not limited to the
making of the loan evidenced hereby or the administration or collection thereof,
shall be brought only in the courts of the State of Maryland. The BORROWER may
not file a counterclaim against the LENDER in a suit brought by the LENDER
against the BORROWER in a state other than the State of Maryland unless under
the rules of procedure of the court in which the LENDER brought the action the
counterclaim is mandatory, and not merely permissive, and will be considered
waived unless filed as a counterclaim in the action instituted by the LENDER.
The BORROWER agrees that any forum other than the State of Maryland is an
inconvenient forum and that a suit brought by the BORROWER against the LENDER in
a court of any state other than the State of Maryland should be forthwith
dismissed or transferred to a court located in the State of Maryland by that
Court.

 

24. Waiver Of Jury Trial. The BORROWER (by execution of this Promissory Note)
and the LENDER (by acceptance of this Promissory Note) agree that any suit,
action, or proceeding, whether claim or counterclaim, brought or instituted by
or against the BORROWER or the LENDER, or any successor or assign of the
BORROWER or the LENDER, on or with respect to this Promissory Note or any of the
other LOAN DOCUMENTS, or which in any way relates, directly or indirectly, to
the obligations of the BORROWER to the LENDER under this Promissory Note or any
of the other LOAN DOCUMENTS, or the dealings of the parties with respect
thereto, shall be tried only by a court and not by a jury. THE BORROWER AND THE
LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT,
ACTION, OR PROCEEDING.

 

25. Amendment and Restatement. This Promissory Note amends and restates in its
entirety the Amended and Restated Demand Promissory Note dated November     ,
2003 in the principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00) (“ORIGINAL NOTE”). This Promissory Note does not constitute a
novation of the BORROWER’S obligations under the ORIGINAL NOTE but an amendment
and restatement of such obligations and an increase in the maximum amount of
such obligations.

 

IN WITNESS WHEREOF, the BORROWER has duly executed this Promissory Note under
seal as of the date first above written.

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WITNESS/ATTEST:   THE BORROWER:     AVATECH SOLUTIONS SUBSIDIARY, INC.,     A
Delaware Corporation

/s/

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  By:  

/s/ Christopher D. Olander

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  (SEAL)     Name:   Christopher D. Olander         Title:  
Executive Vice President