Sr Subordinated Convertible Unsecured Prom. Note

THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.


SENIOR SUBORDINATED CONVERTIBLE UNSECURED NOTE
OF
HENCIE, INC.


$1,400,000 September 22, 2000


FOR VALUE RECEIVED, on or before November 21, 2001 ("Maturity Date"), Hencie, Inc., a Delaware corporation (hereinafter referred to as "Borrower" or "Company"), promises to pay to the order of Edge Technology Group, Inc., a Delaware corporation and a lender ("Lender" or "Holder") at the offices of Lender at 901 Yamato Road, Suite 175, Boca Raton, Florida 33431, the principal amount equal to ONE MILLION FOUR HUNDRED THOUSAND AND 00/100 DOLLARS ($1,400,000.00) (the "Principal Amount"), together with interest on the Principal Amount under this Senior Subordinated Convertible Unsecured Note ("Note") at a fixed rate per annum equal to the lesser of (a) the Maximum Rate (as hereinafter defined) or (b) eight percent (8%) (the "Contract Rate"), calculated on the basis of actual days elapsed but computed as if each year consisted of 360 days. The term "Maximum Rate," as used herein, shall mean, at the particular time in question, the maximum rate of interest which, under applicable law, may then be charged on this Note. If applicable law ceases to provide for such a maximum rate of interest, the Maximum Rate shall be equal to eighteen percent (18%) per annum. The outstanding principal balance of this Note, together with all accrued but unpaid interest, shall be due and payable on the Maturity Date.


The following is a statement of the rights of Holder and the conditions to which this Note is subject, and to which Holder, by acceptance of this Note, agrees:


1. Subordination.


This Note and all indebtedness represented hereby shall be expressly subordinate to: (i) any indebtedness of HCSI (as hereinafter defined) to Bank of America, N.A.; and (ii) any indebtedness of Borrower for money borrowed which has been afforded a security interest under applicable law (collectively, "Senior Indebtedness"). If there shall occur any receivership, insolvency, assignment for the benefit of creditors, bankruptcy, reorganization, or arrangements with creditors (whether or not pursuant to bankruptcy or other insolvency laws), sale of all or substantially all of the assets, dissolution, liquidation, or any other marshaling of the assets and liabilities of HCSI or the Company: (i) no amount shall be paid by HCSI or the Company in respect of the principal of, interest on or other amounts due with respect to this Note at the time outstanding, unless and until the principal of and interest on the Senior Indebtedness then outstanding shall be paid in full; and (ii) no claim or proof of claim shall be filed with HCSI or the Company by or on behalf of Holder of this Note which shall assert any right to receive any payments in respect of the principal of and interest on this Note except subject to the payment in full of the principal of and interest on all of the Senior Indebtedness then outstanding.


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Holder, by its acceptance hereof, shall be deemed to acknowledge and agree that the foregoing subordination provisions are, and are intended to be, an inducement to and a consideration of each holder of Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the creation of the indebtedness evidenced by this Note, and each such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and holding, or in continuing to hold, such Senior Indebtedness.


2. Penalty Interest.


Upon an Event of Default, including failure to pay upon final maturity, the Lender at its option, may, if permitted under applicable law, do one or both of the following: (a) increase the Contract Rate to eighteen percent (18%) per annum, and (b) add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the rate provided in this Note (including any increased Contract Rate).


3. Prepayment.


Borrower may from time to time after the expiration of the Conversion Period (as hereinafter defined) prepay all or any portion of the principal of this Note without premium or penalty. Unless otherwise agreed to in writing, or otherwise required by applicable law, payments will be applied first to unpaid accrued interest, then to principal, and any remaining amount to any unpaid collection costs, delinquency charges and other charges; provided, however, that upon any delinquency or other Event of Default, the Lender reserves the right to apply payments among principal, interest, delinquency charges, collection costs and other charges, at its sole discretion. All prepayments shall be applied to the indebtedness owing hereunder in such order and manner as the Lender may from time to time determine in its sole discretion. All payments and prepayments of principal of or interest on this Note shall be made in lawful money of the United States of America in immediately available funds, at the address of the Lender indicated above, or such other place as the holder of this Note shall designate in writing to Borrower. If any payment of principal of or interest on this Note shall become due on a day which is not a Business Day (as hereinafter defined), such payment shall be made on the next succeeding Business Day and any such extension of time shall be included in computing interest in connection with such payment. As used herein, the term "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which national banking associations are authorized to be closed. The books and records of the Lender shall be prima facie evidence of all outstanding principal of and accrued and unpaid interest on this Note.


4. Events of Default.


Borrower agrees that upon the occurrence of any one or more of the following events of default ("Event of Default"):


(a) failure of Borrower to pay any installment of principal of or
interest on this Note or on any other indebtedness of Borrower to the
Lender when due;


(b) the bankruptcy or insolvency of, the assignment for the
benefit of creditors by, or the appointment of a receiver for any of
the property of, or the liquidation, termination, dissolution or death
or legal incapacity of, any party liable for the payment of this Note,
whether as maker, endorser, guarantor, surety or otherwise; or


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(c) failure of Borrower to comply with the covenants contained in
Section 9 ("Negative Covenants") of this Note.

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