EXHIBIT 10.2
NOTE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE
HARBOR THEREFROM.
No. ______ [US $ ____,000]
TECHNEST HOLDINGS, INC.
8% NOTE DUE [____________ __, 200_]
THIS Note is one of a duly authorized issue of up to [$____0,000] of
TECHNEST HOLDINGS, INC., a corporation organized and existing under the laws of
the State of Nevada and located at 90 Grove Street, Ridgefield CT 06877 (the
"Company") designated as its 8% Convertible Notes.
FOR VALUE RECEIVED, the Company promises to pay to [_______________],
the registered holder hereof (the "Holder"), the principal sum of Three Thousand
and 00/100 Dollars (US $3,000) on [___________] and to pay interest on the
principal sum outstanding from time to time in arrears on [________________]
(the "Maturity Date"), at the rate of 8% per annum accruing from the date of
initial issuance of this Note (the "Issue Date"). Accrual of interest shall
commence on the first such business day to occur after the date hereof and shall
continue until payment in full of the principal sum has been made or duly
provided for. In the event of a default hereunder, the principal of, and
interest on, this Note is payable at the option of the Holder, in Common Shares
of the Company, $.001 par value per share ("Common Stock") as set forth below,
or in United States dollars, at the address last appearing on the Note Register
of the Company as designated in writing by the Holder from time to time. The
Company will pay the principal of and interest upon this Note on the Maturity
Date, less any amounts required by law to be deducted, to the registered holder
of this Note as of the tenth day prior to the Maturity Date and addressed to
such holder at the last address appearing on the Note Register. The forwarding
of such check shall constitute a payment of principal and interest hereunder and
shall satisfy and discharge the liability for principal and interest on this
Note to the extent of the sum represented by such check plus any amounts so
deducted.
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This Note is subject to the following additional provisions:
1. The Note is issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof, provided that the number of shares
to be issued upon conversion is a minimum of 3,000 (unless if at the time of
election to convert the number of shares of Common Stock issuable upon
conversion is less than 3,000). The Note is exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested by
the Holder surrendering the same. No service charge will be made for such
registration or transfer or exchange.
2. The Holder of this Note is entitled at any time, at its option,
subject to the following provisions, to convert all or a portion of the
principal amount of this Note into shares of Common Stock at a conversion price
for each share of Common Stock equal to the Current Market Price multiplied by
seventy-five percent (75%) (the "Conversion Price"). "Current Market Price"
means the average closing bid price of the Common Stock as reported by
Bloomberg, LP or, if not so reported, as reported on the over-the-counter
market, for the five (5) trading days ending on the trading day immediately
before the relevant Conversion Date (as defined below). The amount of shares
issuable pursuant to a conversion shall equal the principal amount (or portion
thereof) of the Note to be converted divided by the Conversion Price.
Conversion shall be effectuated by surrendering the Note to be
converted to the Company, accompanied by or preceded by facsimile or other
delivery to the Company of the form of conversion notice attached hereto as
Exhibit A, executed by the Holder evidencing such Holder's intention to convert
a specified portion hereof, and accompanied, if required by the Company, by
proper assignment hereof in blank. Interest accrued or accruing from the date of
issuance to the date of conversion shall, at the option of the Company, be paid
in cash or Common Stock upon conversion at the Conversion Price. No fractional
shares of Common Stock or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The date on which notice of conversion is given (the "Conversion
Date") shall be deemed to be the date on which the Holder faxes or otherwise
delivers the conversion notice ("Notice of Conversion"), substantially in the
form annexed hereto as Exhibit A, duly executed, to the Company. Facsimile
delivery of the Notice of Conversion shall be accepted by the Company at
facsimile number ( )_______ ATTN: PRESIDENT . Certificates representing Common
Stock upon conversion will be delivered within three (3) business days from the
date the Notice of Conversion is delivered to the Company.
3. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Note any amounts required to be withheld
under the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
4. This Note has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Note, the Company may require, prior to issuance of a new Note
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in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Note in such
other name does not and will not cause a violation of the Act or any applicable
state or foreign securities laws. Prior to due presentment for transfer of this
Note, the Company and any agent of the Company may treat the person in whose
name this Note is duly registered on the Company's Note Register as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Note be overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.
5. No provision of this Note shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Note at the time, place, and rate, and in the coin or
currency, herein prescribed. This Note is a direct obligation of the Company.
6. No recourse shall be had for the payment of the principal of, or the
interest on, this Note, or for any claim based hereon, or otherwise in respect
hereof, against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
7. The Holder of the Note, by acceptance hereof, agrees that this Note
is being acquired for investment and that such Holder will not offer, sell or
otherwise dispose of this Note or the shares of Common Stock issuable upon
conversion thereof except under circumstances which will not result in a
violation of the Act or any applicable state Blue Sky or foreign laws or similar
laws relating to the sale of securities.
8. This Note shall be governed by and construed in accordance with the
laws of the State of New York. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions.
9. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal
or interest on this Note and same shall continue for
a period of five (5) days; or
b. Any of the representations or warranties made by the
Company herein, in any certificate or financial or
other written statements heretofore or hereafter
furnished by the Company in connection with the
execution and delivery of this Note shall be false or
misleading in any material respect at the time made;
or
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c. The Company shall fail to perform or observe, in any
material respect, any other covenant, term,
provision, condition, agreement or obligation of any
Note and such failure shall continue uncured for a
period of thirty (30) days after written notice from
the Holder of such failure; or
d. [INTENTIONALLY LEFT BLANK]
e. The Company shall (1) admit in writing its inability
to pay its debts generally as they mature; (2) make
an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (3)
apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial
part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or
similar process in excess of Fifty Thousand ($50,000)
Dollars in the aggregate shall be entered or filed
against the Company or any of its properties or other
assets and shall remain unpaid, unvacated, unbonded
or unstayed for a period of sixty (60) days or in any
event later than five (5) days prior to the date of
any proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceeding; or
j. The Company shall have its Common Stock suspended or
delisted from an exchange or over-the-counter market
from trading for in excess of two trading days.
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Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider all
obligations under this Note immediately due and payable within five (5) days of
notice, without presentment, demand, protest or notice of any kinds, all of
which are hereby expressly waived, anything herein or in any note or other
instruments contained to the contrary notwithstanding, and the Holder may
immediately enforce any and all of the Holder's rights and remedies provided
herein or any other rights or remedies afforded by law.
10. The Holder may not convert this Note or receive shares of Common
Stock as payment of interest hereunder to the extent such conversion or receipt
of such interest payment would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of
the then issued and outstanding shares of Common Stock, including shares
issuable upon conversion of, and payment of interest on, the Notes held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Company the number of shares of Common Stock it may hold at the
time of a conversion hereunder, unless the conversion at issue would result in
the issuance of shares of Common Stock in excess of 9.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of Notes are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of Notes that
would result in the issuance of in excess of the permitted amount hereunder,
without regard to any other shares that the Holder or its affiliates may
beneficially own, the Company shall notify the Holder of this fact and shall
honor the conversion for the maximum principal amount permitted to be converted
on such Conversion Date and, at the option of the Holder, either retain any
principal amount tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess principal amount to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 61 days prior notice to
the Company. Other Holders shall be unaffected by any such waiver
11. Nothing contained in this Note shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated:
TECHNEST HOLDINGS INC.
By:________________________
___________________________
(Print Name)
___________________________
Director
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