Convertible Promissory Note

Exhibit 10.2


NEITHER THIS NOTE NOR THE SECURITIES TO BE ACQUIRED UPON ITS CONVERSION HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. NO SALE OR DISPOSITION OF THIS NOTE OR THOSE SECURITIES MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.


THIS CONVERTIBLE PROMISSORY NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF A FINANCING AGREEMENT DATED SEPTEMBER 1, 1998 BY AND AMONG EAGLE EYE TECHNOLOGIES, INC. AND TEMPLATE SOFTWARE, INC.


EAGLE EYE TECHNOLOGIES, INC.


12% CONVERTIBLE PROMISSORY NOTE


DUE SEPTEMBER 1, 2000


$1,000,000.00 September 1, 1998
Herndon, Virginia


FOR VALUE RECEIVED, EAGLE EYE TECHNOLOGIES, INC., a VIRGINIA corporation (the "Company"), promises to pay to the order of TEMPLATE SOFTWARE, INC., a Virginia ------- corporation ("Template"), at 45365 Vintage Park Plaza, Dulles, Virginia 20166,
-------- or at such other place as the holder hereof may from time to time designate in writing, in lawful money of the United States of America, without defense, offset or counterclaim, the principal sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), together with interest as described below and in accordance with the following terms and provisions:


1. INTEREST RATE. The unpaid principal balance of this Convertible
------------- Promissory Note (as the same may be amended, modified, supplemented, renewed or replaced from time to time, the "Note") outstanding from time to time shall bear
---- interest at 12% per annum. Interest shall be calculated using a 360-day year, based upon the actual number of days for which the calculation is being made.


2. PAYMENTS. Unless this Note shall be converted in its entirety as
-------- hereinafter provided, this Note shall be repaid in one installment of combined principal and interest on September 1, 2000 (as extended from time to time, the "Maturity Date") and the entire unpaid principal balance of this Note, together ------------- with all accrued and unpaid interest, shall be due and payable in full on the Maturity Date.


3. PREPAYMENT. This Note may be prepaid in whole, but not in part, at any
---------- time without penalty.


4. CONVERSION.
----------


4.1. SURRENDER AND NOTICE BY TEMPLATE. Template shall have the right at
-------------------------------- any time prior to and including the Conversion Date (as defined below), at its option, to convert the outstanding principal amount of the Note (and all accrued interest) into 66,695 shares of fully-paid and non-assessable shares of the Company's Common Stock, without par value , following written notice to the Company at the address set forth in Section 14 below dated on or before the
---------- Conversion Date; it being expressly understood, that Template shall have the
----------------------------- right to convert this Note at all times prior to and including the Conversion Date regardless of whether, prior to or following such exercise, the Company makes available or tenders sufficient funds to pay the unpaid principal balance of this Note, together with all accrued and unpaid interest. For purposes of this Note, the "Conversion Date" shall be the day which is thirty (30) days following the date on which the Company notifies Template, in writing, (the
"Notification Date") that the aggregate amount of payments made by the Company - ------------------ to Template pursuant to the Software Development and Sales Agreement (and related license) of even date herewith exceeds the total amount of funds advanced pursuant to this Note.


4.2. RIGHTS UPON CONVERSION. As promptly as practicable after the
---------------------- notice of Template's intent to convert the Note into the Conversion Shares (as defined below), the Company shall deliver or cause to be delivered to Template certificates representing the number of fully paid and non-assessable shares of Common Stock or other securities into which the Note is converted in accordance with the provisions of this Section 4 (the "Conversion Shares"). Such
--------- ----------------- conversion shall be deemed to have been made at the close of business on the Conversion Date, so that the rights of Template with respect to the principal amount of the Note shall cease at such time and the person or persons entitled to receive the Conversion Shares shall be treated for all purposes as having become the record holder or holders of such shares at such time.


4.3. CONVERSION OF ACCRUED INTEREST. All accrued but unpaid interest
------------------------------- on the Note surrendered for conversion shall be converted to Conversion Shares along with the principal amount of the Note.


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4.4. ISSUANCE OF CERTIFICATES. The issuance of certificates for the
------------------------ Conversion Shares, shall be made without charge to Template for any tax in respect of the issuance of such certificates, and such certificates shall be issued in the name of, or in such names as may be directed by, Template.


5. RESERVATION OF SHARES. The Company covenants that it shall at all
--------------------- times reserve for issuance or delivery upon the conversion of the Note such number of shares of Common Stock as shall be required for issuance or delivery upon conversion of the Note.


6. NO DILUTION OR IMPAIRMENT. The Company covenants that it shall not by
------------------------- amendment of its Articles of Incorporation or through reorganization, consolidation, merger, dissolution, issuance or sale of securities, sale of assets, or by any other voluntary act or deed, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by it, but shall at all times in good faith take all action which may be necessary in order to protect the rights of Template against dilution. The number and kind of securities purchasable upon the exercise of this Note shall be subject to adjustment from time to time upon the happening of certain events, as follows:


(a) In case the Company shall at any time after the date of this Note (i) declare or pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing entity), the kind and number of Conversion Shares purchasable upon exercise of this Note immediately prior thereto shall be adjusted so that the holder of this Note shall be entitled to receive the kind and number of Conversion Shares or other securities of the Company which he would have owned or have been entitled to receive after the happening of any of the events described above, had this Note been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.


(b) In case the Company shall issue rights, options or warrants to all holders of its outstanding Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share which is lower at the record date than $14.99 per share, the number of Conversion Shares thereafter purchasable upon the exercise of this Note shall be determined by multiplying the number of Conversion Shares theretofore purchasable upon exercise of this Note by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on the record date for determining stockholders entitled to receive such rights,


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options or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the denominator shall be the number of shares of Common Stock outstanding on the record date for determining stockholders entitled to receive such rights, options or warrants plus the number of shares which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at $14.99 per share at such record date. Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective as of immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.


(c) In case the Company shall distribute to all holders of its shares of Common Stock evidences of its indebtedness or assets (including securities and cash dividends not paid out of funds legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Company or not made in the ordinary course of business), but excluding dividends or distributions referred to in paragraph (a) above or rights or options or warrants referred to in paragraph (b) above, then in each case the number of Conversion Shares thereafter purchasable upon the exercise of this Note shall be determined by multiplying the number of Conversion Shares theretofore purchasable upon the exercise of this Note by a fraction, of which the numerator shall be the then current market price per share of Common Stock on the date of such distribution, and of which the denominator shall be the then current market price per share of Common Stock, less the then fair value (as reasonably determined in good faith by the Board of Directors of the Company, whose reasonable determination shal ...