Exhibit 10.2

 

CONVERTIBLE PROMISSORY NOTE

 

THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY
TO THE PARENT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF
A NO ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

 

Solidus Networks, Inc.

 

$2,500,000.00

  March 22, 2004     Atlanta, GA

 

Solidus Networks, Inc., a Delaware corporation (the “Parent”), and Payment
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the
Parent (the “Merger Sub,” and together with the Parent referred to herein as the
“Borrowers”), jointly and severally, for value received, hereby promise to pay
to InterCept, Inc., with an address at 3150 Holcomb Bridge Road, Suite 200,
Norcross, GA 30071 (collectively with any successor or assignee, the “Holder”),
the principal amount of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000.00) together with interest on the unpaid principal balance
outstanding from the date hereof at the simple interest rate of eight percent
(8.0%) per annum (the “Interest Rate”), from the date written above until paid.

 

All agreements made in this Promissory Note (this “Note”) are expressly limited
so that in no event whatsoever, whether by reason of advancement of proceeds
hereof, acceleration of maturity of the unpaid balance hereof or otherwise,
shall the interest paid or agreed to be paid to the Holder for the use of the
money advanced or to be advanced hereunder exceed the maximum rate permitted by
law (the “Maximum Rate”). If, for any circumstances whatsoever, the fulfillment
of any provision of this Note or any other agreement or instrument now or
hereafter evidencing, securing or in any way relating to the debt evidenced
hereby shall involve the payment of interest in excess of the Maximum Rate,
then, ipso facto, the obligation to pay interest hereunder shall be reduced to
the Maximum Rate; and if for any circumstance whatsoever, the Holder shall ever
receive interest, the amount of which would exceed the amount collectible at the
Maximum Rate, such amount as would be excessive interest shall be applied to the
reduction of the principal balance remaining unpaid hereunder and not to the
payment of interest. This provision shall control every other provision in any
and all other agreements and instruments existing or hereafter arising between
the Borrowers and the Holder with respect to the debt evidenced hereby.

 

1. Payment.

 

(a) Subject to Section 5 hereof, unless earlier converted in accordance with
Section 2 hereof, the principal amount of this Convertible Promissory Note (this
“Note”) shall be due and payable in full on March 22, 2005 (the “Maturity
Date”). Time is of the essence of this Note.

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(b) Interest on this Note shall accrue at the Interest Rate from the date
hereof, and shall be payable in arrears on the Maturity Date as provided above.

 

(c) The Borrowers may, at their option, prepay principal and accrued interest on
this Note, in whole or in part, without payment of any premium or penalty, by
giving written notice thereof to the Holder at least fifteen (15) days prior to
the date selected for prepayment; provided, however, that the Borrowers’
election to prepay the Note in whole or in part shall not affect Holder’s rights
set forth in Section 2 of this Note.

 

(d) Payment of principal on this Note shall be made by wire transfer to the
Holder according to written instructions provided by the Holder, provided that
if the Holder fails to provide such instructions at least three business days
before such payment is due, then payment may be made by certified check
delivered to the Holder on or before the date due by a method permitted in this
Note.

 

(e) The obligations to make the payments provided for in this Note are absolute
and unconditional and not subject to any defense, set-off, counterclaim,
rescission, recoupment or adjustment whatsoever. Each Borrower hereby expressly
waives demand and presentment for payment, notice of non-payment, notice of
dishonor, protest, notice of protest and diligence in taking any action to
collect any amount called for hereunder, and shall be directly and primarily
liable for the payment of all sums owing and to be owing hereon, regardless of
and without any notice, diligence, act or omission with respect to the
collection of any amount called for hereunder.

 

2. Conversion.

 

The Holder may, at its option, convert this Note, in whole or in part, into a
number of shares of the Parent’s Series B Preferred Stock (the “Series B Stock”)
equal to: (a) the principal amount of this Note converted, divided by (b) $0.60
(the “Conversion Price”), on the same terms and conditions as those given to
existing holders of Series B Stock, including without limitation that the Series
B Stock would become Registrable Securities pursuant to (and as such term is
defined in) the Parent’s Investor Rights Agreement (the “Investor Rights
Agreement”) dated November 14, 2003, as it may be amended from time to time;
provided that Holder agrees in writing to be bound by the Investor Rights
Agreement.

 

3. Covenants. The Borrowers hereby covenant and agree with the Holder that, so
long as any amount remains unpaid on this Note, the Borrowers shall deliver to
the Holder:

 

(i) promptly after either Borrower shall obtain actual knowledge of such,
written notice of all legal or arbitral proceedings, and of all proceedings by
or before any governmental or regulatory authority or agency, and each material
development in respect of such legal or other proceedings, materially affecting
either Borrower;

 

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(ii) promptly after either Borrower shall obtain actual knowledge of the
occurrence of any Event of Default (as hereinafter defined) or any event which
with notice or lapse of time or both would become an Event of Default (an Event
of Default or such other event being a “Default”), a notice specifying that such
notice is a “Notice of Default” and describing such Default in reasonable
detail, and, in such Notice of Default or as soon thereafter as practicable, a
description of the action the Borrowers have taken or propose to take with
respect thereto;

 

(iii) Within 75 days after the end of the Parent’s fiscal year, an audited
consolidated balance sheet of the Parent as of the end of such fiscal year, and
audited consolidated statements of income and cash flows of the Parent for such
year, prepared in accordance with generally accepted accounting principles;

 

(iv) Within 45 days after the end of the Parent’s first, second and third
quarterly accounting periods in each fiscal year of the Parent, an unaudited
consolidated balance sheet of the Parent as of the end of such quarterly period,
and unaudited consolidated statements of income and cash flows of the Parent for
such quarterly period, subject to changes resulting from normal year-end audit
adjustments, all in reasonable detail, except that such financial statements
need not contain the notes required by generally accepted accounting principles;
and

 

(v) so that the Holder may make an investment decision regarding whether to
convert its Note into securities, all materials relating to the business,
finances and operations of the Parent as reasonably requested by the Holder from
time to time, along with the reasonable opportunity to ask questions of the
officers, directors, and other representatives of the Parent.

 

4. Events of Default.

 

The occurrence of any of the following events shall constitute an event of
default (an “Event of Default”):

 

(a) A default in the performance, or a breach, of any covenant or agreement of
the Borrowers with respect to any other indebtedness between either or both
Borrowers and the Holder.

 

(b) A default in the performance, or a breach, of any covenant or agreement of
the Borrowers in this Note and continuance of such default or breach for a
period of five (5) days after written notice from the Holder of such default or
breach; provided that notwithstanding anything in this Note to the contrary,
there shall be no notice or cure period required for any default of the Borrower
with respect to payments required pursuant to Section 1 of this Note.

 

(c) A default or event of default that remains uncured following any applicable
cure period shall have occurred with respect to any indebtedness for borrowed
money of either Borrower in the amount of $250,000 or more and such indebtedness
shall have been accelerated by its holder.

 

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(d) Any representation, warranty, or certification made by the Borrowers in or
pursuant to this Note shall prove to have been false or misleading as of the
date made in any material respect.

 

(e) The entry of a decree or order by a court having jurisdiction adjudging
either Borrower a bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of such
Borrower, under federal bankruptcy law, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
and the continuance of any such decree or order unstayed and in effect for a
period of 30 days; or the commencement by either Borrower of a voluntary case
under federal bankruptcy law, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency, or other similar law, or the
consent by either Borrower to the institution of bankruptcy or insolvency
proceedings against it, or the filing by either Borrower of a petition or answer
or consent seeking reorganization or relief under federal bankruptcy law or any
other applicable federal or state law, or the consent by either Borrower to the
filing of such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator or similar official of such Borrower or of any
substantial part of the property of such Borrower, or the making by either
Borrower of an assignment for the benefit of creditors, or the admission by
either Borrower in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by such Borrower in furtherance of
any such action.

 

5. Remedies Upon Default.

 

(a) Upon the occurrence of an Event of Default referred to in Section 4(e), the
principal amount then outstanding of this Note, and the accrued interest
thereon, shall become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Borrowers. Upon the occurrence of an Event of Default other than
one referred to in Section 4(e), the Holder may declare the principal amount
then outstanding of, and the accrued interest thereon, this Note to be due and
payable immediately, and upon such declaration the same shall become due and
payable immediately, without presentation, demand, protest or other formalities
of any kind, all of which are expressly waived by the Borrowers. If the maturity
date of this Note is accelerated as provided in this Section 5(a), this Note
shall bear interest at the simple interest rate of twelve (12%) per annum (the
“Default Rate”), commencing on the date of such acceleration without further
notice.

 

(b) Upon the occurrence and during the continuance of an Event of Default, the
Holder may institute such actions or proceedings in law or equity as it shall
deem expedient for the protection of its rights and may prosecute and enforce
its claims against all assets of the Borrowers, and in connection with any such
action or proceeding shall be entitled to receive from the Borrowers payment of
the principal amount of this Note plus accrued interest to the date of payment
plus reasonable expenses of collection, including, without limitation,
reasonable attorneys’ fees and expenses actually incurred.

 

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6. Adjustment of Conversion Price, Number of Shares and Class of Shares.

 

The number of shares into which this Note is convertible and the Conversion
Price are subject to adjustment from time to time upon the occurrence of certain
events, as follows

 

(a) In case of any reclassification of the Series B Stock (other than a change
in par value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Parent with or into another corporation (other
than a consolidation or merger with another corporation in which the Parent is a
continuing corporation and in which the Parent’s shareholders immediately
preceding such consolidation or merger own at least 50% of the voting securities
of the Parent following such consolidation or merger and that does not result in
any reclassification of the shares issuable upon conversion of this Note), or in
the case of any sale of all or substantially all of the assets of the Parent,
the Parent, or such successor or purchasing corporation as the case may be,
shall execute a new Note, providing that the Holder shall have the right to
convert such new Note, and procure upon such conversion, in lieu of the Series B
Stock theretofore issuable upon conversion of this Note, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change, consolidation, merger or sale of all or substantially
all of the Parent’s assets by a holder of an equivalent number of shares of
Series B Stock. Such new Note shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 6. The provisions of this subsection (a) shall similarly apply to
successive reclassifications, consolidations, mergers, and the sale of all or
substantially all of the Parent’s assets.

 

(b) Subdivision or Combination of Shares. If the Parent at any time while any
amounts remain outstanding under this Note shall subdivide or combine the Series
B Stock, the Conversion Price shall be proportionately decreased in the case of
a subdivision or increased in the case of a combination.

 

(c) Share Dividends. If the Parent at any time while any amounts remain
outstanding under this Note shall pay a dividend with respect to the shares of
Series B Stock payable in, or make any other distribution with respect to, the
Series B Stock (except any distribution specifically provided for in the
foregoing subsections 6(a) or 6(b)), then the Conversion Price shall be
adjusted, from and after the date of determination of shareholders entitled to
receive such dividend or distribution, to that price determined by multiplying
the Conversion Price in effect immediately prior to such date of determination
by a fraction (1) the numerator of which shall be the total number of shares of
Series B Stock outstanding immediately prior to such dividend or distribution,
and (2) the denominator of which shall be the total number of shares of Series B
Stock outstanding immediately after such dividend or distribution.

 

(d) Adjustment Upon Automatic Conversion of Series B Stock. In the event the
outstanding shares of Series B Stock are automatically converted into Common
Stock of the Parent (“Common Stock”) in accordance with the provisions of the
Parent’s Amended and Restated Certificate of Incorporation (as may be amended
from time to time) (the “Certificate”) (such event, the “Automatic Conversion”),
this Note shall no longer be convertible into shares of Series B Stock, but
shall instead be convertible into for the number of shares of Common

 

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Stock, rounded to the nearest whole share, equal to the product obtained by
multiplying the number of shares of Series B Stock that would be obtained upon
conversion hereof immediately prior to the Automatic Conversion by the number of
shares of Common Stock into which each share of Series B Stock was convertible
upon the Automatic Conversion (the “Substituted Shares”).

 

(e) No Duplication of Adjustments. Notwithstanding anything to the contrary in
this Note, under no circumstances shall the Parent be required to make any
adjustment to the Conversion Price or the number of equity securities issuable
upon conversion of this Note that would duplicate an adjustment that is afforded
to the Series B Stock generally pursuant to the Certificate.

 

7. Miscellaneous.

 

(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex or
similar telecommunications equipment) against receipt to the party to whom it is
to be given, (i) if to the Borrowers, at their respective addresses as set forth
below their signatures, Attention: President, (ii) if to the Holder, at its
address set forth on the first page hereof, or (iii) in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section 7(a). Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party’s address, which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 7(a) shall be deemed given at the time of receipt thereof.

 

(b) Upon receipt of evidence satisfactory to the Borrowers, of the loss, theft,
destruction or mutilation of this Note (and upon surrender of this Note if
mutilated), including an affidavit of the Holder thereof that this Note has been
lost, stolen, destroyed or mutilated together with an indemnity against any
claim that may be made against the Borrowers on account of such lost, stolen,
destroyed or mutilated Note, and upon reimbursement of the Borrowers’ reasonable
incidental expenses, the Borrowers shall execute and deliver to the Holder a new
Note of like date, tenor and denomination.

 

(c) No failure to accelerate the indebtedness evidenced hereby by reason of an
Event of Default hereunder, or other indulgences granted from time to time or
course of dealing hereunder, shall be construed as a novation of this Note or as
a waiver of such right of acceleration or of the right of Holder thereafter to
insist upon strict compliance with the terms of this Note or to prevent the
exercise of such right of acceleration or any other right granted hereunder or
by applicable law. No extension of the time for payment of the indebtedness
evidenced hereby, made by agreement with any person now or hereafter liable for
payment of the indebtedness evidenced hereby, shall operate to release,
discharge, modify, change, or affect the original liability of the Borrowers
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless the Holder
agrees otherwise in writing. No right, power or remedy conferred by this Note
upon the Holder shall be exclusive of any other right, power or remedy referred
to herein or now or hereafter available at law, in equity, by statute or
otherwise, and all such remedies may be exercised singly or concurrently.

 

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(d) This Note may be amended only by a written instrument executed by the
Borrowers and the Holder.

 

(e) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE UNITED STATES OF AMERICA AND THE STATE OF GEORGIA, EXCLUDING CHOICE OF LAW
PRINCIPLES.

 

(f) Any dispute, controversy or claim arising out of or relating to this Note
shall be settled by binding arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association in force at the time
and place and in the manner described in Section 10.6 of that certain Agreement
and Plan of Merger, dated as of the date hereof by and among the Parent, the
Merger Sub, InterCept Payment Solutions, LLC, and InterCept, Inc.

 

(g) Each Borrower irrevocably consents to the exclusive jurisdiction of the
courts of the State of Georgia and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Note, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Note, or a breach of this Note or any such document or
instrument.

 

[The remainder of this page is intentionally left blank, and signatures are on
the following page.]

 

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IN WITNESS WHEREOF, each Borrower has caused this Note to be executed and dated
the day and year first above written.

 

Solidus Networks, Inc.

By:

 

/s/ John Rogers

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Name:

 

John Rogers

Title:

 

President

 

Address:

 

One Market Street

   

Spear Street Tower

   

Suite 700

   

San Francisco, CA 94105

 

Payment Acquisition Corp.

By:

 

/s/ John Rogers

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Name:

 

John Rogers

Title:

 

President

 

Address:

 

One Market Street

   

Spear Street Tower

   

Suite 700

   

San Francisco, CA 94105

 

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