EXHIBIT 4.1
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY
STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING THIS
NOTE AND/OR SUCH SECURITIES, OR THE HOLDER RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THE NOTE AND/OR SUCH SECURITIES SATISFACTORY TO THE CORPORATION
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND THE
QUALIFICATION REQUIREMENTS UNDER STATE LAW.
U.S. WIRELESS DATA, INC.
10%, UNSECURED and NONASSIGNABLE,
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
DUE JUNE 2, 1998
$150,000 June 3, 1997
1) Obligation. FOR VALUE RECEIVED, U.S. Wireless Data, Inc, a Colorado
corporation (hereinafter called the "Corporation"), hereby promises to pay
entrenet Group LLC (hereinafter called the "Holder") the principal sum of
One Hundred Fifty Thousand Dollars ($150,000) payable in one payment of
principal and all accrued interest due on June 2, 1998 (the "Payment
Date"), unless earlier converted pursuant to the terms of this Debenture.
Interest shall accrue on this Debenture at the rate of ten percent (10%)
per annum (based on a 360-day year, 30-day month) until payment in full of
principal.
2) Medium of Payment. The principal and interest on this promissory note (this
"Note") are payable in lawful money of the United States of America at the
Holder's address set forth below, or at such other address as the Holder
hereof may from time to time designate to the Corporation in writing.
3) Prepayment. The Corporation may not prepay this Note in whole or in part at
any time prior to due date of this Note.
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Initial: entrenet /s/ JB Company /s/ EK
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4) Subordination.
a. Senior Indebtedness. The payment of principal and interest on this
Note is subordinated to the prior payment in full of all Senior
Indebtedness of the Corporation, whether outstanding on this date or
thereafter. Senior Indebtedness is defined as the principal of, and premium
and interest on, indebtedness of the Corporation for money borrowed from,
or the payment of which has been guaranteed to, persons, firms or
corporations which engage in lending money, including, but without
limitation, banks, trust and charitable trusts, pension trusts,
governmental lenders and other investing organizations, evidenced by notes
or similar obligations.
b. Accelerated Maturity. If this Note is declared due and payable
before its express maturity because of the occurrence of an event of
default as defined in this Note, the Holder will be entitled to payment
only after there is first paid in full on the then outstanding Senior
Indebtedness all principal and interest then due and payable by
acceleration or otherwise, or after payment shall be provided for in a
manner satisfactory to the holders of such Senior Indebtedness.
c. No Reduction in Corporation's Obligations. No present or future
holder of Senior Indebtedness will be prejudiced by the Holder's right to
enforce this Note by any act or failure to act on the part of the
Corporation. The provisions of this Section 4 are solely for the purpose of
defining the relative rights of the holders of Senior Indebtedness on the
one hand and the Holder of this Note on the other hand, and nothing in this
Note will impair as between the Corporation and the Holder, the
Corporation's obligation to pay to the Holder the principal and interest in
accordance with its terms, nor will anything in this Note prevent the
Holder from exercising all remedies otherwise permitted by applicable law
upon default hereunder subject only to the rights, if any, under this
Section of holders of Senior Indebtedness to receive cash, property or
securities otherwise payable or deliverable to the Holder.
5) Conversion.
a. Timing. This Note is convertible into fully paid and nonassessable
shares of the Corporation's Common Stock, at the option of the Holder, at
any time and from time to time thereafter in whole or in part during the
term of this Note. The Corporation agrees to reserve sufficient shares for
issuance during the remaining term of this Note so as to be able to honor
the exercise of the conversion privilege, subject to the Corporations
increase in Common Stock to be presented at the next Shareholders'
Meeting..
b. Conversion Price. The Note shall be convertible into the
Corporation's Common Stock at a price of fifty cents ($0.50) per share. The
Conversion is payable by the cancellation of principal and any accrued
interest on this Note.
c. Notice of Conversion and Rights. In order to exercise the
conversion privilege granted to the Holder of this Note, the Holder will
surrender this Note to the
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Initial: entrenet /s/ JB Company /s/ EK
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Corporation with duly executed Notice of Conversion specifying the portion
of the principal amount and any accrued and unpaid interest of the Note to
be converted. If the Common Stock into which this Note is convertible is to
be issued in a name or names other than that of the Holder, the Notice of
Conversion must bear or be accompanied by proper endorsement or assignment
of this Note. The Common Stock issued upon the conversion of this Note will
not be entitled to any dividend declared upon such stock prior to the date
of the receipt by the Corporation of such Notice of Conversion, and upon
such conversion, the Holder will not be entitled to any interest on this
Note not due and payable at or prior to the date such Notice of Conversion
is received by the Corporation.
d. Surrender and Cancellation of Note. This Note will be deemed to have
been surrendered for conversion and converted at the close of business on
the date on which it is received by the Corporation or a designated agent
of the Corporation with the duly executed Notice of Conversion, and on such
receipt, the Corporation will promptly issue and deliver to the person or
persons entitled a certificate or certificates of its Common Stock
evidencing the number of shares into which this Note will have been
converted, together with a new Note representing the unconverted and
unredeemed portion, if any, of the Note so converted. The new Note shall be
payable to the Holder and dated as of the date to which interest has been
paid on the converted Note. Such new Note shall otherwise be identical to
the converted Note. The Corporation will then cancel this Note. Only whole
shares of the Corporation's Common Stock will be issued on any conversion.
In the event that Holder of this Note is entitled to a faction of a share
of Common Stock, the Corporation shall instead pay such holder the cash
equivalent of that fractional share, computed by multiplying the fraction
by the applicable Conversion Price.
6) The Corporation's Obligation to Register. If the Corporation at any time
proposes to initiate a registration of its securities under the Securities
Act of 1933, as amended (the "Securities Act") and thereafter to register
any of its securities under the Securities Act (other than a registration
effected solely to implement an employee benefit plan, a transaction to
which Rule 145 of the Commission is applicable or any other form or type of
registration in which Registrable Securities cannot be included pursuant to
Commission rule or practice), it will give written notice to Holder of this
Note of its intention to do so. If such registration is proposed to be on a
form which permits inclusion of the Stock underlying the conversion of this
Note, upon the written request from any Holder within 20 days after
transmittal by the Corporation to the Holder of such notice, the
Corporation will, subject to the limits contained in this Section, use its
best efforts to cause all such Stock underlying the conversion of this Note
to be registered under the Securities Act and qualified for sale under any
relevant state blue sky law, all to the extent requisite to permit such
sale or other disposition by Holder of the Stock so registered.
Notwithstanding any other provision of this Section, if the underwriter
managing such registration notifies the Holder in writing that market or
economic conditions limit the amount of securities which may reasonably be
expected to be sold, Holder will at a minimum be allowed to register their
Stock pro rata based on the ratio of the total number of shares of Stock to
be offered for sale by the Corporation to the total shares outstanding just
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Initial: entrenet /s/ JB Company /s/ EK
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prior to the offering. The Corporation and entrenet will enter into a
customary registration agreement setting forth the terms of such
registration at the time the Corporation proposes to register any shares
for entrenet.
7) Default.
a. Events of Default. Without notice, except as expressly provided
herein, the following will be deemed to be events of default:
i. Covenants. Failure on the part of the Corporation to
observe or perform any of the covenants or agreements on the part
of the Corporation contained in this Note after (A) written notice
of such failure, requiring the Corporation to remedy the same, has
been given to the Corporation by the Holder, and (B) such failure
has continued without remedy for a period of thirty days; or
ii. Receivership. The entry of a decree or order of a court
having jurisdiction in the matter for the appointment of a
receiver and such decree or order has continued in force
undischarged or unstayed for a period of one hundred twenty days;
or
iii.Bankruptcy. The Corporation institutes proceedings to be
adjudged a voluntary bankrupt, or consents to the filing of
bankruptcy proceedings against it, or files a petition or answer
or consent seeking reorganization under the National Bankruptcy
Act or any other similar or applicable federal or state law, or
consents to the filing of any such petition, or consents to the
appointment of a receiver, liquidator, or trustee in bankruptcy,
or makes a general assignment for the benefit of creditors, or
admits in writing its inability to pay its debts generally as they
become due; or
iv. Attachment. Any judgment, writ, or warrant of attachment
or of any similar process in an amount in excess of $100,000 is
entered or filed against the Corporation or against any of its
property or assets and remains unpaid, unvacated, unbonded or
unstayed for a period of 120 days.
b. Acceleration of Maturity. If any one or more of the foregoing events
of default occurs, the Holder, by notice in writing to the Corporation, may
declare the principal of and all accrued interest on this Note then
outstanding immediately due and payable without further notice or demand;
provided, however, that at any time after such declaration the same may be
rescinded and such event of default may be waived by the Holder by written
notice to the Corporation.
c. Payment on Acceleration. Upon any such acceleration of the maturity
of this Note, the Corporation will within 90 days pay to the Holder the
entire principal balance unpaid on this Note, together with accrued
interest thereon to the date of such payment.
d. Failure to Pay. If the Corporation fails to make payment to the
Holder as provided in the preceding Subsection (Payment on Acceleration),
the Holder will be entitled and empowered to take such measures as may be
appropriate to enforce the
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Initial: entrenet /s/ JB Company /s/ EK
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Corporation's obligations under this Note, by judicial proceedings or
otherwise. If suit is brought to enforce payment of this Note, the
Corporation promises to pay reasonable attorneys' fees to be fixed by the
Court.
8) Anti-dilution. If the Corporation elects to combine or subdivide its Common
Stock, the ratio used to determine the number of new shares to be issued in
exchange for the existing shares will be applied to the number of shares
into which this Note may be converted as provided in this Note, and the
conversion price will be appropriately adjusted.
9) No Assignment. This Note is unsecured, non-transferable and non-assignable.
Holder may not sell, assign, pledge, hypothecate or otherwise transfer this
Note
10) Notices. Any communication or notices may be delivered or mailed to the
offices of the Corporation at its principal place of business and to the
Holder at the Holder's address set forth below, or to such other addresses
as the Corporation, or Holder, may designate in writing from time to time.
11) Applicable Law. This Note shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts between
California residents entered into and so be performed entirely within the
State of California.
Executed as of June 3,1997
By: /s/ Evon Kelly
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Evon Kelly
Chief Executive Officer
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Initial: entrenet /s/ JB Company /s/ EK
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The name and address of the registered Holder of this Note is:
entrenet Group LLC
5213 El Mercado Parkway, Suite D
Santa Rosa, California 95403