THIS NOTE AND THE UNDERLYING SECURITIES HAS BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") SHALL HAVE BECOME
EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION
UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS
IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE
ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.
US WIRELESS DATA, INC.
8% Senior Secured Promissory Note
$_______ December 30, 1999
$_______ December 30, 1999
FOR VALUE RECEIVED, US Wireless Data, Inc., a Colorado State corporation
(the "Company") with its principal executive office at 2200 Powell Street,
Emeryville, CA 94603 promises to pay to the order of __________________________
(the "Payee") or registered assigns the principal amount of
_____________________________ ($_______) Dollars (the "Principal Amount") on the
Maturity Date. The Maturity Date shall mean the earliest of (i) the date on
which a Change in Control occurs; (ii) the date on which any Placement occurs;
or (iii) December 30, 2000. "Change in Control" shall mean (a) a merger or
combination of the Company, (b) the sale of all or substantially all of the
assets of the Company, or (c) the purchase by a single entity or group as
defined in Section 13 of the Securities Act of 1933 of more than 50% of the
voting stock of the Company in a single transaction or a series of transactions.
A "Placement" shall mean the closing of either debt or equity financing in which
the Company receives at least five million dollars ($5,000,000) in gross
proceeds in any transaction or series of transactions after the date hereof but
excluding amounts received pursuant to the Commitment Letter (as defined below).
The Principal Amount, accrued interest and any other amounts due under this note
("Note") are payable in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts, except that in the event Commonwealth elects not to proceed with
the Private Placement (as defined below), then the Company may elect to repay
this Note in Common Stock at the Conversion Price. "Conversion Price" means an
amount equal to the average closing bid price of the shares of Common Stock on
the National Association of Securities Dealers, Inc. Bulletin Board (the
"Bulletin Board"), for the ten (10) trading days prior to the date of any
conversion. Interest on this Note shall accrue on the Principal Amount
outstanding from time to time at a rate per annum computed in accordance with
Section 4 hereof.
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Each payment by the Company pursuant to this Note shall be made without
set-off or counterclaim and in immediately available funds.
The Company (i) waives presentment, demand, protest or notice of any kind
in connection with this Note and (ii) agrees, in the event of an Event of
Default (as defined below), to pay to the holder of this Note, on demand, all
costs and expenses (including reasonable legal fees) incurred in connection with
the enforcement and collection of this Note.
This Note is secured by a General Security Agreement dated the date hereof
(the "Security Agreement") of the Company in favor of the Payee covering certain
collateral (the "Collateral"), all as more particularly described and provided
therein, and is entitled to the benefits thereof. The Security Agreement, the
Uniform Commercial Code financing statements in connection with the Security
Agreement, and the Assignment of Patents and any and all other documents
executed and delivered by the Company to the Payee under which the Payee is
granted liens on assets of the Company are collectively referred to as the
"Security Documents."
This Note is being issued pursuant to a letter dated December 30, 1999 by
and between the Company and the Payee (the "Commitment Letter"), pursuant to
which, as provided in the Commitment Letter the Holder has agreed to make
available to the Company up to $1,000,000 of bridge financing (the "Bridge
Financing"). Capitalized terms used but not defined herein shall have the
meaning ascribed to such terms in the Commitment Letter.
4. Conversion Into Private Placement Units. During the period that the
Principal Amount of this Note is outstanding, if in the proposed private
placement (the "Private Placement") of the Company's securities through
Commonwealth Associates L.P. ("Commonwealth"), as contemplated by the Letter of
Intent dated December 23, 1999 by and between the Company and Commonwealth (the
"Term Sheet"), the Company completes a closing of a minimum of $2,500,000 of
gross proceeds through Commonwealth of units (the "Private Placement Units"),
the holders of this Note and of all other notes issued by the Company (the
"Other Notes"), in the Bridge Financing as contemplated by the Term Sheet),
shall, at their sole option, be entitled to convert all or any portion of this
Note or the other Notes into the Private Placement Units on the identical terms
and conditions as investors in the Private Placement purchase the Private
Placement Units. In the event of such election, all amounts due under this Note
and the Other Notes sold in the Bridge Financing so converted into the Private
Placement Units shall be counted as part of the proceeds raised in Private
Placement.
5. The Bridge Warrants. In consideration for the $195,000 loan represented
by this Note and the Commitment to lend up to another $805,000 as set forth in
the Commitment Letter, the Company shall issue to the Payee simultaneously with
the Payee's execution of this Note a seven (7) year warrant to purchase
13,636,363 shares of Common Stock, at an exercise price of $.01 per share upon
the terms and subject to the limitations contained therein (the "Bridge
Warrant") and shall execute and deliver to payee that certain Economic
Participation Agreement dated December 30, 1999 (the "Economic Participation
Agreement").
-2-
6. Prepayment. This Note may be prepaid without penalty in whole or in part
at any time.
7. Computation of Interest.
A. Base Interest Rate. Subject to subsections 4B and 4C below, the
outstanding Principal Amount shall bear interest at the rate of eight (8%)
percent per annum.
B. Penalty Interest. In the event the Note is not repaid on the
Maturity Date, the rate of interest applicable to the unpaid Principal Amount
shall be adjusted to thirteen (13%) percent per annum from the date of default
until repayment; provided, that in no event shall the interest rate exceed the
Maximum Rate provided in Section 4C below.
C. Maximum Rate. In the event that it is determined that New York law
is not applicable to the indebtedness evidenced by this Note or that under New
York law ("Applicable Usury Laws"), the interest, charges and fees payable by
the Company in connection herewith or in connection with any other document or
instrument executed and delivered in connection herewith cause the effective
interest rate applicable to the indebtedness evidenced by this Note to exceed
the maximum rate allowed by law (the "Maximum Rate"), then such interest shall
be recalculated for the period in question and any excess over the Maximum Rate
paid with respect to such period shall be credited, without further agreement or
notice, to the Principal Amount outstanding hereunder to reduce said balance by
such amount with the same force and effect as though the Company had
specifically designated such extra sums to be so applied to principal and the
Payee had agreed to accept such extra payment(s) as a premium-free prepayment.
All such deemed prepayments shall be applied to the principal balance payable at
maturity.
8. Covenants of Company.
A. Affirmative Covenants. The Company covenants and agrees that, so
long as this Note shall be outstanding, it will perform the obligations set
forth in this Section 5A:
(i) Taxes and Levies. The Company will promptly pay and discharge
all taxes, assessments, and governmental charges or levies imposed upon the
Company or upon its income and profits, or upon any of its property, before the
same shall become delinquent, as well as all claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon such properties or
any part thereof; provided, however , that the Company shall not be required to
pay and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings and
the Company shall set aside on its books adequate reserves in accordance with
generally accepted accounting principles ("GAAP") with respect to any such tax,
assessment, charge, levy or claim so contested;
-3-
(ii) Maintenance of Existence. The Company will do or cause to be
done all things reasonably necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and comply with all laws
applicable to the Company, except where the failure to comply would not have a
material adverse effect on the Company;
(iii) Maintenance of Property. The Company will at all times
maintain, preserve, protect and keep its property used or useful in the conduct
of its business in good repair, working order and condition, and from time to
time make all needful and proper repairs, renewals, replacements and
improvements thereto as shall be reasonably required in the conduct of its
business;
(iv) Insurance. The Company will, to the extent necessary for the
operation of its business, keep adequately insured by financially sound
reputable insurers, all property of a character usually insured by similar
corporations and carry such other insurance as is usually carried by similar
corporations;
(v) Books and Records. The Company will at all times keep true
and correct books, records and accounts reflecting all of its business affairs
and transactions in accordance with GAAP. Such books and records shall be open
at reasonable times and upon reasonable notice to the inspection of the Payee or
its agents; and
(vi) Notice of Certain Events. The Company will give prompt
written notice (with a description in reasonable detail) to the Payee of:
(a) the occurrence of any Event of Default or any event
which, with the giving of notice or the lapse of time, would constitute an Event
of Default; and
(b) the delivery of any notice effecting the acceleration of
any indebtedness which singly or together with any other accelerated
indebtedness exceeds $100,000.
B. Negative Covenants. The Company covenants and agrees that, so long
as this Note shall be outstanding, it will perform the obligations set forth in
this Section 5B:
(i) Liquidation, Dissolution. The Company will not liquidate or
dissolve, consolidate with, or merge into or with, any other corporation or
other entity, except that any wholly-owned subsidiary may merge with another
wholly-owned subsidiary or with the Company (so long as the Company is the
surviving corporation and no Event of Default shall occur as a result thereof);
(ii) Sales of Assets. The Company will not sell, transfer, lease
or otherwise dispose of, or grant options, warrants or other rights with respect
to, all or a substantial part of its properties or assets to any person or
entity, provided that this clause (ii) shall not restrict any disposition made
in the ordinary course of business and consisting of:
-4-
(a) capital goods which are obsolete or have no remaining
useful life;
(b) finished goods inventories; and
(c) remaining credit card processing portfolios.
(iii) Redemptions. The Company will not redeem or repurchase any
outstanding equity and/or debt securities of the Company, except for (a)
repurchases of unvested or restricted shares of Common Stock at cost from
employees, consultants or members of the Board of Directors pursuant to
repurchase options of the Company (1) currently outstanding or (2) hereafter
entered into pursuant to a stock option plan or restricted stock plan approved
by the Company's Board of Directors or (b) rescission offers necessary or
appropriate to address violations of applicable securities laws;
(iv) Indebtedness. Other than (i) the Other Notes, and (ii)
indebtedness of the Company existing on the date of this Note as disclosed in
the Company's Report on Form 10- QSB for the quarter ended September 30, 1999,
the Company will hereafter not create, incur, assume or suffer to exist,
contingently or otherwise, any indebtedness except that the Company may incur
indebtedness that is expressly subordinate in all respects to this Note and the
Other Notes or additional unsecured trade debt incurred in the ordinary course
of business in an amount not to exceed $400,000 per month for the period
commencing on October 1, 1999 and ending on March 31, 2000 and in an unlimited
amount thereafter;
(v) Negative Pledge. Other than (i) with respect to the Other
Notes, and (ii) Liens existing on the date of this Note and expressly described
in the Security Agreement, the Company will not hereafter create, incur, assume
or suffer to exist any mortgage, pledge, hypothecation, assignment, security
interest, encumbrance, lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
financing lease) (each, a "Lien") upon any of its property, revenues or assets,
whether now owned or hereafter acquired, except:
(a) Liens granted to secure indebtedness incurred to finance
the acquisition (whether by purchase or capitalized lease) of tangible assets,
but only on the assets acquired with the proceeds of such indebtedness;
(b) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books;
(c) Liens of carriers, warehousemen, mechanics, materialman
and landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books;
-5-
(d) Liens (other than Liens arising under the Employee
Retirement Income Security Act of 1974, as amended, or Section 412(n) of the
Internal Revenue Code of 1986, as amended) incurred in the ordinary course of
business in connection with workers' compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure obligations
on surety or appeal bonds; and
(e) judgment Liens in existence less than 30 days after the
entry thereof or with respect to which execution has been stayed in an amount
not to exceed $100,000 singly or in the aggregate.
(vi) Investments. The Company will not purchase, own, invest in
or otherwise acquire, directly or indirectly, any stock or other securities or
make or permit to exist any investment or capital contribution or acquire any
interest whatsoever in any other person or entity or permit to exist any loans
or advances for such purposes except for investments in direct obligations of
the United States of America or any agency thereof, obligations guaranteed by
the United States of America, certificates of deposit or other obligations of
any bank or trust company organized under the laws of the United States or any
state thereof and having capital and surplus of at least $500,000,000; and
deposit accounts maintained by the Company at Union Bank of California or
another bank having equivalent capital and surplus to such bank; provided,
however, that nothing contained in this clause (vi) shall preclude the Company
from making acquisitions, organizing subsidiaries, entering into joint ventures
or other business arrangements for the purpose of expanding its business.
(vii) Transactions with Affiliates. The Company will not enter
into any transaction, including, without limitation, the purchase, sale, lease
or exchange of property, real or personal, the purchase or sale of any security,
the borrowing or lending of any money, or the rendering of any service, with any
person or entity affiliated with the Company (including officers, directors and
shareholders owning five (5%) percent or more of the Company's outstanding
capital stock), except in the ordinary course of and pursuant to the reasonable
requirements of its business and upon fair and reasonable terms not less
favorable than would be obtained in a comparable arms-length transaction with
any other person or entity not affiliated with the Company and, where the
transaction is valued at in excess of $100,000 with the prior written consent of
the Payee. Nothing herein shall prevent the Company from issuing options to
Affiliates, issuing Liviakis up to 450,000 shares of Common Stock or renewing,
after March 15, 1999, the existing Consulting Agreement with Liviakis Financial
Communications, Inc. provided that a majority of disinterested directors approve
each such transaction.
(viii) Dividends. The Company will not declare or pay any cash
dividends or distributions on its outstanding capital stock.
(ix) Issuance of Securities. Prior to March 31, 2000, the Company
will not, without the prior written consent of the Payee, issue any securities
of the Company other than (i) as provided or disclosed in the Term Sheet, (ii)
pursuant to the exercise or conversion of securities outstanding as of the date
hereof, (iii) up to 15,000,000 of shares underlying options granted after the
date hereof and (iv) up to 450,000 shares of Common Stock to be issued to Mr.
Liviakis.
-6-
9. Events of Default.
A. The term "Event of Default" shall mean any of the events set forth
in this Section 6A:
(i) Non-Payment of Obligations. The Company shall default in the
payment of the principal or accrued interest of this Note as and when the same
shall become due and payable, whether by acceleration or otherwise.
(ii) Non-Performance of Affirmative Covenants. The Company shall
either materially default in the due observance or performance of any covenant
set forth in Section 5A, which default shall continue uncured for thirty (30)
days.
(iii) Non-Performance of Negative Covenants. The Company shall
default in the due observance or performance of any covenant set forth in
Section 5B.
(iv) Bankruptcy. The Company shall:
(a) apply for, consent to, or acquiesce in, the appointment
of a trustee, receiver, sequestrator or other custodian for the Company or any
of its property, or make a general assignment for the benefit of creditors;
(b) in the absence of such application, consent or acquiesce
in, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or for any part of its property;
(c) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Company, and, if such case or proceeding is not
commenced by the Company or converted to a voluntary case, such case or
proceeding shall be consented to or acquiesced in by the Company or shall result
in the entry of an order for relief; or
(d) take any corporate or other action authorizing, or in
furtherance of, any of the foregoing.
(v) Cross-Default. The Company shall default in the payment when
due of any amount payable under any other obligation of the Company for money
borrowed other than the Company's outstanding 6% debentures due July 21, 2000,
-7-
and the debt to RBB Bank in the principal amount of $225,000 and other
indebtedness not to exceed One Hundred Thousand Dollars ($100,000).
(vi) Cross-Acceleration. Any senior debt or any other
indebtedness of the Company in an aggregate principal amount exceeding One
Hundred Thousand Dollars ($100,000) shall be duly declared to be or shall become
due and payable prior to the stated maturity thereof other than the Company's
outstanding 6% debentures due July 21, 2000, and the debt to RBB Bank in the
principal amount of $225,000.
(vii) Other Breaches, Defaults. The Company shall materially
default and/or be in material breach of any term and/or provision in the Term
Sheet, Commitment Letter, the Bridge Warrant, the Other Notes, the Security
Documents or any other document relating to the Bridge Financing and/or the
Private Placement, or any representation and/or warranty made by the Company to
the Payee (including in this Note, the Bridge Warrant or the Other Notes) or
Commonwealth or any investor of Commonwealth who purchases securities of the
Company shall be false and/or misleading.
10. Representations of the Company. The Company represents and warrants to
the Payee that:
A. Corporate Organization: Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and has full corporate power and authority to carry on its business as
it is now being conducted and to own the properties and assets it now owns; is
duly qualified or licensed to do business as a foreign corporation in good
standing in the jurisdictions in which such qualification is required. The
copies of the articles of incorporation and by-laws and all amendments thereto
of the Company heretofore delivered to the Payee are complete and correct copies
of such instruments as presently in effect.
B. Capitalization of the Company. As of the date of this Note, the
authorized capital stock of the Company consists of 40,000,000 shares of Common
Stock, of which approximately 22,800,000 shares are issued and outstanding, and
5,000,000 shares of preferred stock $1.00 par value per share, of which
1,954,705 shares are issued and outstanding and are designated Series B 6%
Convertible Preferred Stock. As of the date hereof, approximately 2,375,000
shares of Common Stock were issuable upon the exercise of outstanding options
and approximately 6,772,000 shares of Common Stock were issuable upon the
exercise of outstanding warrants. All issued and outstanding shares of capital
stock of the Company are validly issued, fully paid and non-assessable. Except
as contemplated in the Commitment Letter, there are no outstanding (a)
securities convertible into or exchangeable for the Company's capital stock; (b)
options, warrants or other rights to purchase or subscribe to capital stock of
the Company or securities convertible into or exchangeable for capital stock of
the Company; or (c) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance of any capital stock of the
Company, any such convertible or exchangeable securities or any such options,
warrants or rights; except for the impact of anti dilution provisions in
previously issued warrants which will be activated by the issuance of the
Warrant defined herein.
-8-
C. Subsidiaries. The Company does not own, directly or indirectly, any
capital stock or other equity securities of any corporation, limited liability
company, partnership or any other entity or have any direct or indirect equity
or ownership interest in any business.
D. Authorization; No Violation.
(a) The Company has full corporate power and authority necessary
to enter into this Note, the Commitment Letter, the Bridge Warrant, the Economic
Participation Agreement and the Security Documents (collectively, the
"Documents"), and to carry out the transactions contemplated by the Documents.
The Board of Directors of the Company has taken such necessary action to
authorize the execution and delivery of the Documents and the consummation of
the transactions contemplated thereby. The Documents have been duly executed and
delivered by the Company and are legal, valid and binding obligations of the
Company enforceable against it in accordance with its terms except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefore may be brought.
(b) Neither the execution and delivery of any of the Documents
nor the consummation of the transactions contemplated thereby will violate any
provision of the articles or certificate of incorporation or by-laws or other
organizational documents of the Company, be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any debt
or obligation pursuant to, or result in the creation or imposition of any
security interest, lien or other encumbrance upon any property or assets of the
Company, any agreement or commitment to which the Company is a party or by which
the Company is bound or to which the property of the Company is subject, or
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority applicable to the Company, except that the
Company does not currently have sufficient authorized shares for the exercise of
the Bridge Warrant and the issuance of such warrant triggers certain
antidilution provisions disclosed elsewhere herein.
E. Financial Statements. The Company has heretofore delivered to the
Payee (i) a balance sheet of the Company as at June 30, in each of the years
1998 and 1999; and statements of operations, changes in shareholders' equity
(deficit) and cash flows for each of the years then ended, all audited and
certified; and (ii) an unaudited balance sheet of the Company as at September
30, 1999 (the "Balance Sheet"), and unaudited statements of operations for the
three (3) month period then ended. Such balance sheets and the notes thereto
fairly present the assets, liabilities and financial condition of the Company as
at the respective dates thereof, and such available statements of operations,
changes in shareholders' equity (deficit) and cash flows and the notes thereto
fairly present the results of operations for the periods therein referred to;
all in accordance with generally accepted accounting principles consistently
-9-
applied throughout the periods involved except, in the case of unaudited
statements, for normally recurring year-end adjustments, which adjustments will
not be material either individually or in the aggregate.
F. No Undisclosed Liabilities, Etc. The Company has no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) not
otherwise disclosed herein which are not fully reflected or reserved against in
the Balance Sheet, which, in accordance with generally accepted accounting
principles, should have been shown or reflected in the Balance Sheet except for
accounts payable incurred in the ordinary course of business. The reserves
reflected in the Balance Sheet are adequate, appropriate and reasonable.
G. Title to Properties: Encumbrances.
(a) The Company has good, valid and marketable title to or in the
case of assets or Intellectual Property held pursuant to a lease or a license,
valid and subsisting leasehold interests, or licenses in, all properties and
assets which it uses or purports to own, use or exploit (real, personal and
mixed, tangible and intangible), including, without limitation, all the
properties and assets reflected in the Balance Sheet (except for inventory and
obsolete equipment sold since the date of the Balance Sheet in the ordinary
course of business and consistent with past practice), all intellectual
property, and all the properties and assets purchased by the Company since the
date of the Balance Sheet, except in each case for (i) liens for taxes which are
not yet due and payable or which are being contested in good faith, (ii)
statutory, common law, builder, mechanic, warehouseman, materialman, contractor,
workmen, repairmen, carrier or other liens which do not interfere with the use
by the Company of the assets relating to the business of the Company, (iii)
other restrictions on the use of property which do not materially interfere with
the conduct of the ordinary course of business of the Company or materially
impair the use or value of property, or (iv) those liens referred to in Section
5(B)(v)(ii) (collectively, "Permitted Liens"). All such properties and assets
are free and clear of all title defects or objections, liens, claims, charges,
pledges, options, security interests or other encumbrances of any kind or nature
whatsoever including, without limitation leases, chattel mortgages, deed of
trusts, conditional sales contracts, collateral security arrangements and other
title or interest retention arrangements (collectively, "Liens"), and are not,
in the case of real property subject to any rights of way, encroachments,
building use restrictions, exceptions, variances, reservations or limitations of
any nature whatsoever or other right of third parties, whether voluntarily
incurred or arising by operation of law, including without limitation, any
agreement to give any of the foregoing in the future and any contingent sale or
other title retention agreement except in each case (i) with respect to all such
properties and assets, liens as securing specified liabilities or obligations
shown on the Balance Sheet and (ii) for Permitted Liens. As used herein,
Intellectual Property means all registered or unregistered, now existing or
hereafter acquired or created (a) patents, letters patent, inventions,
copyrights, trademarks, trade names, styles, logos, source or business
identifiers, trade secrets and customer lists; (b) applications, rights, claims
and interests under licensing or other contracts pertaining to any of the
foregoing; (c) all registrations, recordings, applications, reissues,
extensions, substitutions, upgrades and renewals of any of the foregoing; (d)
all books, records, files and documents related to any of the foregoing; (e) all
goodwill ascribed or related to any of the foregoing; and (f) all products and
proceeds of any of the foregoing.
-10-
H. Material Contracts. The Company is not and has not received any
notice, or has any knowledge that it or any other party is, in or may be in
default in any respect under any material contract or that any other party
intends to terminate, breach or not renew any material contract; and to the best
knowledge of the Company, there has not occurred any event that, with the lapse
of time or the giving of notice or both, would constitute a default under any
material contracts, except with respect to overdue payables and defaults under
agreements evidencing the Company's 6% convertible debentures due July 21, 2000,
the indebtedness to RBB Bank in the amount of $225,000 and the Company's Series
B Preferred Stock.
I. Litigation. Except as disclosed in the Company's most recently
filed Form 10- KSB and Form 10-QSB, there is no action, order, writ, injunction,
judgment or decree, or any claim, suit, litigation, labor dispute, arbitrational
action, inquiry, proceeding or investigation by or before any court or
governmental or other regulatory or administrative agency or commission pending,
threatened against or involving the Company, or which questions or challenges
the validity of any of the Documents or any of the transactions contemplated
thereby or in the Commitment Letter. Except as disclosed in the Company's most
recently filed Form 10-KSB and Form 10-QSB, the Company is not subject to any
judgment, order or decree entered in any lawsuit or proceeding which would have
a material adverse effect on its business practices or on its ability to
continue to conduct its business as currently conducted.
11. Miscellaneous.
A. Parties in Interest. All covenants, agreements and undertakings in
this Note binding upon the Company or the Payee shall bind and inure to the
benefit of its successors and permitted assigns of the Company and the Payee,
respectively, whether so express or not.
B. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof. The parties hereto hereby agree that any
suit or proceeding arising directly and/or indirectly pursuant to or under this
instrument or the consummation of the transactions contemplated hereby, shall be
brought solely in a federal or state court located in the City, County and State
of New York. By its execution hereof, the parties hereby covenant and
irrevocably submit to the in personam jurisdiction of the federal and state
courts located in the City, County and State of New York and agrees that any
process in any such action may be served upon any of them personally, or by
certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon them
in New York City. The parties hereto waive any claim that any such jurisdiction
is not a convenient forum for any such suit or proceeding and any defense or
lack of in personam jurisdiction with respect thereto. In the event of any such
action or proceeding, the party prevailing therein shall be entitled to payment
from the other party hereto of its reasonable counsel fees and disbursements in
an amount judicially determined.
C. Waiver of Ju1y Trial. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
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CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PAYEE OR THE COMPANY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S PURCHASING THIS NOTE.
D. Expenses and Fees. All fees, costs and expenses of every kind and
nature, including but not limited to the reasonable attorneys fees and legal
expenses incurred by Payee in connection with the collection, administration, or
enforcement of its rights under this Note (and the Other Notes) or in defending
or prosecuting any actions or proceedings arising out of or related to any
amounts due to Payee, this Note, the Other Notes or the Commitment Letter shall
be borne and paid by the Company upon written demand by the Payee and until
paid, shall be added to the amounts due hereunder and bear interest at a rate
per annum equal to 18%.
E. Entire Agreement. This Note, the Other Notes, the Security
Documents, the Commitment Letter, the Bridge Warrant, the Economic Participation
Agreement, the Term Sheet and the other Documents set forth the entire agreement
of the parties with respect to the subject matter hereof and thereof,
superceding and replacing any agreement or understanding that may have existed
between the parties prior to the date hereof in respect to such subject matter.
12. Conversions. Notwithstanding anything to the contrary provided herein
or elsewhere, the Payee shall have the right, at its sole option, to convert all
or any part of this Note into a pro rata participation in any debt or equity
financing of the Company occurring after the date hereof in excess of one
million dollars ($1,000,000), provided such conversion shall be on the identical
terms and conditions as the other parties to the financing.
13. Board of Directors. As long as this Note and any Other Note remains
outstanding, the Board of Directors of the Company shall consist of four (4)
directors, of which one (1) director shall be appointed by ____________. In
addition, ____________ shall be entitled to have one (1) observer present at all
board meetings and that observer shall receive all information provided to
directors, provided the observer signs a confidentiality agreement. The observer
either shall be an employee, partner or shareholder of _______ or one of its
affiliates or otherwise shall be reasonably acceptable to the Company.
14. Use of Proceeds. The Company will use the $195,000 loan represented by
this Note for working capital purposes.
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IN WITNESS WHEREOF, this Note has been executed and delivered on the date
specified above by the duly authorized representative of the Company.
US WIRELESS DATA, INC.
By:
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Name:
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Title:
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