ECONOMIC PARTICIPATION AGREEMENT
This Economic Participation Agreement (the "Agreement") dated December 30,
1999 is made by and between U.S. Wireless Data, Inc., a Colorado corporation
(the "Company") and ComVest Capital Management LLC ("ComVest").
W I T N E S S E T H:
WHEREAS, ComVest is concurrently herewith making available to the Company a
secured loan (the "Loan") in an amount up to $1.0 million, which amount will be
funded $195,000 on the date hereof and the balance may be borrowed upon the
satisfaction or waiver of certain conditions; and
WHEREAS, as an inducement for ComVest to make the Loan the Company has
agreed to issue warrants (the "Warrant") to ComVest to purchase 13,636,363
shares; and
WHEREAS, the Company does not have sufficient authorized shares of Common
Stock as would be required to be reserved under the Warrant to enable the
Warrant to be exercised in full; and
WHEREAS, the Company's Board of Directors will approve as soon as possible
an amendment (the "Amendment") to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock so that the Company,
among other things, will be able to reserve all shares that may be exercisable
under the Warrants and the Company has agreed to use its best efforts to obtain
shareholder approval of the Amendment; and
WHEREAS, the Company is entering into this Agreement to grant ComVest the
economic equivalent of ownership of those shares of Common Stock as to which the
Warrant is not then exercisable; and
WHEREAS, once the Company has obtained the requisite shareholder approval
for the Amendment and has amended its Certificate of Incorporation thereby, this
Agreement shall be cancelled in consideration of the Company reserving for
issuance under the Warrant sufficient shares of Common Stock such that the
Warrant may be exercised in full.
NOW, THEREFORE, for and in consideration of ten dollars and other good and
valuable consideration, including the premises, promises, covenants and
agreements made herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Economic Participation. Upon any sale, liquidation, dividend (other
than mandatory dividends payable under the Company's Series B Preferred
Stock as in effect as the date hereof), distribution, merger,
consolidation, restructuring, reorganization or other similar transaction
involving the Company, or upon a sale, lease, license or transfer of all or
at least a majority of the assets of the Company, or if any person or group
(as defined in Section 13 of the Securities Exchange Act of 1934, as
amended), acquires or receives any shares of Common Stock so that after
such acquisition or receipt such person or group owns at least a majority
of the outstanding shares of Common Stock in each case in one or a series
of transactions, the Company will pay (in cash or at ComVest's option if
applicable in the form of consideration received by such common
shareholder) to ComVest an amount equal to the product of (A) the amount
paid or received by a common shareholder of the Company in respect of each
share held in connection with the transaction triggering the payment to
ComVest and (B) the Adjusted Shares. For purposes of this Agreement,
"Adjusted Shares" shall mean 13,636,363 shares of Common Stock which amount
shall be decreased by (i) the aggregate number of shares of Common Stock
hereafter reserved for issuance by the Company under the Warrant (adjusted
for any adjustments in the number of shares subject to the Warrant) and
(ii) 6,818,182 shares (which number shall be reduced by 1 for each two
shares of Common Stock hereafter reserved for issuance under the Warrant
and further proportionately adjusted to take into effect any changes to the
shares of Common Stock subject to the Warrant) in the event of a Forfeiture
Event as defined in the Warrant.
2. Termination of This Agreement. At such time as the number of shares
of Common Stock that are reserved for issuance upon exercise of the Warrant
are sufficient to allow the Warrant to be exercised in full (with all
adjustments as may be made pursuant to the terms of the Warrant), this
Agreement shall automatically terminate, unless ComVest shall have already
exercised its right to liquidated damages pursuant to Section 3 hereof, in
which event the termination of this Agreement shall be governed by Section
3.
3. Liquidated Damages. If this Agreement should not have been
automatically terminated as contemplated by Section 2 hereof within 120
days of the date of this Agreement, then the Company shall pay to ComVest
on such 120th day a nonconversion fee of $500,000 and, in addition, until
such time as this Agreement is terminated as provided in such section,
ComVest may elect to receive in cash in consideration of canceling this
Agreement the greater of (A) $2.0 million or (B) the product of (1) the
Adjusted Shares and (2) the remainder of (x) the closing asking price of
the Common Stock on the last trading date prior to the exercise by ComVest
of its liquidation right and (y) $0.01. ComVest may exercise its right to
receive a liquidated damage payment by delivering a written notice to the
Company by facsimile transmission, by hand, by overnight courier or by U.S.
mail and such notice will be deemed received by the Company on the date
sent by ComVest unless the Company can thereafter prove no delivery
thereafter actually occurred.
4. Complete Agreement. This Agreement constitutes the complete
understanding among the parties with respect to its subject matter and
prior agreements and understandings among any of the parties hereto are
hereby superseded and terminated and shall have no further force or effect.
5. Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
6. Successors and Assigns. All of the terms of this Agreement shall
inure to the benefit of and shall be binding upon the successors and
assigns of the parties hereto except that the Company may not assign any of
its obligations hereunder.
7. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to the provisions, policies or principles thereof respecting
conflict or choice of laws.
8. Modification; Amendment. Except as otherwise provided herein,
neither this Agreement nor any provision hereof can be modified, amended,
changed, discharged or terminated except by an instrument in writing signed
by the parties hereto.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
taken together shall constitute one and the same agreement.
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10. Severability. If at any time subsequent to the date of this
Agreement, any provision of this Agreement shall be held by any court of
competent jurisdiction to be illegal, void or unenforceable, such provision
shall be of no force or effect but the illegality or enforceable of such
provision shall have no effect upon or impair the enforceability of any
other provision.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
U.S. WIRELESS DATA, INC.
By:
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Name:
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Title:
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COMVEST CAPITAL MANAGEMENT LLC
By:
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Name:
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Title:
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