SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) May 6, 1999
U.S. Wireless Data, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 0-22848 84-1178691
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
2200 Powell Street, Suite 800, Emeryville, California 94608
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 596-2025
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
INITIAL CLOSING OF PRIVATE OFFERING OF SERIES B CUMULATIVE
CONVERTIBLE REDEEMABLE PREFERRED STOCK AND COMMON STOCK PURCHASE WARRANTS
On May 6, 1999 (the "Closing Date"), U.S. Wireless Data, Inc. (the
"Company") closed the minimum amount of a private offering of $1,500,000
minimum, $5,000,000 maximum, of Series B Cumulative Convertible Redeemable
Preferred Stock (the "Series B Preferred"), selling 1,500,000 shares at $1.00
per share, with a stated value of $1.00 per share. In addition to the sale of
1,500,000 shares of Series B Preferred for cash, a total of 454,705 shares of
Series B Preferred was issued to the holders of the Company's 6% Convertible
Subordinated Debentures Due July 21, 2000 (the "6% Debentures"), to pay
penalties and interest owing under the 6% Debentures through June 30, 1999. The
holders of the 6% Debentures also agreed to waive certain prior defaults on the
6% Debentures and the related registration rights agreement in exchange for the
issuance of the Series B Preferred to them, together with certain modifications
to the 6% Debentures and the Company's registration obligations relating to the
underlying Common Stock issuable upon conversion of the 6% Debentures.
The Company also issued a Common Stock Purchase Warrant exercisable to
purchase 300,000 shares of Common Stock at $1.50 per share for five years from
April 30, 1999 (the "Series B Warrants") to the cash purchaser of the Series B
Preferred. Holders of the 6% Debentures did not receive Series B Warrants
Net proceeds to the Company from closing the minimum offering of the
Series B Preferred will be approximately $1,279,000, after paying a finder's fee
of $180,000 plus estimated offering expenses of $41,000 (including approximately
$25,800 for the investor's legal fees). The Company immediately used $400,800 of
the proceeds to repay $400,000 of short term loans from the purchaser of the
Series B Preferred, which it made to the Company over the three-week period
prior to closing of the minimum offering. The Company is obligated to utilize an
additional $413,000 of the proceeds to pay past and future legal and accounting
fees, while the estimated balance of $465,200 is to be used as working capital.
RBB Bank Aktiengesselschaft, which is the agent for the holders of
certain shares of the Company's Series A Preferred Stock, $1,000,000 of 6%
Debentures and a promissory note in the principal amount of $250,000, agreed to
waive the right to immediate repayment of the $250,000 note (which was
originally payable upon completion of the next funding received by the Company
of at least $1,000,000). RBB Bank agreed to forebear initiating an action
against the Company to collect the obligation evidenced by the Note until the
first to occur of: (a) receipt by the Company of funding in the aggregate of at
least $2,500,000; or (b) December 1, 1999.
Mr. John Liviakis, a significant shareholder of the Company, also
agreed to transfer a total of 443,077 shares of Company Common Stock owned by
him to the finder who located the cash purchaser of the Series B Preferred
Stock. The shares will be transferred as "restricted securities" as defined in
Rule 144 under the Securities Act of 1933 and will not have any registration
rights.
The offering is being made pursuant to the registration exemptions
contained in Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 of Regulation D promulgated thereunder. Neither
the Series B Preferred nor the Warrants nor the shares of Common Stock
underlying those securities have been registered under the Securities Act and
may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements.
OTHER KEY TERMS OF THE OFFERING, THE SECURITIES AND APPLICABLE REGISTRATION
RIGHTS
The following is a summary of additional key terms and conditions of
certain agreements entered into between the Company and the purchasers of the
Series B Preferred (including the holders of the 6% Debentures). The summary
descriptions contained herein are qualified in their entirety by reference to
copies of the operative documents, including the Articles of Amendment to the
Company's Articles of Incorporation (containing the Designation of Series B
Cumulative Convertible Redeemable Preferred Stock) (hereafter the
"Designation"), the Securities Purchase Agreement, the Supplement to Securities
Purchase Agreement entered into with the holders of the Company's 6% Debentures,
the Registration Rights Agreement, the Waiver of Rights and First Amendment to
Debenture Agreement and the First Amendment to Note and Common Stock Purchase
Agreement entered into April 22, 1999, which are filed as Exhibits to this
Report.
Dividends
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The Series B Preferred accrues a cumulative dividend at the annual rate
of 6% per annum, payable semi-annually on March 31 and September 30 of each
year. The dividend may be paid at the Company's option in cash or shares of
Common Stock. If paid in Common Stock, the number of shares issuable as a
dividend is determined based on the amount of the dividend being paid, divided
by the "Average Quoted Price" of the Common Stock, which is defined in the
Designation to be the five-day average closing bid price of the Common Stock as
quoted on the OTC Electronic Bulletin Board or one of the NASDAQ markets (if so
listed and quoted) or any other exchange where the Common Stock is listed and
quoted. All dividends owing to the date of conversion are payable upon any
conversion.
Voting Rights
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Generally, the Series B Preferred does not have voting rights, although
it is entitled to one vote per share on those matters upon which all classes of
a Colorado corporation's shares are entitled by law to vote upon by class. In
that case, a majority of the Series B Preferred Stock, voting as a class, is
required to approve any such matter. On any matter that the Series B Preferred
would be entitled to vote upon in the same class as Common Stock, each share of
the Series B Preferred is entitled to that number of votes equal to the number
of shares of Common Stock into which it would be convertible as of the record
date for the matter being voted upon.
Conversion Terms
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50% of the Series B Preferred Stock is convertible at the option of the
holders into shares of the Company's Common Stock beginning on the earlier of 90
days after its issuance date or five days after notice by the Securities and
Exchange Commission that the registration statement (to be filed pursuant to the
terms of the Registration Rights Agreement) (the "Series B Registration
Statement") may be declared effective. Thirty days thereafter, the remaining
shares of the Series B Preferred becomes convertible into Common Stock. The rate
at which the Series B Preferred is convertible (per share of Series B Preferred
Stock) into Common Stock is equal to 80% of the average of the closing bid price
of the Common Stock over the five trading days prior to conversion (the
"Conversion Rate"). The Company may convert the Series B Preferred into Common
Stock at its option at any time after the close of the business on the second
anniversary of the effectiveness date of the Series B Registration Statement at
the then-applicable Conversion Rate.
Subject to certain exceptions applicable to mandatory conversions at
the behest of the Company and automatic conversions upon the occurrence of
certain "Fundamental Changes" (as defined in the Designation), to the extent
that convertibility of Series B Preferred would result in beneficial ownership
(as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934,
as amended) by a holder in excess of 4.99% of the Company's Common Stock, the
number of shares of Series B Preferred that result in such excess beneficial
ownership is not then convertible, notwithstanding any other provision making
them eligible for conversion.
Registration Rights
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The Company also entered into an agreement (the "Registration Rights
Agreement") with the purchasers of the Series B Preferred to file a registration
statement with the SEC covering the Common Stock underlying the Series B
Preferred and the Warrants within 30 days of the Closing Date (the "Series B
Registration Statement"), to be effective within 90 days of the Closing Date. If
the Company fails to file the Series B Registration Statement within 30 days of
the Closing Date (the "Required Filing Date"), a late filing penalty becomes due
and payable one day thereafter in the amount of 3% of the purchase price of the
Series B Preferred Stock, with an additional 3% penalty due on each monthly
anniversary following the Required Filing Date during which the Series B
Registration Statement has not been filed. If the Series B Registration
Statement is not effective with the SEC on or before the earlier of five days
after notice from the SEC that it may be declared effective or 90 days of the
Closing Date (the "Required Effective Date"), a penalty equal to 3% of the
purchase price of the Series B Preferred will be due and owing by the Company to
the holders, with an additional penalty equal to 2% of the purchase price due
and owing on each monthly anniversary thereafter during which the Series B
Registration Statement is not declared effective. In addition, if the Series B
Registration Statement has not been filed within 60 days of the Closing Date or
has not been declared effective within 150 days of the Closing Date, the holders
of the Series B Preferred may require the Company to redeem the Series B
Preferred for $1.25 per share, plus all accrued dividends.
The filing by the Company of the Series B Registration Statement will
activate certain prior registration rights granted by the Company to holders of
certain of its securities. The Company estimates that in addition to the shares
it will be required to register to cover conversions of the Series B Preferred,
it will include up to an approximately 7,000,000 additional shares of Common
Stock on the Series B Registration Statement to honor such registration rights
(including 150% of the shares needed to cover conversions of the 6% Debentures).
This estimated share number is based upon a last sale price of the Company's
Common Stock of $.875 as of May 10, 1999.
Amendment of 6% Debentures
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Contemporaneously with the initial closing of the Series B Preferred
placement the holders of all $2,000,000 face value of the 6% Debentures agreed
to accept payment of all interest owing through June 30, 1999 (including past
due interest) and penalties owing by the Company for failure to timely file a
registration statement to register the shares of Common Stock underlying the 6%
Debentures. In total the Company issued a total of 454,705 shares of Series B
Preferred to the holders of the 6% Debentures to cover $454,705 of interest and
penalties. The 6% Debenture holders also agreed to waive all past defaults on
the 6% Debentures arising out of the failure to pay interest or timely register
the underlying shares of Common Stock. The holders further agreed not to declare
the 6% Debentures in default for failure to pay interest or register the
underlying shares of Common Stock unless and until the holders of the Series B
Preferred have the right to require the Company to redeem the Series B Preferred
in the event the Company fails to either file the Series B Registration
Statement within 60 days of the Closing Date or achieve effectiveness of the
Series B Registration Statement within 150 days of the Closing Date. The Company
also agreed to include the shares underlying the 6% Debentures in the Series B
Registration Statement and that the same cash penalty provisions as apply to the
Series B Preferred will apply to the 6% Debentures in the event the Company
fails to file the Series B Registration Statement within 30 days of the Closing
Date and to achieve effectiveness of it within 90 days of the Closing Date.
Item 7. Financial Statement and Exhibits.
The following Exhibits are filed as part of this report:
Exhibit
Number Description of Exhibit
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3.1 Articles of Amendment to the Articles of Incorporation
(including Designation of Series B Cumulative Convertible
Redeemable Preferred Stock) filed by the Company on April 29, 1999
4.1 Form of Series B Preferred Stock Securities Purchase Agreement
entered into with purchasers of Series B Preferred Stock as of
April 30, 1999
4.2 Form of Series B Preferred Stock Registration Rights Agreement
entered into with purchasers of Series B Preferred Stock as of
April 30, 1999
4.3 Form of Common Stock Purchase Warrant issued to cash purchaser of
Series B Preferred Stock as of April 30, 1999
4.4 Form of Waiver of Rights and First Amendment to Debenture Agreement
(relating to 6% Convertible Subordinated Debentures Due July 21, 2000
entered into as of April 30, 1999
4.5 Form of Supplement to Series B Preferred Stock Securities Purchase
Agreement entered into with holders of the Company's 6% Debentures as
of April 30, 1999
4.6 First Amendment to Note and Common Stock Purchase Agreement entered
into with RBB Bank Aktiengesellschaft AG as of April 22, 1999
99.1 Press Release issued by the Company dated May 7, 1999
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U.S. Wireless Data, Inc.
(Registrant)
May 10, 1999 By /s/ Robert E. Robichaud
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(Date) (Signature)
Robert E. Robichaud
Chief Financial Officer
U.S. WIRELESS DATA, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
FIRST: That the name of the Corporation is U.S. Wireless Data, Inc.
SECOND: That the text of the Amendment to the Articles of
Incorporation of the Corporation determining the designations, preferences,
limitations and relative rights of the Series B Preferred Stock is set
forth on Exhibit A attached hereto and is incorporated herein by reference.
THIRD: That the Amendment was adopted on April 22, 1999.
FOURTH: That the Amendment was duly adopted by the Board of Directors
of the Corporation.
IN WITNESS WHEREOF, U.S. Wireless Data, Inc. has caused these Articles of
Amendment to be duly executed this 28th day of April, 1999. U.S. Wireless Data,
Inc.
By: /s/ Rod Stambaugh
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Rod Stambaugh
President
ATTEST:
/s/ Robert E. Robichaud
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Robert E. Robichaud,
Secretary
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Exhibit A
DESIGNATION OF SERIES B CUMULATIVE
CONVERTIBLE REDEEMABLE PREFERRED STOCK
U.S. Wireless Data, Inc., a Colorado corporation (the
"Corporation"), hereby designates the preferences, limitations and relative
rights of its Series B Cumulative Convertible Redeemable Preferred Stock as
follows:
A. Description and Designation of Series B Preferred
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1. Designation and Definitions.
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(a) Designation. Five Million (5,000,000) shares of the
Corporation's 15,000,000 total authorized shares of no par value preferred stock
are hereby designated as Series B Cumulative Convertible Redeemable Preferred
Stock (hereinafter referred to as the "Series B Preferred"). The Series B
Preferred shall have a stated value (original issue price) of one dollar ($1.00)
per share (the "Original Issue Price").
(b) Certain Definitions. As used herein, the following terms,
unless the context otherwise requires, have the following respective meanings:
(i) "Average Quoted Price" means the average
of the closing bid price of the Common Stock of the Corporation as reported by
the Nasdaq Bulletin Board, Nasdaq SmallCap Market or Nasdaq National Market or,
if the Corporation's Common Stock is no longer traded on a Nasdaq market, such
other exchange on which the Corporation's Common Stock is then traded, for the
five (5) trading days immediately preceding any holder's Conversion Date, the
Mandatory Conversion Date (as defined in Section 5(c) below) or the date of the
consummation or closing of a Fundamental Change, as the case may be.
(ii) "Conversion Date" means each date on which the
Corporation receives by
telecopy written notice in accordance with Section 5(j) hereof from a holder of
Series B Preferred that such holder elects to convert shares of its Series B
Preferred.
(iii) "Fundamental Change" means: (i) any sale,
lease, exchange or other transfer of all or substantially all of the assets of
the Corporation; or (ii) any merger or consolidation to which the Corporation is
a party. Notwithstanding the foregoing, the following shall not be a Fundamental
Change: A merger or consolidation (a) to which the Corporation is a party; (b)
in which it is the surviving corporation and there is no resulting
reclassification of the outstanding Common Stock; and (c) after giving effect to
which,
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persons who were, immediately before the consummation or closing of such merger
or consolidation, holders of outstanding Common Stock will be the direct or
indirect owners of securities of the Corporation possessing, on a fully diluted
basis, at least seventy-five percent (75%) of the voting power of all voting
securities of the Corporation (excluding, for purposes of such computation, any
such person who also is a party to such merger or consolidation).
(iv) "Issue Date" means, with respect to each share
of Series B Preferred held by any holder, the date on which the Corporation
originally issued such share to such holder (irrespective of any subsequent
transfer or other disposition of such share to any other holder).
2. Dividends.
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(a) Preferred Dividend - Cash and/or In-Kind. When and as
declared by the Board of Directors and to the extent permitted by the Colorado
Business Corporation Act, the Corporation shall pay preferential dividends to
the holders of the Series B Preferred as provided in this Section 2(a).
(i) Preferred Dividend. Except as otherwise
provided herein, dividends on each share of Series B Preferred shall accrue,
cumulatively on a daily basis, at the rate of six percent (6%) per annum of the
Original Issue Price, from and including the Issue Date of such share to and
including the date on which the Liquidation Value of such share is paid or such
share is converted in accordance with the provisions hereof (the "Preferred
Dividend"). Such Preferred Dividend will accrue whether or not it has been
declared and whether or not there are profits, surplus or other funds of the
Corporation legally available for its payment.
(ii) Semi-Annual Payments. Commencing on
September 30, 1999, the Preferred Dividend shall be payable in cash (subject to
Section 2(a)(v) below) semi-annually, for the actual number of days elapsed, on
each March 31 and September 30, to the holders of record of shares of Series B
Preferred as of the tenth (10th) trading day preceding the applicable dividend
payment date.
(iii) No Interest. Accrued but unpaid Preferred
Dividends shall not bear interest.
Preferred Dividends paid in cash in an amount less than the total amount of such
dividends at the time accrued and payable shall be allocated on a share-by-share
basis among all shares of Series B Preferred at the time outstanding.
(iv) Payment Upon Conversion. On the date on
which any holder's shares of Series B Preferred are converted into Common Stock
pursuant to Section 5 hereof, the accrued Preferred Dividend with respect to the
shares so converted shall be paid to such holder. All accrued Preferred
Dividends also shall be payable upon the liquidation,
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dissolution or winding up of the Corporation.
(v) Payment in Common Stock. The Corporation,
at its sole discretion, may pay the Preferred Dividends in cash or in shares of
Common Stock at the then fair market value per share of Common Stock as of the
date on which the Preferred Dividend is payable. For purposes of this Section
2(a)(v), fair market value shall be the average of the closing bid price of the
Common Stock of the Corporation as reported by the Nasdaq SmallCap Market or
Nasdaq National Market or, if the Corporation's Common Stock is no longer traded
on a Nasdaq market, such other exchange on which the Corporation's Common Stock
is then traded, for the five (5) trading days immediately preceding the date on
which the Preferred Dividend is payable.
(vi) Fractional Shares. Notwithstanding
anything herein to the contrary, no fractional shares shall be issued pursuant
to this Section 2, and the number of shares of Common Stock issued upon the
payment of the Preferred Dividend shall be rounded up or down to the nearest
whole share, with fractional shares of 0.5 or greater being rounded up.
(b) Declared Dividends on Common Stock. If the Board of
Directors shall declare a cash dividend payable upon the then outstanding shares
of Common Stock (other than a stock dividend on the Common Stock distributed
solely in the form of additional shares of Common Stock), the holders of the
Series B Preferred Stock shall be entitled to the amount of dividends on the
Series B Preferred as would be declared payable on the largest number of whole
shares of Common Stock into which the shares of Series B Preferred held by each
holder thereof could be converted pursuant to the provisions of Section 5
hereof, such number determined as of the record date for the determination of
holders of Common Stock entitled to receive such dividend. Such determination of
"whole shares" shall be based upon the aggregate number of shares of Series B
Preferred held by each holder, and not upon each share of Series B Preferred so
held by the holder.
(c) Dividends on Other Securities. Subject to the foregoing
provisions of this Section 2, the Board of Directors may declare and the
Corporation may pay or set apart for payment, or cause the accrual of, stated or
cumulative dividends and other distributions on the Series A Preferred Stock of
the Corporation, or any other series of preferred stock hereafter designated,
and may purchase or otherwise redeem any of the same (or any warrants, rights,
options or other securities exercisable therefor or convertible or exchangeable
there into), and the holders of Series B Preferred shall not be entitled to
share therein.
3. Liquidation, Dissolution or Winding Up.
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(a) Treatment at Liquidation, Dissolution or Winding Up. In
the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, or in the event of its insolvency, before any
distribution or payment is made to
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any holders of Common Stock or any other class or series of capital stock of the
Corporation designated to be junior to the Series B Preferred, and subject to
the liquidation rights and preferences of any class or series of Preferred Stock
designated by the Board of Directors in the future to be senior to or on a
parity with the Series B Preferred with respect to liquidation preferences, the
holder of each share of Series B Preferred shall be entitled to be paid first
out of the assets of the Corporation available for distribution to holders of
the Corporation's capital stock of all classes, whether such assets are capital,
surplus or earnings, an amount equal to the Original Issue Price per share of
Series B Preferred held by any holder, plus the Preferred Dividend accruing to
such share of Series B Preferred pursuant to Section 2 above (the "Liquidation
Value"). For purposes hereof, the Series B Preferred shall rank on liquidation
junior to the Series A Preferred Stock.
If, upon liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of the Series B Preferred
the full amount to which they otherwise would be entitled, the holders of Series
B Preferred shall share ratably in any distribution of available assets pro rata
in proportion to the respective liquidation preference amounts which would
otherwise be payable upon liquidation with respect to the outstanding shares of
the Series B Preferred if all liquidation preference amounts with respect to
such shares were paid in full, based upon the aggregate Liquidation Value
payable upon all shares of Series B Preferred then outstanding.
After such payment shall have been made in full to the holders
of the Series B Preferred, or funds necessary for such payment shall have been
set aside by the Corporation in trust for the account of holders of the Series B
Preferred so as to be available for such payment, the remaining assets available
for distribution shall be distributed ratably among the holders of the Common
Stock and any class or series of capital stock designated to be junior to the
Series B Preferred (if any) in right of payment upon any liquidation,
dissolution or winding up of the Corporation.
The amounts set forth above shall be subject to equitable
adjustment by the Board of Directors whenever there shall occur a stock
dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the capital
structure of the Series B Preferred.
(b) Distributions Other than Cash. Whenever the distributions
provided for in this Section shall be payable in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors. All distributions (including
distributions other than cash) made hereunder shall be made pro rata to the
holders of Series B Preferred.
(c) Events Not Deemed a Liquidation. Neither the merger or
consolidation of the Corporation into or with any other corporation(s), nor the
sale or transfer by the Corporation of all or any part of its assets, nor the
reduction of the capital stock of the
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Corporation, will be deemed to be a liquidation, dissolution or winding up of
the Corporation under this Section 3.
4. Voting Power.
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(a) General. The holders of Series B Preferred will not have
any voting rights except as set forth below or as otherwise from time to time
required by law.
To the extent that under Colorado law the vote of the holders
of Series B Preferred, voting separately as a class, is required to authorize a
given action of the Corporation, the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of Series B Preferred shall
constitute the approval of such action by the class. To the extent that under
Colorado law the holders of Series B Preferred are entitled to vote on a matter
with holders of Common Stock, voting together as one class, each share of Series
B Preferred shall be entitled to a number of votes equal to the number of shares
of Common Stock into which it is then convertible using the record date for the
taking of such vote of stockholders as the date as of which the Conversion Price
is calculated. Holders of Series B Preferred shall be entitled to notice of all
shareholders meetings or written consents regardless of whether they would be
entitled to vote with respect thereto, which notice would be provided pursuant
to the Corporation's by-laws and applicable statutes.
(b) Amendments to Charter. For so long as there are any shares
of Series B Preferred outstanding, the Corporation shall not amend its Articles
of Incorporation or this Certificate of Designation without the approval, by
vote or written consent, of the holders of at least a majority of the then
outstanding shares of Series B Preferred, voting together as a class, each share
of Series B Preferred to be entitled to one vote in each instance, if such
amendment would adversely affect the rights of the holders of Series B
Preferred; provided, that the creation, or increase in the authorized number of
shares, of any class or series of stock ranking prior to or on a parity with the
Series B Preferred either as to dividends or upon liquidation shall not be
deemed to adversely affect the rights of the holders of Series B Preferred for
purposes of this Section 4(b).
5. Conversion Rights.
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(a) Conversion at the Option of Holders. Beginning the earlier
of ninety (90) days after the Issue Date to such holder, or five (5) days after
notice by the Securities and Exchange Commission that the Registration Statement
(filed with the SEC pursuant to the Registration Rights Agreement, dated the
date hereof, between the Company and the holders of the Series B Preferred) may
be declared effective, each such holder of Series B Preferred shall have the
right, at such holder's option, to convert up to fifty percent (50%) of the
shares of Series B Preferred held by such holder into such number of fully paid
and nonassessable shares of Common Stock as shall be determined by multiplying
the number of shares of Series B Preferred to be converted by a fraction, the
numerator of which is the Original Issue Price, and the denominator of which is
the applicable Conversion Price (as defined below). Beginning thirty (30) days
thereafter, all of the Preferred Stock shall, at
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the option of the Holder, be convertible.
(b) Conversion Price. The conversion price per share (the
"Conversion Price") shall be equal to Eighty Percent (80%) of the Average Quoted
Price.
(c) Conversion at Option of Corporation. At any time after the
close of business on the second (2nd) year anniversary of the date on which the
Securities and Exchange Commission declares effective the registration statement
registering the shares of Common Stock issuable upon conversion of the Series B
Preferred, all of the shares of Series B Preferred shall be convertible, at the
option of the Corporation, into such number of fully paid and nonassessable
shares of Common Stock as shall be determined by multiplying the number of
shares of Series B Preferred outstanding on the Mandatory Conversion Date (as
defined below) by a fraction, the numerator of which is the Original Issue
Price, and the denominator of which is the applicable Conversion Price.
The Corporation shall give notice of its exercise of such conversion
option to all holders of Series B Preferred no later than five (5) trading days
before the date as of which the Corporation has elected to make such conversion
effective (such effective date of the conversion, the "Mandatory Conversion
Date"). Each holder of Series B Preferred as of the Mandatory Conversion Date
shall, promptly after such date, surrender for conversion to the Corporation at
its principal office or to any transfer agent for the Series B Preferred or the
Common Stock all certificates representing all shares of Series B Preferred held
by such holder, accompanied by a written notice specifying the name or names in
which such holder wishes the certificate(s) for shares of Common Stock to be
issued.
Effective as of the close of business on the Mandatory Conversion Date,
each share of Series B Preferred then outstanding shall be (and be deemed to
have been) converted automatically, without any further action by the holders
thereof, into shares of Common Stock. Such conversion shall be deemed to have
occurred whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent.
(d) Limitation on Number of Shares. Additionally,
notwithstanding anything set forth in this Section 5 to the contrary:
(i) in no event shall any holder of Series B
Preferred, prior to the earlier to occur of the Mandatory Conversion Date or the
date of the consummation or closing of a Fundamental Change, be entitled to
convert Series B Preferred into shares of Common Stock to the extent that (x)
the number of shares of the Corporation's Common Stock beneficially owned by
such holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the shares of Series B Preferred held by such holder) plus (y) the number of
shares of Common Stock issuable upon such conversion would result in beneficial
ownership by the holder and its affiliates of more than 4.99% of the shares of
Common Stock then outstanding. For purposes of this Section 5(d), beneficial
ownership shall be determined in
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accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D and 13G promulgated thereunder, except as otherwise
provided in clause (x) of this Section 5(d). Each holder shall, upon delivering
to the Corporation a notice of election to convert shares of Series B Preferred
in accordance with Section 5(j) hereof, be required to provide the Corporation
with a certification in form and substance reasonably satisfactory to the
Corporation, that the conversion of the Series B Preferred being converted will
not result in such holder and its affiliates beneficially holding more than
4.99%, determined as heretofore provided, of the outstanding shares of Common
Stock on such Conversion Date. If the holder cannot make such certification, the
shares of Series B Preferred to be converted shall not be convertible.
Notwithstanding the foregoing, upon the Mandatory Conversion Date or upon the
consummation or closing of a Fundamental Change, all such shares of Series B
Preferred then outstanding shall be converted into Common Stock in accordance
with Section 5(c) or 5(h), as applicable.
(ii) the maximum number of shares which will be
issued on conversion of the Series B Preferred and exercise of the Warrants, if
any, is 3,472,583 (20% of the outstanding shares) (the "Share Cap") unless and
until the shareholders of the Corporation shall have approved the issuance of
shares of Common Stock beyond the Cap, if such approval is required by the NASD
or NASDAQ, subject to the redemption rights of the holders of the Series B
Preferred set forth in Sections 4(i)(x) and (y) of the Securities Purchase
Agreement.
(e) Intentionally Deleted.
(f) Dividends Other Than Common Stock Dividends. In the event
the Corporation shall make or issue, or shall fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution (other than a distribution in liquidation or other distribution
otherwise provided for herein) with respect to the Common Stock payable in (i)
securities of the Corporation other than shares of Common Stock, or (ii) other
assets (excluding cash dividends or distributions), then and in each such event
provision shall be made so that the holders of the Series B Preferred shall
receive upon conversion thereof in addition to the number of shares of Common
Stock receivable thereupon, the number of securities or such other assets of the
Corporation which they would have received had their Series B Preferred been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the Conversion
Date, retained such securities or such other assets receivable by them during
such period, giving application to all other adjustments called for during such
period under this Section 5 with respect to the rights of the holders of the
Series B Preferred.
(g) Capital Reorganization or Reclassification. If the Common
Stock issuable upon the conversion of the Series B Preferred shall be changed
into the same or different number of shares of any class or classes of capital
stock, whether by capital reorganization, recapitalization, reclassification or
otherwise (other than a subdivision or
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combination of shares or stock dividend provided for elsewhere in this Section
5, or the sale of all or substantially all of the Corporation's capital stock or
assets to any other person), then and in each such event the holders of Series B
Preferred shall have the right thereafter to convert such shares into the kind
and amount of shares of capital stock and other securities and property
receivable upon such reorganization, recapitalization, reclassification or other
change by the holders of the number of shares of Common Stock into which such
shares of Series B Preferred might have been converted immediately prior to such
reorganization, recapitalization, reclassification or change, all subject to
further adjustment as provided herein.
(h) Mandatory Conversion - Fundamental Change. If any
Fundamental Change shall occur, then each share of Series B Preferred
outstanding as of the date of the consummation or closing thereof shall be (and
be deemed to have been) converted automatically, without any further action by
the holders thereof, into such number of fully paid and nonassessable shares of
Common Stock as shall be determined by multiplying the number of shares of
Series B Preferred outstanding on the date of such consummation or closing date
by a fraction, the numerator of which is the Original Issue Price, and the
denominator of which is the applicable Conversion Price. Such conversion shall
be deemed to have occurred whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent.
The Corporation shall give notice of a proposed or anticipated
Fundamental Change to all holders of the Series B Preferred not later than ten
(10) trading days before the expected closing or consummation of such
Fundamental Change. The Corporation also shall give prompt notice of the closing
or consummation of such Fundamental Change to all holders of record of the
Series B Preferred as of the date of such closing or consummation. Each holder
of Series B Preferred shall thereupon promptly surrender for conversion, to the
Corporation at its principal office or to any transfer agent for the Series B
Preferred or the Common Stock, all certificates representing all shares of
Series B Preferred held by such holder, accompanied by a written notice
specifying the name or names in which such holder wishes the certificate(s) for
shares of Common Stock to be issued.
(i) Certificate as to Adjustments; Notice by Corporation. In
each case of an adjustment or readjustment of the Original Issue Price, the
Corporation at its expense will furnish each holder of Series B Preferred so
affected with a certificate prepared by an officer of the Corporation, showing
such adjustment or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.
(j) Exercise of Conversion Privilege. To exercise its
conversion privilege, a holder of Series B Preferred shall give written notice
by telecopy to the Corporation at its principal office that such holder elects
to convert shares of its Series B Preferred and shall thereafter surrender the
original certificate(s) representing the shares being converted to the
Corporation at its principal office together with an originally executed copy of
such notice. Such notice shall also state the name or names (with its address or
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addresses, as well as the address(es) for delivery) in which the certificate(s)
for shares of Common Stock issuable upon such conversion shall be issued. The
certificate(s) for the shares of Series B Preferred surrendered for conversion
shall be accompanied by proper assignment thereof to the Corporation or in
blank. As promptly as practicable after the Corporation receives the original
certificate(s) for the shares of Series B Preferred surrendered for conversion,
the proper assignment thereof to the Corporation or in blank and the original
notice of conversion (collectively, the "Original Documentation"), but in no
event more than three (3) trading days after the Corporation's receipt of the
Original Documentation, the Corporation shall issue and deliver to the holder of
the shares of Series B Preferred being converted, at the addresses set forth
therefor by the holder, such certificate(s) as it may request for the number of
whole shares of Common Stock issuable upon the conversion of such shares of
Series B Preferred in accordance with the provisions of this Section 5. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Series B Preferred shall cease and the
person(s) in whose name(s) any certificate(s) for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder(s) of
record of the shares of Common Stock represented thereby. If the Corporation
fails to issue and deliver to such holder such certificate(s) for shares of
Common Stock within three (3) trading days after the Corporation's receipt of
the Original Documentation, the Corporation shall pay the liquidated damages set
forth in Section 5 of the Stock Purchase Agreement between the Corporation and
the purchasers of the Series B Preferred (the "Stock Purchase Agreement"). No
issuance of shares in any name other than the original holder shall be effected
unless such transfer is in compliance with the transfer restrictions contained
in the Stock Purchase Agreement.
(k) Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares shall be issued upon the conversion of
shares of Series B Preferred. Instead of any fractional shares of Common Stock
that would otherwise be issuable upon conversion of Series B Preferred, the
number of shares issuable upon conversion shall be rounded up or down to the
nearest whole share, with fractional shares of 0.5 or greater being rounded up.
(l) Partial Conversion. In the event some but not all of the
shares of Series B Preferred represented by a certificate(s) surrendered by a
holder are converted, the Corporation shall execute and deliver to or on the
order of the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series B Preferred which were not
converted. Such new certificate shall be so delivered on or prior to the date
set forth in Section 5(j) for the delivery of certificates for shares of Common
Stock.
(m) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series B Preferred, 150% of such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred (including any shares of
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<PAGE>
Series B Preferred represented by any warrants, options, subscription or
purchase rights for the Series B Preferred), and if at any time the number of
authorized but unissued shares of Common Stock shall not be 150% of the number
of such shares sufficient to effect the conversion of all then outstanding
shares of the Series B Preferred (including any shares of Series B Preferred
represented by any warrants, options, subscriptions or purchase rights for the
Series B Preferred), then the Corporation shall be deemed to be in breach and
default of its obligations hereunder, and in addition to all charges, claims and
rights at law or in equity that each holder shall be entitled to, the
Corporation shall use all means reasonably available to it, and promptly take
any and all actions as may be necessary, to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be 150% of the amount
sufficient for such purpose.
6. Redemption and Repurchase Rights.
--------------------------------
The Corporation shall have no right to redeem and holders of shares of
Series B Preferred shall have no right to cause the Corporation to redeem, any
or all of the outstanding shares of Series B Preferred, except as follows:
(a) if a holder of shares of Series B Preferred submits
Original Documentation relating to the conversion of shares of Series B
Preferred in the manner provided for in Section 5(j) and the number of shares of
Common Stock issuable upon such conversion is limited by reason of the Share Cap
described in Section 5(d)(ii), the Corporation shall, on demand of any holder of
Series B Preferred, redeem any portion of the Series B Preferred not exercisable
as a result of such limitation at a redemption price equal to $1.25 per share
plus accrued dividends (the "Share Cap Redemption Price"). The Share Cap
Redemption Price shall be payable within five (5) business days after demand for
such redemption is made.
(b) if (i) the Registration Statement is not filed within
sixty (60) days from the Closing Date (as defined in the Registration Rights
Agreement) or (b) the Required Effective Date (as defined in the Registration
Rights Agreement) is greater than one hundred fifty (150) days after the Closing
Date, or (c) the effectiveness of the Registration Statement is not maintained
during the Registration Period (as defined in the Registration Rights Agreement)
each holder may, at its option, require the Company to redeem the Preferred
Shares in full, within three (3) days, in cash, at the Share Cap Redemption
Price.
(c) in the event that the Company does not register the
Preferred Stock within 150 days after the Closing Date (as defined in the
Registration Rights Agreement), as more particularly described in Section 2 of
the Registration Rights Agreement, the Company shall redeem the Preferred Shares
at the Share Cap Redemption Price within three (3) business days after it has
received demand for such redemption from the holders of the Series B Preferred.
In exercising its rights hereunder or pursuant to Section 6(a) above the holders
can individually exercise their respective redemption rights without the
participation
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of the other holders.
7. Notices of Record Date. In the event of any:
-----------------------------------------------
(a) taking by the Corporation of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right, or
(b) capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other Corporation, or
any other entity or person, or
(c) voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, then and in each such event the Corporation shall
telecopy and thereafter mail or cause to be mailed to each holder of Series B
Preferred a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and a description
of such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding up. Such
notice shall be telecopied and thereafter mailed by first class mail, postage
prepaid, or by express overnight courier service, at least ten (10) days prior
to the date specified in such notice on which such action is to be taken.
8. General.
--------
(a) Replacement of Certificates. Upon the Corporation's
receipt, from the holder of any certificate evidencing shares of Series B
Preferred, of evidence reasonably satisfactory to the Corporation (an affidavit
of such holder will be satisfactory) of the ownership and the loss, theft,
destruction or mutilation of such certificate, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation, and in the case of any such mutilation, upon surrender of such
certificate, the Corporation (at its expense) shall execute and deliver to such
holder, in lieu of such certificate, a new certificate that represents the
number of shares represented by, is dated the date of, is issued in the name of
the holder of, and is substantially identical in form of, such
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lost, stolen, destroyed or mutilated certificate.
(b) Payment of Taxes. The Corporation shall pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed in connection with the issuance or delivery of any shares of Common
Stock (or other of the Corporation's securities) that results from (i) the
conversion of shares of Series B Preferred pursuant to this Certificate of
Designations or (ii) the application of Section 2(a)(v) hereof. Notwithstanding
the foregoing, if the Corporation, pursuant to a notice from a holder of any
shares of Series B Preferred, effects the issuance or delivery of any shares of
Common Stock (or other of the Corporation's securities) in any name(s) other
than such holder's name, then such holder shall deliver to the Corporation with
the aforesaid notice (A) all transfer taxes and other governmental charges
payable upon the issuance or delivery of securities in such other name(s) or (B)
evidence satisfactory to the Corporation that such taxes and charges have been
or shall be paid in full.
(c) Status of Redeemed or Converted Shares. Shares of Series B
Preferred that are redeemed, converted or otherwise acquired by the Corporation
in any manner (including by purchase or exchange) shall be canceled and upon
cancellation (i) shall no longer be deemed to be outstanding, (ii) shall become
authorized but unissued shares of preferred stock undesignated as to series and
(iii) may be reissued as part of another series of preferred stock.
[End of Certificate of Designation]
A-12
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of April 30,
1999, is entered into by and between U.S. Wireless Data, Inc., a Colorado
corporation, with headquarters located at 2200 Powell Street, Suite 800,
Emeryville, California 94608 (the "Company"), and the undersigned (referred to
individually as the "Buyer" and collectively as the ("Buyers").
W I T N E S S E T H:
WHEREAS, the Company and the Buyers are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under Regulation
D ("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), and/or Section 4(2) of the 1933 Act;
WHEREAS, in consideration of the foregoing, the Buyer wishes
to purchase, upon the terms and subject to the conditions of this Agreement, 6%
Cumulative Convertible Redeemable Preferred Stock, Series B, $1.00 stated value
(the "Preferred Stock"), of the Company which will be convertible into shares of
Common Stock, no par value per share of the Company (the "Common Stock"),
together with the Common Stock Purchase Warrants described herein, upon the
terms and subject to the conditions of such Preferred Stock, and subject to
acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase; Certain Definitions. (i) The undersigned hereby
agrees to purchase from the Company shares of the Preferred Stock in the amount
set forth on the signature page of this Agreement, out of a total offering of
not less than $1,500,000 and not in excess of $5,000,000 of such Preferred
Stock, and having the terms and conditions set forth in the Certificate of
Designations, attached hereto as Annex I (the "Certificate of Designations").
The purchase price for the Preferred Stock shall be as set forth on the
signature page hereto (the "Purchase Price") and shall be payable in United
States Dollars.
(ii) As used herein, the term "Preferred Stock"
includes all preferred shares, if any, issued as dividends thereon, unless the
context otherwise requires.
(iii) As used herein, the term "Securities" means the
Preferred Stock and the Common Stock issuable upon conversion of the Preferred
Stock.
b. Form of Payment. The Buyer shall pay the purchase price for
the Preferred Stock by delivering immediately available good funds in United
States Dollars to the escrow agent (the
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"Escrow Agent") identified in the Joint Escrow Instructions attached hereto as
Annex II (the "Joint Escrow Instructions"). No later than the Closing Date (as
defined below), the Company shall deliver one or more certificates representing
the Preferred Stock duly executed on behalf of the Company (collectively, the
"Certificate") to the Escrow Agent. By signing this Agreement, the Buyer and the
Company, and subject to acceptance by the Escrow Agent, each agrees to all of
the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
c. Method of Payment. Payment into escrow of the Purchase
Price for the Preferred Stock shall be made by wire transfer of funds to:
City National Bank
1950 Avenue of the Stars
Los Angeles, CA 90067
ABA# 122016066
For credit to the account of Law Offices of Michael S. Rosenblum
Escrow for Bold Street, LLC
Account No.: 009477772
Not later than 1:00 p.m., New York time, on the date which is one (1) New York
Stock Exchange trading day after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the aggregate purchase
price for the Preferred Stock, in immediately available funds. Time is of the
essence with respect to such payment, and failure by the Buyer to make such
payment shall allow the Company to cancel this Agreement.
d. Escrow Property. The Purchase Price and the Certificate
delivered to the Escrow Agent as contemplated by Sections 1(b) and (c) hereof
are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
Each Buyer represents and warrants to, and covenants and
agrees with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement (as that term is defined in the
Registration Rights Agreement defined below), the Buyer is purchasing the
Preferred Stock and will be acquiring the shares of Common Stock issuable upon
conversion of the Preferred Stock (the "Converted Shares") for its own account
for investment, and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof.
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in
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<PAGE>
making investments of the kind described in this Agreement and the related
documents, (iii) able, by reason of the business and financial experience of its
officers (if an entity) and professional advisors (who are not affiliated with
or compensated in any way by the Company or any of its affiliates or selling
agents), to protect its own interests in connection with the transactions
described in this Agreement, and the related documents, and (iv) able to afford
the entire loss of its investment in the Securities.
c. All subsequent offers and sales of the Preferred Stock and
the shares of Common Stock representing the Converted Shares (such Common Stock
sometimes referred to as the "Shares") by the Buyer shall be made pursuant to
registration of the Shares under the 1933 Act or pursuant to an exemption from
registration.
d. The Buyer understands that the Preferred Stock are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Stock.
e. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Preferred Stock and
the offer of the Shares which have been requested by the Buyer, including Annex
V hereto. The Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
the Buyer has also had the opportunity to obtain and to review (i) the Company's
annual report on Form 10-KSB for the year ending June 30, 1998, (ii) the
Company's reports on Form 10-QSB for the periods ending September 30, 1998 and
December 31, 1998 (the "SEC Reports");
f. The Buyer understands that its investment in the
Securities involves a high degree of risk.
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
i. Notwithstanding the provisions hereof or of the Preferred
Stock, in no event (except with respect to an automatic conversion of the
Preferred Stock as provided in the Certificate of Designations) shall each Buyer
be entitled to convert any Preferred Stock to the extent that, after such
conversion, the sum of (1) the number of shares of Common Stock beneficially
owned by such Buyer and its affiliates (other than shares of Common Stock which
may be deemed beneficially owned through the
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ownership of the unconverted portion of the Preferred Stock), and (2) the number
of shares of Common Stock issuable upon the conversion of the Preferred Stock
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by such Buyer and its affiliates of more than
4.99% of the outstanding shares of Common Stock. For purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"). Any issuance by the Company to the Buyer in excess of the
limit contained in this Paragraph 3.i. shall be null and void, ab initio, and
upon notice of such invalid issuance, the Company shall correct its books and
cause its transfer agent's books to be corrected forthwith to reflect that the
Buyer's ownership of Common Stock is within the limit set forth herein. Buyer
shall immediately deliver any certificates for invalidly issued Common Stock to
the Company's transfer agent. The Company further agrees to (i) immediately
reissue certificates for Common Stock to the extent that a portion of the Common
Stock represented by said certificates have been validly issued and (ii)
immediately reissue all or a portion of those shares which were deemed invalidly
issued (at a price set forth in the original conversion notices applicable to
such shares) upon notice from the Buyer that the reissuance of such shares would
not cause such Buyer to have a beneficial ownership interest in excess of 4.99%.
With respect to the foregoing, the Company acknowledges and agrees that, it is
aware that some of the Buyers of the Securities may have the same investment
advisor or "sub-advisor" and that, based on such limited relationship alone,
such entities are not a group for the purposes of determining beneficial
ownership pursuant to Sections 13(d) and 16 of the 1934 Act. The Company hereby
indemnifies and holds each Buyer free and harmless in connection with any and
all liabilities, losses, costs and expenses, including, without limitation,
attorneys' fees and costs arising from or relating to claims made by any third
parties with respect to any and all purported violations by each Buyer under
Sections 13(d) and 16 resulting from a conversion(s) of Preferred Stock, unless
such claim arises from such Buyer's default of its obligations hereunder, or
representations or warranties contained herein.
j. Buyer represents that it neither is nor will be obligated
for any finders' fee or commission nor is it aware of any such fee or commission
payable in connection with this transaction other than as set forth on the Joint
Escrow Instructions (attached hereto as Annex II). Buyer agrees to indemnify and
to hold harmless the Company from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which such Buyer or
any of its officers, partners, employees, or representatives is responsible.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants and hereby covenants and
agrees with each Buyer that:
a. Concerning the Preferred Stock and the Shares. The
Preferred Stock has been duly authorized and, when issued, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. There are no
preemptive rights of any stockholder of the Company, as such, to acquire the
Preferred Stock or the Shares.
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b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or prospects or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is listed and
traded on the NASDAQ/Bulletin Board market. The Company has received no notice,
either oral or written, with respect to the continued eligibility of the Common
Stock for such listing, and the Company has maintained all requirements for the
continuation of such listing.
c. Authorized Shares. The Company has at March 31, 1999,
14,410,689 shares of Common Stock outstanding, and has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Preferred Stock (assuming all future conversions occurred are based upon an
average 5-day closing bid of the Common Stock, as reported by Bloomberg, LP
which was one-half (1/2) of the closing bid price of the Common Stock on the
Closing Date [the "Closing Date Bid"]) and exercise of the Warrants (as defined
in Section 4.j.) at the Closing Date Bid. The Common Stock has been duly
authorized and, when issued upon conversion of the Preferred Stock in accordance
with its terms, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder.
d. Securities Purchase Agreement; Registration Rights
Agreement and Stock. This Agreement and the Registration Rights Agreement, the
form of which is attached hereto as Annex IV (the "Registration Rights
Agreement"), and the transactions contemplated hereby and thereby, have been
duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Preferred
Stock, and the Registration Rights Agreement, when executed and delivered by or
on behalf of the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject, as to
enforceability, to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. Non-contravention. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) except as disclosed in Annex V, any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock (except as herein set forth), (iii) to
its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) any
listing agreement for its Common Stock, except such conflict, breach or default
which
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<PAGE>
would not have a material adverse effect on the transactions contemplated
herein.
f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. None of the Company's SEC Reports contained,
at the time they were filed, any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading, except as corrected by an amended filing made prior to the
date hereof. Except as set forth on Annex V hereto, the Company has since June
1997 timely filed all requisite forms, reports and exhibits thereto with the
SEC.,
h. Absence of Certain Changes. Since December 31, 1998, there
has been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company and its subsidiaries, taken as a whole, except as
disclosed in Annex V or in the Company's SEC Reports. Since December 31, 1998,
the Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. Full Disclosure. There is no fact known to the Company
(other than general economic conditions known to the public generally or as
disclosed in the Company's SEC Reports), that has not been disclosed in writing
to the Buyer that (i) would reasonably be expected to have a material adverse
effect on the business or financial condition of the Company or (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement or any of the
agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements").
j. Absence of Litigation. Except as set forth in Annex V
hereto, and in the Company's SEC Reports, which the Buyer has reviewed, there is
no action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would
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have a material adverse effect on the properties, business or financial
condition. results of operation or prospects of the Company and its subsidiaries
taken as a whole or the transactions contemplated by any of the Transaction
Agreements or which would adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, any of
the Transaction Agreements.
k. Absence of Events of Default. Except as set forth in Annex
V hereto, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a material adverse effect on the Company's
financial condition or results of operations.
l. Prior Issues. Except as set forth in Annex V, during the
twelve (12) months preceding the date hereof, the Company has not issued any
Common Stock or convertible securities in capital transactions which have not
been fully disclosed in the Company's filings with the SEC. Except as set forth
in Annex V, all such issuances (except for issuances to Buyer) have been fully
converted into shares of common stock and there are no outstanding unconverted
debt or convertible securities from those transactions.
m. No Undisclosed Liabilities or Events. Except as set forth
in Annex V, the Company has no liabilities or obligations other than those
disclosed in the Company's SEC Reports or those incurred in the ordinary course
of the Company's business since December 31, 1998, and which, individually or in
the aggregate, do not or would not have a material adverse effect on the
properties, business, condition (financial or otherwise), results of operations
or prospects of the Company and its subsidiaries, taken as a whole. No event or
circumstances has occurred or exists with respect to the Company or its
properties, business, condition (financial or otherwise), results of operations
or prospects, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed.
n. No Default. Except as disclosed in Annex V, hereto, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it or its property is bound.
o. No Integrated Offering. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, made any offer or sales of any security or solicited any offers to
buy any security under circumstances that would eliminate the availability of
the exemption from registration under Regulation D in connection with the offer
and sale of the Securities as contemplated hereby.
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<PAGE>
p. Dilution. The number of Shares issuable upon conversion of
the Preferred Stock may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines prior to the conversion of the Preferred
Stock. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have a potential dilutive effect. The board of directors of the Company has
concluded that, in its good faith business judgment, such issuance is in the
best interests of the Company. The Company specifically acknowledges that its
obligation to issue the Shares upon conversion of the Preferred Stock is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.
q. Acknowledgment by Company. Company represents and warrants
that neither the Buyer, nor any persons or entities representing or purporting
to represent the Buyer have made any representation or warranty which is not
contained expressly in this Agreement or any other agreements referred to
herein. Without limiting the foregoing, Company specifically acknowledges that
the Buyer has made no representations that it is a "long term" investor in the
Company, or that it intends to hold the Preferred Stock or shares of stock in
the Company (obtained by conversions of the Preferred Stock) for any period
beyond that which is required under the Securities Act. Company further
acknowledges that the Buyer may hedge the shares of stock in the Company prior
to or after the conversions of any of the Preferred Stock, provided that such
hedging is done in compliance with the Securities Act, Securities Exchange Act,
any rules applicable to securities traded on the "OTC Bulletin Board" and the
express terms of this Agreement, the Certificate of Designation for the
Preferred Stock and the Registration Rights Agreement.
r. Brokers Fee. The Company represents that it neither is nor
will be obligated for any finders' fee or commission nor is it aware of any such
fee or commission payable in connection with this transaction other than as set
forth on the Joint Escrow Instructions (attached hereto as Annex II). The
Company agrees to indemnify and to hold harmless the Buyer from any liability
for any commission or compensation in the nature of a finders' fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, partners, employees, or
representatives is responsible.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Preferred Stock has not been and is not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and
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<PAGE>
regulations of the SEC thereunder; and (3) neither the Company nor any other
person is under any obligation to register the Securities (other than pursuant
to the Registration Rights Agreement) under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that
the Preferred Stock and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
pursuant to an effective Registration Statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to
enter into the Registration Rights Agreement on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Preferred Stock to the
Buyer under any United States laws and regulations, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns
any of the Preferred Stock, the Company shall file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.
f. Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Stock (excluding amounts paid by the Company for legal
fees, finder's fees and escrow agent fees in connection with the sale of the
Preferred Stock) for general capital purposes and, without limiting the
foregoing, shall not, directly or indirectly, use any of such proceeds for
investment in any other affiliate.
g. Future Purchases. Intentionally deleted.
h. Certain Agreements. (i) The Company covenants and agrees
that it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until one hundred eighty (180) days after
the Effective Date (as defined below).
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<PAGE>
(ii) The provisions of subparagraph (h)(i) will not apply to
(w) Common Stock issued as "restricted stock" as defined in SEC Rule 144,
provided the holder thereof holds such Common Stock for at least one year from
the date of issuance; (x) a secondary public offering of shares of Common Stock
at market; (y) an offering of convertible debentures at market or above; or (z)
the issuance of securities (other than for cash) in connection with a merger,
consolidation, sale of assets, disposition or the exchange of the capital stock
for assets, stock or other joint venture interests; provided, such securities
would not be included in the Registration Statement relating to the Shares and a
registration statement in respect of such stock shall not be filed prior to
sixty (60) days after the Effective Date.
(iii) The term "Effective Date" means the effective date of
the Registration Statement covering the Registrable Securities (as defined in
the Registration Rights Agreement).
(iv) In the event the Company breaches the provisions of this
Paragraph 4(h), the Conversion Price shall be amended to be the lesser of 75% of
the lowest two (2) day average closing bid (not necessarily consecutive) for the
fifteen (15) days prior to the Conversion Notice, but at no time in excess of
100% of the fifteen (15) day average bid price prior to Closing, and Buyer may,
within thirty (30) days after it receives written notice of such breach from the
Company, require the Company to immediately redeem all outstanding Preferred
Stock in accordance with Section 4(k)(y).
(v) Notwithstanding anything contained in this Section, it
shall not be a violation of this Agreement for the Company to issue additional
options pursuant to its 1992 Stock Option Plan, and to issue shares of its
Common Stock upon exercise of any presently outstanding option or warrant or
upon conversion of, or as dividends on, Series A Preferred Stock. The Company
shall also be entitled to register any shares underlying presently outstanding
stock options on Form S-8, to the extent not currently covered by an effective
S-8 Registration Statement.
i. Available Shares. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock equal to one hundred fifty percent (150%) of the number of shares
of Common Stock issuable upon conversion of all of the outstanding Preferred
Stock, and the exercise of the Warrants (as defined below).
j. Warrants. The Company agrees to issue to Buyer at the
Closing, transferable divisible warrants with cashless exercise provisions (the
"Warrants") for 10,000 shares of Common Stock for each $50,000 of the Purchase
Price. Such Warrants shall bear an exercise price of $1.50 per share of Common
Stock, and shall be exercisable immediately upon issuance, and for a period of
five (5) years thereafter, in the form annexed hereto as Annex VI, together with
piggy-back registration rights, and demand registration rights under the
Registration Rights Agreement.
k. Limitation on Issuance of Shares. The Company may be
limited in the number of shares of Common Stock it may issue by the "Cap
Regulations". Without limiting the other provisions thereof, the Preferred Stock
shall provide that (i) the Company will take all steps reasonably necessary to
be in a position to issue shares of Common Stock on conversion of the Preferred
Stock and/or exercise of the Warrants without violating the Cap Regulations and
(ii) if, despite taking such steps, the Company still can not issue such shares
of Common Stock due upon a Notice of Conversion without violating the Cap
Regulations (each such share, an "Unconverted Preferred Stock"), the Company
shall have the option,
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<PAGE>
in its discretion, by notice within five (5) business days, to elect either of
the following remedies:
(x) issue shares of Common Stock in accordance with such
holder's notice of conversion at a conversion purchase price equal to
the average of the closing bid price per share of Common Stock for the
five (5) consecutive trading days (subject to certain equitable
adjustments for certain events occurring during such period) preceding
the date of notice of conversion; or
(y) redeem each Unconverted Preferred Stock for an amount in
cash (the "Redemption Amount") equal to:
V x 125%
where:
"V" means the aggregate Purchase Price of such Unconverted
Preferred Stock plus any accrued but unpaid dividend thereon;
The Preferred Stock shall contain provisions substantially consistent with the
above terms, with such additional provisions as may be consented to by the
Buyer. The provisions of this paragraph are not intended to limit the scope of
the provisions otherwise included in the Preferred Stock.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the
aggregate purchase price for the Preferred Stock in accordance with Section 1(c)
hereof, the Company will irrevocably instruct its transfer agent to issue Common
Stock from time to time upon conversion of the Preferred Stock in such amounts
as specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Preferred Stock. The Company warrants
that no instruction other than such instructions referred to in this Section 5
and stop transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this Section shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Securities and, in the case of the Shares, promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right
to convert the
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<PAGE>
Preferred Stock by telecopying an executed and completed Notice of Conversion
(as defined in the Certificate of Designation) to the Company and delivering
within three (3) business days thereafter, the original Notice of Conversion,
together with the original share certificate, by express courier.
(ii) The term "Conversion Date" means, with respect
to any conversion elected by the
holder of the Preferred Stock after the Effective Date, the date specified in
the Notice of Conversion, provided the copy of the Notice of Conversion is
telecopied to or otherwise delivered to the Company in accordance with the
provisions hereof so that is received by the Company on or before such specified
date. The Conversion Date for any mandatory conversion at maturity shall be the
Maturity Date of the Preferred Stock.
(iii) The Company shall, at its expense, take all
actions and use all means necessary
and diligent to cause its transfer agent to transmit the certificates
representing the Shares issuable upon conversion of any Preferred Stock
(together with Preferred Stock not being so converted) to the Buyer via express
courier, by electronic transfer or otherwise, within three (3) business days
after receipt by the Company of the later of (i) receipt by the Company of the
copy of the original Notice of Conversion and share certificate, and (ii) the
Conversion Date (the "Delivery Date").
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer in the event that due entirely to the Corporation's
failure to issue and deliver the Shares upon Conversion in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
business days beyond five (5) business days from Delivery Date):
Late Payment For Each $10,000
of Preferred Stock Liquidation
No. Business Days Late Amount Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
>5 $500 +$200 for each Business
Day Late beyond 5 days from
The Delivery Date
The Company shall pay any payments incurred under this Section
in immediately available funds upon demand. Nothing herein shall limit the
Buyer's right to pursue actual damages or to cause the Company to redeem the
Preferred Shares as provided below for the Company's actions or inactions
resulting in the transfer agent's failure to issue and deliver the Common Stock
to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails to deliver such
shares of Common Stock within five (5) business days after the Delivery Date,
the Buyer will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such
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<PAGE>
effect to the Company whereupon the Company and the Buyer shall each be restored
to their respective positions immediately prior to delivery of such Notice of
Conversion. In the event the Company's actions or inactions result in the
transfer agent's failure to issue and deliver the Common Stock to the Buyer
within ten (10) days after the Delivery Date, Buyer may, at its option, require
the Company (without limiting its other remedies hereunder) to immediately
redeem all outstanding Preferred Stock in accordance with Section 4(k)(y).
d. If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of the Preferred
Stock and after such Delivery Date, the holder of the Preferred Stock being
converted (a "Converting Holder") purchases, in an open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder made
after a Conversion Date (the "Sold Shares"), which delivery such Converting
Holder anticipated to make using the Shares to be issued upon such conversion (a
"Buy-In"), the Company shall pay to the Converting Holder, in addition to all
other amounts contemplated in other provisions of the Transaction Agreements,
and not in lieu thereof, the Buy-In Adjustment Amount (as defined below). The
"Buy-In Adjustment Amount" is the amount equal to the excess, if any, of (x) the
Converting Holder's total purchase price (including brokerage commissions, if
any) for the Covering Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Converting Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Buyer in
immediately available funds immediately upon demand by the Converting Holder. By
way of illustration and not in limitation of the foregoing, if the Converting
Holder purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which Company will be required to pay to the Converting Holder will be $1,000.
The remedies set forth in paragraphs 5(c) and (d) shall be cumulative.
e. In lieu of delivering physical certificates representing
the unlegended securities issuable upon conversion, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Buyer and its
compliance with the provisions contained in this paragraph, so long as the
certificates therefor do not bear a legend and the Buyer thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Buyer by crediting the
account of Buyer's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission system.
f. The original certificate representing the Preferred Stock
shall be delivered by the Buyer to the Company simultaneous with the final
Notice of Conversion.
6. DELIVERY INSTRUCTIONS.
The Preferred Stock shall be delivered by the Company to the
Escrow Agent pursuant to Section 1(b) hereof, on a delivery against payment
basis, no later than on the Closing Date.
7. CLOSING DATE.
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(i) The closing of the issuance and sale of the Preferred
Stock shall occur on the date (the "Closing Date") which is the first NYSE
trading day after the fulfillment or waiver of all closing conditions pursuant
to Sections 8 and 9 hereof or such other date and time as is mutually agreed
upon by the Company and the Buyer.
(ii) The closing of the purchase and issuance of Preferred
Stock shall occur on the Closing Date, at the offices of the Escrow Agent and
shall take place no later than 12:00 Noon, PST, on such day or such other time
as is mutually agreed upon by the Company and the Buyer.
(iii) Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the Escrow Property (as
defined in the Escrow Agreement) only upon satisfaction of the conditions set
forth in Sections 8 and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Preferred Stock on the Closing Date and to the Buyer pursuant to this
Agreement is conditioned upon:
a. The receipt and acceptance by the Buyer of this Agreement
as evidenced by execution of this Agreement by the Buyer for at least One
Million Five Hundred Thousand Dollars ($1,500,000) in principal amount of the
Preferred Stock (or such lesser amount as the Company, in its sole discretion,
shall determine on the Closing Date);
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Preferred Stock
in accordance with Section 1(c) hereof;
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date, and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date;
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Preferred Stock on the Closing Date is conditioned upon:
a. Acceptance by the Company of this Agreement for the
sale of Preferred Stock, as indicated by execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the
appropriate Preferred Stock
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<PAGE>
in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this Agreement
as if made on the Closing Date and the performance by the Company on or before
the Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date and as to Preferred Stock, the
conditions set forth in Paragraph 4g; and
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<PAGE>
d. On the Closing Date, Buyer having received (i) an opinion
of counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in Annex III
attached hereto, (ii) the Registration Rights Agreement annexed hereto as Annex
IV and the Warrants.
e. No statute, rule, regulation, executive order, decree,
ruling or injunction shall be enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits or
adversely effects any of the transactions contemplated by this Agreement or the
Transaction Documents, and no proceeding or investigation shall have been
commenced or threatened which may have the effect of prohibiting or adversely
effecting any of the transactions contemplated by this Agreement or the
Transaction Documents.
f. From and after the date hereof to and including the Closing
Date, the trading of the Common Stock shall not have been suspended by the SEC,
or the NASD and trading in securities generally on the New York Stock Exchange,
NASDAQ/Small Cap, or Bulletin Board, as applicable, shall not have been
suspended or limited, nor shall minimum prices been established for securities
traded on NASDAQ/Small Cap or Bulletin Board, as applicable, nor shall there be
any outbreak or escalation of hostilities involving the United States or any
material adverse change in any financial market that in either case in the
reasonable judgment of the Buyer makes it impracticable or inadvisable to
purchase the Preferred Stock.
10. GOVERNING LAW; MISCELLANEOUS.
a. This Agreement and all agreements entered into in
connection herewith shall be governed by and interpreted in accordance with the
laws of the State of California for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Any litigation based thereon, or arising out of, under, or in
connection with, this agreement or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Company or Buyer shall be
brought and maintained exclusively in the state or Federal courts of the State
of California, sitting in the City of Los Angeles. The Company hereby expressly
and irrevocably submits to the jurisdiction of the state and federal Courts of
the State of California for the purpose of any such litigation as set forth
above and irrevocably agrees to be bound by any final judgment rendered thereby
in connection with such litigation. The Company further irrevocably consents to
the service of process by registered mail, postage prepaid, or by personal
service within or without the State of California. The Company hereby expressly
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may have or hereafter may have to the laying of venue of any such
litigation brought in any such court referred to above and any claim that any
such litigation has been brought in any inconvenient forum. To the extent that
the Company has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, the Company hereby irrevocably waives such immunity in
respect of its obligations under this Agreement and the related agreements
entered into in connection herewith.
b. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
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<PAGE>
c. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
d. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
h. Except as otherwise set forth herein, all costs and
expenses, including reasonable attorneys' fees, incurred by the Buyer in the
enforcement of this Agreement or any agreements related thereto, shall be paid
by the Company upon demand.
11. NOTICES. Any notice or communication required or permitted by this
Agreement shall be given in writing addressed as follows:
COMPANY: U.S. Wireless Data, Inc.
2200 Powell Street, Suite 800
Emeryville, California 94608
ATTN: Robert Robichaud, Esq.
Telecopier No.: (510) 596-2029
Telephone No.: (510) 596-2025
with a copy to:
Jack Lewis, Esq.
1675 Broadway, Suite 2600
Denver, Colorado 80202
Telecopier No.: (303) 623-2062
Telephone No.: (303) 623-2700
BUYER: At the address set forth on the signature page of this
Agreement.
17
<PAGE>
ESCROW AGENT: Law Offices of Michael S. Rosenblum
1875 Century Park East, Suite 700
Los Angeles, CA 90067
Telecopier No. (310) 286-2100
All notices shall be served personally by telecopy, by telex, by overnight
express mail service or other overnight courier, or by first class registered or
certified mail, postage prepaid, return receipt requested. If served personally,
or by telecopy, notice shall be deemed delivered upon receipt (provided that if
served by telecopy, sender has written confirmation of delivery); if served by
overnight express mail or overnight courier, notice shall be deemed delivered
forty-eight (48) hours after deposit; and if served by first class mail, notice
shall be deemed delivered seventy-two (72) hours after mailing. Any party may
give written notification to the other parties of any change of address for the
sending of notices, pursuant to any method provided for herein.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
representations and warranties herein shall survive the execution and delivery
of this Agreement and the delivery of the Preferred Stock and the Purchase
Price, and shall inure to the benefit of the Buyer and its successors and
assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE>
NUMBER OF SHARES OF PREFERRED STOCK TO BE PURCHASED: _________*
AGGREGATE PURCHASE PRICE OF SUCH PREFERRED STOCK: $_________*
*As detailed below
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf as of this 30th day of April, 1999.
Printed Names of Buyers
By: See Annexed
(Signature of Authorized Person)
-------------------------------------
Printed Name and Title
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
U.S. Wireless Data, Inc., a Colorado corporation
By: ____________________________
Title: ____________________________
Date: ____________________________
<PAGE>
ANNEX TO SIGNATURE PAGE
AMOUNT SHARES
$1,500,000 1,500,000 BOLD STREET, LLC, a Cayman Islands
limited liability company
By: __________________________________
Manager
ADDRESS: c/o Thomson Kernaghan & Co.
365 Bay Street, Suite 1000, 10th Fl.
Toronto, Ontario M5H 2V2
Telephone No.: (416) 860-4160
Telecopier No.: (416) 860-8313
$--------- -----------------------------
By: __________________________________
President
<PAGE>
ANNEX I CERTIFICATE OF DESIGNATIONS [Filed herewith as Exhibit 3.1]
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT [Filed herewith as Exhibit 4.2]
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI COMMON STOCK PURCHASE WARRANT [Filed herewith as Exhibit 4.3]
<PAGE>
SECURITIES PURCHASE AGREEMENT
ANNEX V
As of April 27, 1999
SEC Filing Status: (Per Securities Purchase Agreement - Section 3.g.)
Since June 1997, the following four SEC Reports were filed following the
respective due dates:
Form 10-KSB for year ended June 30, 1997
Form 10-QSB for quarter ended March 31, 1998
Form 10-KSB for year ended June 30, 1998
Form 10-QSB for quarter ended September 30, 1998
Certain Changes - from Dec. 31, 1998: (Per Securities Purchase Agreement
- Section 3.h.)
Capitalization: On March 15, 1999, the Company completed at $250,000 bridge
financing from an existing investor. The investor received a $250,000 promissory
note which bears interest at 10% per annum and is due at the earlier of June 12,
1999, or receipt by the Company of proceeds from a subsequent financing of at
least $1 million. The investor received 50,000 shares of the Company's Common
Stock and a fee equal to 12% of the proceeds of the investment.
Effective March 19, 1999, the Company and the Burtzloff Family Trust entered
into a Promissory Note Conversion and Stock Purchase Agreement whereby $500,000
of notes payable plus accrued interest were converted into 598,213 shares of the
Company's Common Stock.
Effective March 19, 1999, the Company and Liviakis Financial Communications,
Inc. entered into a Promissory Note Conversion and Stock Purchase Agreement
whereby $1,990,000 of notes payable plus accrued interest were converted into
2,363,040 shares of the Company's Common Stock.
As of the end of March 1999, the Company has approximately 17,362,916 shares of
Common Stock outstanding. The Company expects to receive requests for conversion
of Series A Preferred Stock to Common Stock from existing investors. Currently
there are approximately 790,000 shares of Series A Preferred Stock outstanding,
which convert into Common Stock at 75% of market.
In anticipation of the close of Financing from Bold Street LLC, the Company
received an advance of $200,000 on the first funding via the execution of a 10%
Promissory Note which will be paid back at the close of this Series B
transaction.
Management: On March 19, 1999, Roger Peirce, CEO and Chairman, resigned from the
Company for personal reasons. The Board of Directors is finalizing an agreement
with a new CEO candidate. The compensation package will include salary, bonus
and a significant grant of performance based options or warrants.
In February 1999, Charles Russell resigned from the Board of Directors for
health reasons.
Press Releases: Refer to attached releases
Litigation: (Per Securities Purchase Agreement - Section 3.j.) As disclosed in
the Company's Report on Form 10-QSB for the period ended September 30, 1998, in
Part II, Item 1, the Company reached a settlement of claims of certain
Noteholders in April 1998. The Company is considering an offer from a
representative of several of the Noteholders, presently holding 83,500 shares of
the Company's Common Stock, regarding the deferral or elimination of the
guarantee and "put" provision.
Event of Default: (Per Securities Purchase Agreement - Section 3.k.) As
disclosed in the Company's Report on Form 10-QSB for the period ended September
30, 1998, in Part II, Item 3, the Company is in default of certain requirements
relating to the 6% Convertible Debentures and Series A Preferred Stock
(including Warrants issued to several Series A Preferred shareholders in
conjunction with an agreement covering a partial redemption and conversion
restrictions of Series A Preferred shares). As a condition of this financing,
the Company has negotiated a "Waiver of Rights and First Amendment to Debenture
Agreement" with the Holders of the 6% Convertible Debentures that has been
reviewed by and is acceptable to Southridge Capital.
Prior Issues: (Per Securities Purchase Agreement - Section 3.l.) See Certain
Changes, above.
Undisclosed Liabilities or Events: (Per Securities Purchase Agreement - Section
3.m.)
See items listed above in Annex V
On February 5, the Company signed a binding Term Sheet for a paid-in-full
software license with respect to Maverick International Processing Services, Inc
proprietary front-end processing system. Consideration from the Company will be
in the form of 300,000 to 375,000 shares of Common Stock. The actual software
licensing agreement has been drafted and is in the final stages of discussion.
ANNEX IV
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 30, 1999
(this "Agreement"), is made by and between U.S. Wireless Data, Inc., a Colorado
corporation (the "Company"), and the each entity named on the signature page
hereto (individually referred to as the "Initial Investor" and collectively
referred to as the "Initial Investors").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of April 30, 1999, between the Initial
Investors and the Company (the "Securities Purchase Agreement"; capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Securities Purchase Agreement), the Company has agreed to issue and sell to
the Initial Investors an aggregate of up to 5,000,000 shares of Series B
Cumulative Convertible Redeemable Preferred Stock, no par value, $1.00 (plus
accrued dividends) liquidation preference of the Company (the "Preferred Stock,"
which term, as used herein shall have the meaning ascribed to it in the
Securities Purchase Agreement); and
WHEREAS, the Company has agreed to issue the Warrants to the
Initial Investors in connection with the issuance of the Preferred Stock; and
WHEREAS, the Preferred Stock is convertible into shares of
Common Stock (the "Conversion Shares") upon the terms and subject to the
conditions contained in the Certificate of Designations; and
WHEREAS, the Warrants to be issued to the Initial Investors
may be exercised for the purchase of shares of Common Stock (the "Warrant
Shares") upon the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Investors to execute and
deliver the Securities Purchase Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute
(collectively, the "Securities Act"), with respect to the Conversion Shares and
the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
<PAGE>
1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(a) "Investors" means the Initial Investors and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(b) "Potential Material Event" means any of the following: (i)
the possession by the Company of material information not ripe for disclosure in
a registration statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company; or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time, which determination shall be accompanied by a good faith
determination by the Board of Directors of the Company that the registration
statement would be materially misleading absent the inclusion of such
information.
(c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(d) "Registrable Securities" means the Conversion Shares
and the Warrant Shares.
(e) "Registration Statement" means a registration statement of
the Company under the Securities Act.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file
with the SEC, as soon as possible after the Closing Date, but no later than
thirty (30) days following the Closing Date, a Registration Statement on Form
SB-2, registering for resale by the Investors all of the Registrable Securities,
but in no event less than two hundred percent (200%) of the aggregate number of
shares into (i) which the Preferred Stock would be convertible at the time of
filing of the Registration Statement (assuming for such purposes that all shares
of Preferred Stock had been eligible to be converted, and had been converted,
into Conversion Shares in accordance with their terms, whether or not such
eligibility or conversion had in fact occurred as of such date), and (ii) which
would be issued upon exercise of all of the Warrants at the time of filing of
the Registration Statement (assuming for such purposes that all such Warrants
had been eligible to be exercised and had been exercised in accordance with
their terms, whether or not such eligibility or exercise had in fact occurred as
of such date). The Registration Statement shall also state that, in accordance
with Rule 416 and 457 under the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Stock and the exercise of the Warrants (and the
Existing Warrants) to prevent dilution resulting from stock splits, or stock
dividends. The Company will use its reasonable best efforts to cause the
Registration Statement to be declared effective no later than ninety days (90)
days after the Closing
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<PAGE>
Date. If at any time the number of shares of Common Stock into which the
Preferred Stock may be converted and which would be issued upon exercise of the
Warrants equals more than seventy percent (75%) of the aggregate number of
shares of Common Stock then registered, the Company shall, within ten (10)
business days after receipt of a written notice from any Investor, either (i)
further amend the Registration Statement filed by the Company pursuant to the
preceding sentence, if such Registration Statement has not been declared
effective by the SEC at that time, to register 200% of the aggregate of all
shares of Common Stock into which the Preferred Stock may then or in the future
be converted and which would be issued currently or in the future upon exercise
of the Warrants, or (ii) if such Registration Statement has been declared
effective by the SEC at that time, file with the SEC an additional Registration
Statement on Form SB-2, as may be appropriate, to register (A) 200% of the
aggregate shares of Common Stock into which the unconverted Preferred Stock may
then or in the future be converted and which would be issued currently or in the
future upon exercise of the unexercised Warrants, less (B) the aggregate number
of shares of Common Stock already registered which have not been issued upon
conversions of Preferred Stock or the exercise of Warrants. The Registration
Statement shall not include any shares other than the Registrable Securities,
and certain other shares that the Company is obligated to Register as set forth
in Schedule 5(b), without the consent of all of the Investors. The Investor
acknowledges that after the closing hereof (but prior to the filing of the
Registration Statement) up to five million Preferred Shares (less the amount
purchased concurrently herewith by the current Investors) may be sold by the
Company (and included on the Registration Statment) on the condition that the
sale of such Preferred Shares is on the same terms which are contained in the
Securities Purchase Agreement.
(b) Payments by the Company.
(i) If the Registration Statement covering the
Registrable Securities is not filed in proper form with the SEC on or before
thirty (30) days after the Closing Date (the "Required Filing Date"), then the
Company shall pay each Investor a late filing penalty (collectively "Late Filing
Penalties"), (i) on the first day after the Required Filing Date, an amount
equal to three percent (3%) of the purchase price paid pursuant to the
Securities Purchase Agreement (the "Purchase Price") for the Preferred Stock
then held by each such Investor on such date, and (ii) on each subsequent
monthly anniversary of the Required Filing Date, if the Registration Statement
has not been filed in proper form on or before such date, an amount equal to
three percent (3%) of the Purchase Price for the Preferred Stock held by each
such Investor on each such subsequent monthly anniversary date.
(ii) If the Registration Statement covering the
Registrable Securities is not effective within the earlier of (a) five (5) days
after notice by the SEC that it may be declared effective, or (b) ninety (90)
days following the Closing Date (the "Required Effective Date"), then the
Company shall pay each Investor a late effective date penalty (collectively
"Late Effective Date Penalties")(sometimes Late Filing Penalties and Late
Effective Penalties are collectively referred to as "Late Penalties"), (i) on
the first day after the Required Effective Date, an amount equal to three
percent (3%) of the Purchase Price for the Preferred Stock then held by each
such Investor on such date and (ii) on each subsequent monthly anniversary of
the Required Effective Date, if the Registration Statement has not been declared
effective on or before such date, an amount equal to two percent (2%) of the
Purchase Price for the Preferred Stock held by each such Investor on each such
subsequent monthly anniversary date.
(iii) By way of illustration and not in limitation
of the foregoing, assuming a
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<PAGE>
Closing Date of February 3, 2000 (X) if the Registration Statement is timely
filed but is not declared effective until July 15, 2000 (assuming for the
purpose of this example that the SEC has not previously provided notice that it
may be declared effective), the aggregate Late Effective Date Penalty will equal
9% percent of the Purchase Price (3% on May 4, the 90th day after the Closing
Date, plus 3% on June 3 and July 2) or (Y) if the Registration is filed on April
9 and is not declared effective until May 15, 2000 (assuming for the purpose of
this example that the SEC has not previously provided notice that it may be
declared effective), the aggregate Late Filing Penalty will equal 6% of the
Purchase Price (3% on March 5, the 30th day after the Closing Date, plus 3% on
April 4) and the aggregate Late Effective Date Penalty will equal 3% percent of
the Purchase Price (3% on May 4, the 90th day after the Closing Date).
(iv) Additionally, if (a) the Registration
Statement is not filed within sixty (60) days from the Closing Date or (b) the
Required Effective Date is greater than one hundred fifty (150) days after the
Closing Date, or (c) the effectiveness of the Registration Statement is not
maintained during the Registration Period as hereinafter defined, each Investor
may, at its option, require the Company to redeem the Preferred Shares in full,
within three (3) days, in cash, in accordance with Section 6(b) of the
Certificate of Designation.
(v) Late Penalties will be payable to the
Investor by the Company in cash or other immediately available funds on the date
such Late Penalty is incurred.
(vi) The parties acknowledge that the damages
which may be incurred by the Investors if the Registration Statement is not
filed by the Required Filing Date or if the Registration Statement has not been
declared effective by the Required Registration Date may be difficult to
ascertain. The parties agree that the Late Penalties represent a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of such damages. The payment of the Late Penalties to the Investors shall
not limit the Investors' other rights and remedies hereunder or under any other
document entered into in connection herewith.
(vii) Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not be payable to the
extent any delay in the effectiveness of the Registration Statement occurs
because of an act of, or a failure to act or to act timely by the Investors or
their counsel if the Company timely forwards to counsel any required documents
or in the event all of the Registrable Securities may be sold pursuant to Rule
144 or another available exemption under the Act.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following.
(a) Prepare promptly, and file with the SEC by the Required
Filing Date, the Registration Statement with respect to not less than the number
of Registrable Securities provided in Section 2(a) above, and thereafter use its
reasonable best efforts to cause each Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is two (2) years after the Closing
Date, (ii) the date when the Investors may sell all Registrable Securities under
Rule 144 or (iii) the date the Investors no longer own any of the Registrable
Securities, which Registration Statement (including any amendments or
supplements thereto and prospectuses contained
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<PAGE>
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm or counsel
designated by the Investors to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time (but not less
than three (3) business days) prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects.
(d) Notify the Investors, their counsel and managing
underwriters, if any, immediately (and, in the case of (i)(A) below, not less
than five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) Business Day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the Commission notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or representatives of
the Company receive on its behalf) any oral or written comments from the
Commission in respect of a Registration Statement (copies or, in the case of
oral comments, summaries of such comments shall be promptly furnished by the
Company to the Investors); and (D) with respect to the Registration Statement or
any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investors with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) Business Day in advance
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<PAGE>
of the filing of such responses with the Commission so that the Investors shall
have the opportunity to comment thereon.
(e) Furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, and all
amendments and supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a Notice of Effectiveness or any notice of effectiveness
or any stop order or other suspension of the effectiveness of the Registration
Statement at the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing of the existence of a Potential
Material Event, the Investors shall not offer or sell any Registrable
Securities, or engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice with respect to a
Potential Material Event until such Investor receives written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; provided, however,
that the Company may not so suspend the right to such holders of Registrable
Securities for more than two twenty (20) day periods in the aggregate during any
12-month period ("Suspension Period") with at least a ten (10) business day
interval between such periods, during the periods the Registration Statement is
required to be in effect;
(i) Use its reasonable efforts to secure or maintain, as
applicable, NASDAQ/OTC Bulletin Board authorization and quotation for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities;
(j) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
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<PAGE>
(k) Cooperate with the Investors who hold Registrable
Securities (or, subject to receipt by the Company of appropriate notice and
documentation, as may be required by the Securities Purchase Agreement, the
Certificate of Designations, the Warrants or this Agreement, securities
convertible into Registrable Securities) being offered to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts as the case
may be, as the Investors may reasonably request, and, within three (3) business
days after a Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities or securities convertible into Registrable Securities are included in
such Registration Statement) an appropriate instruction and opinion of such
counsel; provided, however, that nothing in this subparagraph (j) shall be
deemed to waive any of the provisions regarding the conditions or method of
conversion of Preferred Stock or exercise of Warrants into Registrable
Securities; and
(l) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, each Investor shall have the
following obligations:
(a) As a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor, such Investor shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of the Registrable Securities held
by it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least five (5) days prior
to the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor (the "Requested Information") if such Investor elects to have any
of such Investor's Registrable Securities included in the Registration
Statement. If at least two (2) business days prior to the filing date the
Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor;
(b) To cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e) or 3(f), above,
such Investor shall immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such
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<PAGE>
Investor's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses of Registration. (a) All reasonable expenses
(other than underwriting discounts and commissions of each Investor and legal
fees of counsel to each Investor) incurred in connection with registrations,
filings or qualifications pursuant to Section 3, including, without limitation,
all registration, listing, and qualifications fees, printers and accounting
fees, the fees and disbursements of counsel for the Company, and a fee for a
single counsel for the Investors not exceeding $3,500, shall be borne by the
Company.
(b) Except as and to the extent specifically set forth in
Schedule 5(b) attached hereto, neither the Company nor any of its subsidiaries
has, as of the date hereof, nor shall the Company nor any of its subsidiaries,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Investors
herein or otherwise conflicts with the provisions hereof. Except as and to the
extent specifically set forth in Schedule 5(b) attached hereto, neither the
Company nor any of its subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
person or entity. Without limiting the generality of the foregoing, without the
written consent of the Investors of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Investors set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
6. Indemnification. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (each, an "Indemnified Person" or "Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii)
8
<PAGE>
being, collectively, "Violations"). Subject to clause (b) of this Section 6, the
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) shall not (I) apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a failure of
the Investor to deliver or cause to be delivered the prospectus made available
by the Company; or (III) apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Each Investor will indemnify
the Company and its officers, directors and agents against any claims arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company, by or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any reasonable legal or other reasonable
out-of-pocket expenses subsequently incurred by such Indemnified Person or
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action of its final conclusion. The Indemnified Person or Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and reasonable out-of-pocket
expenses of such counsel shall not be at the expense of the indemnifying party
if the indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the Indemnified Person or Indemnified Party. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the
9
<PAGE>
amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available
to the Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time permit
the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. Assignment of the Registration Rights. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by an Investor to any transferee of the Registrable
Securities (or all or any portion of any Preferred Stock of the Company which is
convertible into such securities) permitted or allowable by the terms of the
Securities Purchase Agreement only if: (a) such Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (b)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with or in favor of the Company to be bound by all of the provisions
contained herein, a copy of which shall
10
<PAGE>
be provided to the Company. The copies referred to in clauses (a) and (d) of the
immediately preceding sentence may be redacted to delete certain financial and
other details of the transaction between the Investor and its transferee if the
same is included in the document to be provided to the Company. In the event of
any delay in filing or effectiveness of the Registration Statement as a result
of such assignment, the Company shall not be liable for any damages arising from
such delay, or the payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of each
such Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold collectively eighty (80%) percent of the Preferred Shares. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notice or communication required or permitted by this
Agreement shall be given in writing addressed as follows:
If to Company: U.S. Wireless Data, Inc.
2200 Powell Street, Suite 800
Emeryville, California 94608
Attention: Robert Robichaud, CFO
with a copy to: Jack Lewis, Esq.
1675 Broadway, Suite 2600
Denver, Colorado 80202
If to Investors: Bold Street, LLC
c/o Thomson Kernaghan & Co.
365 Bay Street, Suite 1000, 10th Fl.
Toronto, Ontario M5H 2V2
Telephone No.: (416) 860-4160
Telecopier No.: (416) 860-8313
with a copy to: Michael S. Rosenblum, Esq.
Law Offices of Michael S. Rosenblum
1875 Century Park East, Suite 700
Los Angeles, California 90067
11
<PAGE>
All notices shall be served personally by telecopy, by telex, by overnight
express mail service or other overnight courier, or by first class registered or
certified mail, postage prepaid, return receipt requested. If served personally,
or by telecopy, notice shall be deemed delivered upon receipt (provided that if
served by telecopy, sender has written confirmation of delivery); if served by
overnight express mail or overnight courier, notice shall be deemed delivered
forty-eight (48) hours after deposit; and if served by first class mail, notice
shall be deemed delivered seventy-two (72) hours after mailing. Any party may
give written notification to the other parties of any change of address for the
sending of notices, pursuant to any method provided for herein.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Any litigation based thereon, or arising out of,
under, or in connection with, this agreement or any course of conduct, course of
dealing, statements (whether oral or written) or actions of the Company or
Purchaser shall be brought and maintained exclusively in the state or Federal
courts of the State of California, sitting in the City of Los Angeles. The
Company hereby expressly and irrevocably submits to the jurisdiction of the
state and federal Courts of the State of California for the purpose of any such
litigation as set forth above and irrevocably agrees to be bound by any final
judgment rendered thereby in connection with such litigation. The Company
further irrevocably consents to the service of process by registered mail,
postage prepaid, or by personal service within or without the State of
California. The Company hereby expressly and irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter may have
to the laying of venue of any such litigation brought in any such court referred
to above and any claim that any such litigation has been brought in any
inconvenient forum. To the extent that the Company has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution or otherwise) with respect to itself or its property, the Company
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement and the related agreements entered into in connection herewith.
(e) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
12
<PAGE>
(i) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(j) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees that,
in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.
(k) This Agreement, the Securities Purchase Agreement and the
other documents referenced therein constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
(l) Any default by an individual Investor hereunder or any
related agreement, including, without limitation, the Securities Purchase
Agreement, shall not be deemed a default by any other Investor and shall not
excuse the Company's performance hereunder or thereunder with respect to the
non-defaulting Investors.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
U.S. Wireless Data, Inc., a Colorado corporation
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
------------------------------------------
BOLD STREET LLC, a Cayman Islands limited liability company
By:
--------------------------------------------
Manager
------------------------------------------------
By:
--------------------------------------------
Authorized Signatory
<PAGE>
<TABLE>
<CAPTION>
REGISTRATION RIGHTS AGREEMENT
EXHIBIT 5(b)
---------------------------------------------------------
Assumed Stock Price for conversions: $ 1.00
---------------------------------------------------------
Estimated #
Common Shares (000) Description of Outstanding Security Registration Rights
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,053 Est. 790K 8% Preferred Series A shares 12/97 - Mandatory and Piggyback - 144 avail.
(@ 75% of avg. closing bid price)
100 Estimate of Series A dividends through 12/99 (w/o conv.) Mandatory and Piggyback - 144 avail.
2,500 $2M 6% Convertible Debentures 7/98-7/00 Mandatory and Piggyback
(@ 80% of avg. closing bid price)
50 JWG finder warrants @ $6.525 - 12/97-12/00 Piggyback - 144 avail.
8 entrenet consulting warrants @ $2.40 - 9/98-9/03 Piggyback
20 RBB Bank Bridge Loan warrants @ $4.375 - 6/98-9/01 Piggyback
100 6% Convertible Debenture holder warrants @$ 4.25 - 7/98-7/01 Mandatory and Piggyback
60 JWG finder warrants @ $4.50 - 7/98-7/01 Piggyback - unlimited
15 JWG finder warrants @ $2.70 - 9/98-9/01 Piggyback
212 Warrants on Series A Preferred Redemption @$2.40 - 3.69 Mandatory and Piggyback
10/98 to 12/98-10/01 to 12/01
100 EBI consulting warrants @ $1.00 - 3/99-3/02 Piggyback
50 RBB Bridge Loan - 3/99 Mandatory and Piggyback
375 Software Purchase - Maverick Piggyback
4,643
Note: John Liviakis, Bob Prag, and Liviakis Financial
Communications, Inc. and entrenet and its affiliates have
waived registration rights on all previously issued shares
for this registration statement.
</TABLE>
THIS WARRANT AND THE STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES
LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF
COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER (WHICH SHALL BE IN
FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY SATISFACTORY TO THE COMPANY),
SUCH REGISTRATION IS NOT THEN REQUIRED.
U.S. WIRELESS DATA, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable consideration, the
receipt of which is hereby acknowledged by U.S. Wireless Data, Inc., a Colorado
corporation (the "Company"), Bold Street, LLC, a Cayman Islands limited
liability company, or registered assigns (the "Holder") is hereby granted the
right to purchase at any time until 5:00 P.M., Pacific Coast time, on April 30,
2004 (the "Expiration Date"), Three Hundred Thousand (300,000) fully paid and
nonassessable shares of the Company's Common Stock, no par value per share (the
"Common Stock") at an exercise price of $1.50 per share (the "Exercise Price")
subject to further adjustment as set forth in Section 6 hereof.
2. Exercise of Warrants. This Warrant is exercisable in whole
or in part for whole shares of the Company's Common Stock at the Exercise Price
per share of Common Stock payable hereunder, payable in cash or by certified or
official bank check. In lieu of paying cash to exercise this Warrant, the Holder
may, by designating a "cashless" exercise on the Notice of Exercise Form,
acquire a number of whole shares of the Company's Common Stock equal to (a) the
difference between (i) the Market Value of the Company's Common Stock and (ii)
the Exercise Price, multiplied by (b) the number of shares of Common Stock
purchasable under the portion of the Warrant tendered to the Company, divided by
(c) the Market Value of the Company's Common Stock. Upon surrender of this
Warrant Certificate with the annexed Notice of Exercise Form duly executed,
together with payment of the Exercise Price for the shares of Common Stock
purchased, the Holder shall be entitled to receive a certificate or certificates
for the shares of Common Stock so purchased. For the purposes of this Section 2,
"Market Value" shall be an amount equal to the average closing bid price of a
share of Common Stock for the five (5) business days immediately preceding the
Company's receipt of the Notice of Exercise Form duly executed.
3. Reservation of Shares. The Company hereby agrees that at
all times during the term of this Warrant there shall be reserved for issuance
upon exercise of this Warrant such number of shares of its Common Stock as shall
be required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
<PAGE>
5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Adjustments to Exercise Terms.
If the Company at any time prior to the full
execution of this Warrant shall, by subdivision, combination, merger, spin-off,
re-classification or like capital adjustment of the securities, change any of
the securities to which purchase rights under this Warrant exist into the same
or different number of securities of any class or classes, this Warrant shall
thereafter entitle the Holder to acquire such number and kind of securities as
would have been issuable as a result of such change with respect to the
securities acquirable immediately prior to such transaction. If shares of the
securities acquirable upon exercise of this Warrant are subdivided into a
greater number of securities, including any stock dividend, or if such
securities are combined into a lesser number of securities, then the purchase
price for the securities acquirable upon exercise of this Warrant and the
securities acquirable pursuant to this Warrant shall be proportionately and
equitably adjusted.
7. Transfer to Comply with the Securities Act; Registration
Rights.
(a) This Warrant has not been registered under the Securities
Act of 1933, as amended, (the "Act") and has been issued to the Holder for
investment and not with a view to the distribution of either the Warrant or the
Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other
security issued or issuable upon exercise of this Warrant may be sold,
transferred, pledged or hypothecated in the absence of an effective registration
statement under the Act and applicable state securities laws relating to such
security, unless in the opinion of counsel satisfactory to the Company, such
registrations are not required under the Act. Each certificate for the Warrant,
the Warrant Shares and any other security issued or issuable upon exercise of
this Warrant shall contain a legend on the face thereof, in form and substance
satisfactory to counsel for the Company, setting forth the restrictions on
transfer contained in this Section.
(b) The Company agrees to file a registration statement, which
shall include the Warrant Shares, on Form SB-2 or another available form (the
"Registration Statement"), pursuant to the Act, pursuant to a Registration
Rights Agreement between the Company and Holder dated as of the date hereof (the
"Registration Rights Agreement").
8. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage pre-paid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission, or, if mailed, two days after the date of deposit in the United
States mails, as follows:
(i) if the to Company, to:
U.S. Wireless Data, Inc.
2200 Powell Street, Suite 800
2
<PAGE>
Emeryville, California 94608
ATTN: Robert Robichaud, Esq.
Telecopier No.: (510) 596-2029
Telephone No.: (510) 596-2025
(ii) if to the Holder, to:
c/o Thomson Kernaghan & Co.
365 Bay Street, Suite 1000, 10th Fl.
Toronto, Ontario M5H 2V2
Telephone No.: (416) 860-4160
Telecopier No.: (416) 860-8313
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant
may be amended or supplemented only by an instrument in writing signed by the
parties hereto. This Warrant contains the full understanding of the parties
hereto with respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of California and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State.
11. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the 3rd day of May, 1999.
U.S. WIRELESS DATA, INC.
By:/s/ Rod Stambaugh
--------------------
Name: Rod Stambaugh
Title: President
Attest:
/s/ Robert E. Robichaud
- -----------------------
Name: Robert E. Robichaud
Title: Secretary
3
WAIVER OF RIGHTS
AND
FIRST AMENDMENT TO DEBENTURE AGREEMENT
This Waiver of Rights and First Amendment to Debenture Agreement is entered
into effective as of the 30th day of April 1999, between U.S. Wireless Data,
Inc., a Colorado corporation (the "Company") and the undersigned holders (the
"Holders") of the Company's 6% Convertible Debentures Due July 21, 2000 (the
"Debentures") to waive certain rights held by the Debenture holders and to
modify and amend the Debenture Agreement relating to the Debentures. RECITALS
WHEREAS, the Company has issued Debentures in the aggregate face
amount of $2,000,000;
WHEREAS, the Holders hold Debentures in the face amount set forth
below its name on the execution page of this Agreement;
WHEREAS, the Company owes the undersigned accrued but unpaid interest
and damages on the Debentures through April 26, 1999 (the "Calculation
Date") and has also agreed to prepay the balance of interest that will
become payable through June 30, 1999, in the aggregate amount set forth
below each Holder's name on the execution page of this Agreement;
WHEREAS, each of the Holders is willing to waive all defaults related
to the Debentures up to the date of this Agreement, if the Company pays
such accrued but unpaid interest and penalties in the form of the Company's
Series B Cumulative Convertible Redeemable Preferred Stock;
WHEREAS, Section III of the Debenture Agreement gives the Holders the
right to declare the principal and all accrued interest on such Debenture
to be immediately due and payable upon the satisfaction of certain
conditions;
WHEREAS, Section IV.D. of the Debenture Agreement gives the Holders
the right to require the Company to redeem the Debentures upon the
satisfaction of certain conditions and to receive additional consideration
in the event the shares of stock underlying the Debenture are not timely
registered;
WHEREAS, the Holders are willing to restrict such rights under Section
III and Section IV.D. of the Debenture Agreement in consideration of the
Company attempting to raise additional capital by selling the Company's 6%
Series B Cumulative Convertible Redeemable Preferred Stock.
NOW, THEREFORE, in consideration of the Company's attempts to raise
additional capital, the opportunity being given to the Holders to
participate in such offering, and other valuable consideration, the parties
agrees as follows:
Page 1 of 4
<PAGE>
1. The Holders agree to exchange all accrued and unpaid interest and
damages due on the Debentures and all interest that will become payable on such
Debentures on or before June 30, 1999 (such aggregate amount set forth below the
undersigned's name on the execution page of this Agreement) for the Company's
Series B Cumulative Convertible Redeemable Preferred Stock, and to waive any and
all previously occurring or currently existing defaults under the Debentures,
the Debenture Agreement, or any related registration rights agreement. To
accomplish the purchase of the Company's Series B Cumulative Convertible
Redeemable Preferred Stock, the undersigned agrees to execute a Securities
Purchase Agreement in substantially the same form as the agreement attached
hereto as Exhibit A.
2. Notwithstanding anything to the contrary in any other agreement, the
Debenture Agreement is hereby amended so that the Holders waive their right to
declare the principal and all accrued interest on the Debentures immediately due
and payable pursuant to Section III of the Debenture Agreement solely due to
default in the payment of interest and the failure to register the underlying
shares of Common Stock, prior to the date hereof.
3. The Holders agree not to declare the principal and accrued interest on
the Debentures due and payable pursuant to Section III of the Debenture
Agreement due to any of the reasons set forth in Section 2 above unless and
until:
a. the holders of the Company's Series B Cumulative Convertible
Redeemable Preferred Stock have a then exercisable right of redemption
regarding such stock under Section 2(b)(iv) of the Registration Rights
Agreement annexed to the Securities Purchase Agreement attached hereto as
Exhibit A (the "New Registration Rights Agreement"); or
b. 180 days have elapsed following the "Closing Date" (as that term is
defined in the New Registration Rights Agreement).
4. Notwithstanding anything to the contrary in any other agreement, Section
IV.D of the Debenture Agreement is hereby amended such that:
a. the Holders will not have any right to force the Company to redeem
any Debenture unless and until the holders of the Company's Series B
Cumulative Convertible Redeemable Preferred Stock have a then exercisable
right of redemption regarding such stock under Section 2(b)(iv) of the New
Registration Rights Agreement; and
b. the Holders will have no future right to accrue any penalty for the
Company's failure to file a registration statement regarding the securities
underlying the Debentures (the "Registration Statement"), or the Company's
failure to cause the Registration Statement to become effective, other than
as set forth below:
i. If the Registration Statement is not filed in proper form with
the Securities and Exchange Commission on or before the Required
Filing Date (as that term is
Page 2 of 4
<PAGE>
defined in the New Registration Rights Agreement), then the Company
shall pay the undersigned a late filing penalty on the first day after
such Required Filing Date in an amount equal to three percent (3%) of
the face amount of the Debentures then held by the Holders.
ii. If the Registration Statement is not filed in proper form
with the Securities and Exchange Commission on or before each monthly
anniversary of the Required Filing Date (as that term is defined in
the New Registration Rights Agreement), then the Company shall pay the
Holders a late filing penalty on each such date in an amount equal to
three percent (3%) of the face amount of the Debentures then held by
the Holders.
iii. If the Registration Statement is not effective on or before
the Required Effective Date (as that term is defined in the New
Registration Rights Agreement), then the Company shall pay the Holders
a late filing penalty on the first day after such Required Effective
Date in an amount equal to three percent (3%) of the face amount of
the Debentures then held by the Holders.
iv. If the Registration Statement is not effective on or before
each monthly anniversary of the Required Effective Date (as that term
is defined in the New Registration Rights Agreement), then the Company
shall pay the Holders a late filing penalty on each such date in an
amount equal to two percent (2%) of the face amount of the Debentures
then held by the Holders.
5. Except for the remedies granted to the Holders pursuant to Section III
and Section IV of the Debenture Agreement, the Holders do not waive any and all
other remedies available to them under the Debenture Agreement and any related
New Registration Rights Agreement.
6. In all other respects the Debenture and the Debenture Agreement shall
remain unchanged.
7. This Waiver and Amendment Agreement shall not be binding on any party
until similar agreements are fully executed by all Holders and the Company.
Notwithstanding the foregoing, this Waiver and Amendment Agreement may be
executed in counterparts and by facsimile signature.
8. This Waiver and Amendment Agreement shall be construed under the laws of
the State of Colorado for contracts executed and to be performed fully in such
State.
IN WITNESS WHEREOF, each of the undersigned have executed this Waiver and
Amendment Agreement effective as of the date first above written.
Page 3 of 4
<PAGE>
U.S. Wireless Data, Inc.
By:
--------------------------------------------------
Print Name:
-------------------------------------------
Title:
-------------------------------------------------
Date:
--------------------------------------------------
Debenture Holder Debenture Holder
By: By:
------------------------------------- --------------------------------
Print Name: Print Name:
----------------------------- ------------------------
Title: Title:
---------------------------------- ----------------------------
Date: Date:
----------------------------------- -----------------------------
Face Amount of Face Amount of:
Debentures Held: $ Debentures Held: $
-------------------- ------------
Aggregate Interest and Aggregate Interest and
Penalties Owed as of Penalties Owed as of
the calculation date: $ the calculation date: $
----------------- ---------
Debenture Holder
By:
--------------------------------------
Print Name:
-------------------------------
Title:
------------------------------------
Date:
-------------------------------------
Face Amount of
Debentures Held: $
-----------------------
Aggregate Interest and
Penalties Owed as of
the Calculation Date: $
------------------
Page 4 of 4
<PAGE>
EXHIBIT A
FORM OF SECURITIES PURCHASE AGREEMENT
WITH REGISTRATION RIGHTS AGREEMENT ANNEXED
[Filed herewith as Exhibit 4.1 and 4.2, respectively.]
SUPPLEMENT TO SERIES B PREFERRED
SECURITIES PURCHASE AGREEMENT
This Supplement to Series B Preferred Stock Purchase Agreement is made
and entered into effective as of the date below, between U.S. Wireless Data,
Inc., a Colorado corporation (the "Company") and The Cuttyhunk Fund Limited and
Tonga Partners LP (the "Purchasers") in conjunction with the acquisition by
Purchasers of shares of the Company's Series B Cumulative Convertible Redeemable
Preferred Stock (the "Series B Preferred"), in exchange for certain accrued
interest and damages owing to Purchasers on the Company's 6% Convertible
Subordinated Debentures Due July 21, 2000 (the "6% Debentures") as more fully
described in that certain Waiver of Rights and First Amendment to Debenture
Agreement dated as of the date hereof (the "Debenture Amendment"). This
Agreement is entered into to set forth certain additional agreements between the
Company and the Purchasers.
In consideration of the acquisition of the Series B Preferred by the
Purchasers and the entry of the Debenture Amendment between the Company and the
Purchasers, and other good and valuable consideration, the Company and the
Purchasers hereby agree as follows:
1. Notwithstanding the acquisition of the Series B Preferred by the Purchasers
in exchange for (a) interest owing on the 6% Debentures through June 30, 1999,
and (b) damages owing to Purchasers on the 6% Debentures, all as described in
the Debenture Amendment, the Company agrees and acknowledges that the 6%
Debentures remain as obligations for money loaned to the Company and will not be
treated as an equity instrument by the Company.
2. The Company hereby acknowledges and agrees that the representations and
warranties of the Company being given to the Purchasers in conjunction with the
acquisition of the Series B Preferred Stock set forth in the Securities Purchase
Agreement relating thereto, shall be deemed representations and warranties of
the Company applicable to the 6% Debentures, made as of the date hereof, as if
the 6% Debentures were being purchased by Purchasers thereunder. Purchasers
acknowledge and affirm the representation and warranties contained in the
Securities Purchase Agreement as of the date hereof in connection with their
decision to retain their 6% Debentures.
3. The Company agrees that at the time of filing a registration statement under
the Securities Act of 1933 which includes the shares of Common Stock underlying
the 6% Debentures and the Common Stock Purchase Warrants issued to Purchasers
with the 6% Debentures (which shall be the same registration statement which
includes the shares of Common Stock underlying the Series B Preferred Stock),
such registration statement shall include for purposes of satisfying the
conversion rights of the 6% Debentures, at least that number of shares of Common
Stock equal to 150% of the number of shares issuable upon conversion of the 6%
Debentures as of the last trading date immediately preceding the date of filing
such registration statement together with the number of shares of Common Stock
issuable upon exercise of such Warrants.
<PAGE>
Supplement to Series B Preferred
Securities Purchase Agreement
Page 2 of 3
4. The Company agrees that it will take no position inconsistent with an
original acquisition date of the 6% Debentures by Purchasers of July 23, 1998 in
calculating the commencement of Purchasers' holding periods for the 6%
Debentures under Rule 144 of the SEC's Rules and Regulation under the Securities
Act of 1933.
5. The Company acknowledges that Purchasers have advised it that they are not
affiliated in any manner with the other initial Purchaser of the Series B
Preferred, Bold Street LLC, a Cayman limited liability company, and the Company
acknowledges that it is not aware of any facts contrary to this assertion.
6. Notwithstanding Section 4.j in the Securities Purchase Agreement, Purchasers
acknowledge that they are not entitled to any warrants in conjunction with their
acquisition of Series B Preferred in exchange for the interest and damages owing
on the 6% Debentures.
7. The Company hereby agrees that the 6% Debentures currently held by Purchasers
shall be amended such that Purchasers shall have the benefit of any terms
contained in the Securities Purchase Agreement, the Registration Rights
Agreement or Certificate of Designation for the Series B Preferred. Purchasers
shall reasonably determine which terms they deem beneficial. Any such amendment
shall be subject to the review of the Company's independent accountants, and
should such accountants determine that any such amendment(s) determined by the
Purchasers (or the right granted hereby to Purchasers to determine the
applicability of such amendment(s)) would require a reclassification of the 6%
Debentures into other than a debt instrument of the Company, then no such
amendment shall be permitted and this clause shall be considered void ab-initio
as to any such right to amend the 6% Debentures or the rights related thereto.
8. The Company agrees that it will pay the legal fees incurred by Purchasers in
connection with the negotiation of the Debenture Amendment and the acquisition
of the Series B Preferred, in an amount of $9,775, to be paid from the proceeds
of the sale of the Series B Preferred, immediately following the initial closing
of the sale of the Series B Preferred and presentation of an invoice from The
Goldstein Law Group, P.C., which has represented Purchasers in these
transactions.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK.]
<PAGE>
Supplement to Series B Preferred
Securities Purchase Agreement
Page 3 of 3
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of this ________ day of April, 1999.
U.S. Wireless Data, Inc.
By:
--------------------------------------------------------------
Print Name:
--------------------------------------------------------
Title:
------------------------------------------------------------
Date:
--------------------------------------------------------------
The Cuttyhunk Fund Limited
By:
--------------------------------------------------------------
Print Name:
--------------------------------------------------------
Title:
-------------------------------------------------------------
Date:
--------------------------------------------------------------
Tonga Partners LP
By:
--------------------------------------------------------------
Print Name:
--------------------------------------------------------
Title:
-------------------------------------------------------------
Date:
--------------------------------------------------------------
RBB Bank Aktiengesellschaft AG
By:
--------------------------------------------------------------
Print Name:
--------------------------------------------------------
Title:
-------------------------------------------------------------
Date:
--------------------------------------------------------------
FIRST AMENDMENT
TO
NOTE AND COMMON STOCK PURCHASE AGREEMENT
This First Amendment to Note and Common Stock Purchase Agreement is
entered into effective as of the 22nd day of April 1999, to amend the Note and
Common Stock Purchase Agreement (the "Agreement") between U.S. Wireless Data,
Inc., a Colorado corporation (the "Company") and the undersigned ("Holder"),
pursuant to which Holder holds the Company's $250,000 Note due June 12, 1999
(the "Note").
RECITALS
WHEREAS, Section 4 of the Agreement requires that the Note be paid in
full at the time the company sells any equity or debt securities of the Company,
provided the Company has received gross proceeds in the minimum amount of U.S.
one million dollars (US$1,000,000);
WHEREAS, Holder is willing to amend Section 4 of the Agreement to allow
the Company to delay prepayment of the Note;
NOW, THEREFORE, in consideration of the Company's attempts to raise
additional capital, and the opportunity being given to the undersigned to
participate in that offering, Holder and Company agree as follows:
1. Section 4 of the Agreement is amended to read as follows:
4. Prepayment of the Note. Investor understands that the Company has been
engaged in discussions with various parties, including Investor, regarding
the possible issuance by the Company of additional debt or equity
securities (apart from the Bridge Financing described above), including the
possible issuance of a Preferred Stock to be authorized and issued by the
Company upon final agreement as to the terms of such Preferred Stock. The
Company and Investor agree that at any time prior to the Due Date of the
Note, the Note shall be paid in full (as to all amounts of unpaid principal
and interest then owing) from the proceeds of the sale of any equity or
debt securities of the Company (including shares of Preferred Stock),
provided the Company has received gross proceeds in the minimum amount of
U.S. Two Million Five Hundred Thousand Dollars (US$2,500,000) from the sale
of such equity or debt securities (but from which amount any proceeds from
a Bridge Financing or conversion of previously existing debentures
(including interest and penalties on such debentures) shall be excluded).
2. Holder will forebear from initiating an action against the Company to collect
the obligation evidenced by the Note until (a) prepayment of the Note is
required pursuant to Section 4 of the Agreement, or (b) December 1, 1999,
whichever is first to occur. Notwithstanding the foregoing, Holder preserves its
right to collect the obligation evidenced by the Note from any person
guarantying the Note.
3. In all other respects the Agreement shall remain unchanged.
First Amendment to Note and Stock Purchase Agreement
Page 1 of 2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
to Debenture Agreement effective as of the date first above written.
U.S. Wireless Data, Inc.
By: /s/ Roberty E. Robichaud
----------------------------------------------
Print Name: Roberty E. Robichaud
--------------------------------------
Title: Chief Financial Officer
--------------------------------------------
Date: April 22, 1999
---------------------------------------------
Holder: RBB Bank Aktiengesellschaft AG (as agent for clients)
By: /s/ Herbert Strauss
-----------------------------------------------------
Print Name: Herbert Strauss
---------------------------------------
Title: Managing Director US Equity
--------------------------------------------
Date: April 22, 1999
---------------------------------------------
First Amendment to Note and Stock Purchase Agreement
page 2 of 2
FOR IMMEDIATE RELEASE
- ---------------------
U.S. Wireless Data Announces Equity Financing
EMERYVILLE, CA - (May 7, 1999) - U.S. WIRELESS DATA, INC. ("USWD") (OTCBB:
USWDA) announced today it has completed the first phase of a $1.5 to $5.0
million private placement pursuant to Regulation D of the Securities Act of
1933. The financing was facilitated by an institutional investor, through which
the Company raised gross proceeds of $1,500,000. The Company issued 6%
Cumulative Convertible Redeemable Preferred Stock (Series B) for $1.00 per
share. The instrument gives the holder the right to convert the Preferred Stock
into shares of the Company's Common Stock in the future at 80% of then current
market price. Concurrent with this transaction, the holders of the Company's 6%
Convertible Debentures agreed to convert all accrued interest and penalties into
shares of the Series B Preferred Stock. The Series B Preferred Stock and Common
Stock to be issued upon conversion have not been registered under the Act and
may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements. The Company will file a
Current Report on Form 8-K with the Securities and Exchange Commission setting
forth further details with respect to the financing including conversion terms
and registration rights.
Forward-Looking Statements: Certain information above contains forward-looking
statements that involve risk and uncertainties. While the management of the
Company believes that current expectations reflect reasonable assumptions, no
assurances can be given that the Company will achieve its goals. Factors that
could cause actual results to differ materially include, but are not limited to:
the Company's requirement for additional capital; failure of the Company to
raise additional capital critical to continue ongoing operations, the failure to
execute definitive agreements with potential strategic alliance partners;
technological change; the ability of the Company to develop new distribution
channels; or the intensification of competition. The reports filed by the
Company pursuant to United States securities laws contain a detailed discussion
of these factors and certain other risks to which the Company is subject.
Management of the Company advises the reader to review these reports (which are
available from the United States Securities and Exchange Commission's EDGAR
database at http://www.sec.gov and at various other Commission reference
facilities in the United States) before making an investment decision regarding
the Company or its securities.
Contacts:
U.S. Wireless Data, Inc. Liviakis Financial Communications, Inc.
Robert E. Robichaud, CFO Tony Altavilla, Senior Vice President
(510) 596-2025 (916) 448-6084
www.uswirelessdata.com Email: [email protected]
SOURCE: U.S. Wireless Data, Inc.
