SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
December 23, 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 (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
2200 Powell Street, Suite 800
Emeryville, CA 94608
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(Address of principal executive offices)
Registrant's Telephone Number, including
area code (510) 596-2025
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(Former Address, if changed since last report)
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Item 5: Other Events
All references to "we" or "us" contained in this Form 8-K refer to
U.S. Wireless Data, Inc. The following descriptions of agreements we have
entered into are summaries and are qualified by reference to the agreements
which we filed as exhibits to this report.
On December 23, 1999, we entered into an agreement with an investment
banking firm in connection with a proposed equity private placement. The
securities contemplated to be issued in the proposed equity private placement
will not be, and the securities issued in the bridge financing referred to below
have not been, registered under the Securities Act of 1933, as amended, and may
not be offered or sold in the United States absent registration or an applicable
exemption from registration requirements.
In connection with the engagement of the bank, we entered into an
agreement on December 30, 1999, with an entity affiliated with the bank under
which it agreed to lend us up to $1,000,000, subject to certain conditions,
including that (a) Dean M. Leavitt, our Chief Executive Officer, make and honor
a similar commitment to lend us up to $100,000, (b) Mr. Leavitt remain our Chief
Executive Officer and a director and (c) we are able to enter into an agreement
to convert, modify or purchase our outstanding Series B Preferred Stock and 6%
Convertible Debentures on terms acceptable to the lender. The loans are secured
by substantially all of our assets pursuant to a General Security Agreement and
each loan is evidenced by a note, bearing interest at a rate of 8% per annum and
due on the earlier of (x) the date a change of control (as defined in the note)
occurs, (y) the date we conclude a debt or equity financing in which we receive
at least $5,000,000 of gross proceeds, or (z) December 30, 2000. The notes
include certain negative covenants, including prohibitions on the payment of
certain dividends, redemptions and asset sales and limitations on the incurrence
of indebtedness, liens and the issuance, prior to March 31, 2000, of securities.
The lenders may, at their option, convert the outstanding principal amount of
the notes into securities issued in connection with any private placement
transaction on the same terms as investors in such placement. In addition, we
have agreed to appoint a designee of the bank affiliate lender to our board of
directors and to have an observer present at all meetings of our board of
directors. The bank affiliate lender has not yet named anyone to this
directorship. These rights expire after the note and any subsequent notes have
been satisfied.
In connection with the commitments to lend up to $1,100,000, we also
issued the bank affiliate lender a warrant to purchase 13,636,363 shares of our
common stock at an exercise price of $0.01 per share and we issued to Mr.
Leavitt a similar warrant to purchase 1,363,637 shares of our common stock. The
warrants may be exercised at any time, subject to certain conditions, including
the approval by our shareholders of an amendment to our Articles of
Incorporation to increase the number of our authorized shares of common stock.
The warrants expire on December 30, 2006. If the bank is unable or unwilling to
complete the private placement contemplated by the December 23rd agreement,
then, subject to certain exceptions described below, the lenders will pay us a
break-up fee of $5,000,000, payable at the lenders' option either in cash or by
cancellation of 50% of the warrants. Such break-up fee would not be payable if
certain events occur, including (a) certain breaches by us, (b) Mr. Leavitt's no
longer being an officer and director, (c) our being unable to increase our
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authorized preferred and common stock by April 28, 2000 and (d) our being unable
to enter into agreements to redeem, convert, amend or retire the Series B
Preferred Stock or 6% Convertible Debentures by March 1, 2000 on terms
satisfactory to the bank. The lender and Mr. Leavitt have certain demand and
"piggyback" registration rights, commencing in June 2000, as to the shares of
common stock underlying the warrants.
Currently, we do not have enough authorized common stock for the
warrants to be exercised. As a result, we entered into Economic Participation
Agreements with the lenders which are intended to provide the lenders with the
economic equivalent of ownership of the shares of common stock underlying the
warrants in the event that we are unable to amend our Articles of Incorporation
to increase the number of authorized shares of common stock. The Economic
Participation Agreements terminate at such time as a sufficient number of shares
of our common stock is authorized and reserved for issuance upon the exercise of
the warrants, unless we have failed to amend our Articles of Incorporation by
April 28, 2000, in which case the lenders are entitled to liquidated damages
which are calculated in accordance with the agreement.
As of January 10, 2000, we had received an aggregate of $500,000
pursuant to the bridge financing described above, of which $466,298.33 was
received from the lender and $33,701.66 was received from Mr. Leavitt.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
4.1 Form of Warrant issued by the Registrant.
4.2 Commitment Letter dated as of December 30, 1999, between
Registrant and the bank affiliate lender.
4.3 Form of 8% Senior Secured Promissory Note.
4.4 Form of General Security Agreement dated as of December 30,
1999, between the Registrant and the lenders.
4.5 Form of Economic Participation Agreement dated as of December
30, 1999, between the Registrant and the bank affiliate lender.
4.6 Letter dated as of December 30, 1999, addressed to the lender
from Dean M. Leavitt.
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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.
Dated: January 12, 2000
U.S. WIRELESS DATA, INC.
By: /s/ Dean M. Leavitt
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Dean M. Leavitt
Chief Executive Officer
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THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). NEITHER THIS WARRANT NOR SUCH SECURITIES MAY BE TRANSFERRED
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR (B) UPON RECEIPT BY THE ISSUER OF AN OPINION
OF COUNSEL, WHICH OPINION OF COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE
ISSUER, TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
ACT AND SUCH STATE SECURITIES LAWS.
WARRANT AGREEMENT
FOR COMMON STOCK OF
U.S. WIRELESS DATA, INC.
Warrant No. _____
THIS CERTIFIES that, for value received, ______________________________, or
its permitted assigns registered on the books of the Company (collectively, the
"Holder"), is entitled to purchase from U.S. Wireless Data, Inc., a Colorado
corporation (the "Company"), at any time, and from time to time, during the
exercise period referred to in Section 1 hereof, __________ shares (the
"Shares") of fully paid and nonassessable shares of common stock of the Company
(the "Common Stock"). The purchase price for each Share (the "Share Price") is
one cent ($0.01) per Share. Securities issuable upon exercise of this Warrant
and the price payable therefor are subject to adjustment from time to time as
hereinafter set forth. As used herein, the term "Warrant" shall include any
warrant or warrants hereafter issued in consequence of the exercise of this
Warrant in part or transfer of this Warrant in whole or in part.
1. Exercise; Payment for Ownership Interest. Upon the terms and subject to the
conditions set forth herein, this Warrant may be exercised in whole or in part
by the Holder hereof at any time, or from time to time, on or after the date
hereof and prior to 5 p.m. San Francisco time on December 30, 2006 by
presentation and surrender of this Warrant to the principal offices of the
Company, together with the Purchase Form annexed hereto, duly executed, and
accompanied by payment to the Company of an amount equal to the Share Price
multiplied by the number of Shares as to which this Warrant is then being
exercised; provided, however, the Holder may not exercise this Warrant to the
extent such exercise would exceed the number of shares of Common Stock reserved
for issuance under this Warrant it being agreed that on the date of this Warrant
no shares of Common Stock have been duly reserved for issuance. If the Holder
has exercised all or any portion of this Warrant within six months of the date
of this Warrant the Holder may not during such period sell, assign, transfer,
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pledge or encumber any such shares to the extent any such shares exceeds a
number (the "Excess Shares") equal to the product of (1) __________ and (2) a
fraction the numerator of which is the sum of all loans made by ________________
________________ to the Company pursuant to the Commitment Letter dated December
30, 1999 and the denominator of which is $1,000,000. In the event that within
six months of the date of this Warrant, the Company shall have requested funds
under the Commitment Letter and ________ shall not have honored any such request
for financing that it is required to honor by the terms of the Commitment Letter
and the promissory note relating to such borrowing request, then in respect of
such failure to honor such request the Holder shall forfeit to the Company
(either in shares of Excess Shares, warrants to purchase shares of Common Stock
that have not yet been exercised but that if purchased by the Holder would
constitute Excess Shares, or a combination of both, in each case at the option
of the Holder) that number of shares of Common Stock as is equal to the product
of (1) __________ and (2) a fraction the numerator of which is the sum of (x)
the amount of funds represented by the borrowing request that ________ failed to
honor but was required to do so and (y) the amount of borrowing at that time
that the Company may still request under the Commitment Letter and the
denominator of which is $1,000,000. If the Holder forfeits any Excess Shares,
then within five (5) business days of the date of forfeiture the Company will
pay to the Holder the exercise price paid to the Company by the Holder to
purchase such Excess Shares. Any transfer of Shares obtained by Holder in
exercise of this Warrant is subject to the requirement that such securities are
registered under the Securities Act of 1933, as amended (the "1933 Act") and
applicable state securities laws or are exempt from registration under such
laws. The Holder of this Warrant shall be deemed to be a shareholder of the
Shares as to which this Warrant is exercised in accordance herewith effective
immediately after the close of business on the date on which the Holder shall
have delivered to the Company this Warrant in proper form for exercise and
payment by certified or official bank check or wire transfer of the cash
purchase price for the number of Shares as to which the exercise is being made,
or by delivery to the Company of securities of the Company having a value equal
to the cash purchase price for such number of Shares determined as of the date
of delivery. If this Warrant shall be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the Shares purchasable hereunder as to which the Warrant has not been exercised.
If this Warrant is exercised in part, such exercise shall be for a whole number
of Shares. Upon any exercise and surrender of this Warrant, the Company (a) will
issue and deliver to the Holder a certificate or certificates in the name of the
Holder for the largest whole number of Shares to which the Holder shall be
entitled and, if this Warrant is exercised in whole, in lieu of any fractional
Share to which the Holder otherwise might be entitled, cash in an amount equal
to the fair value of such fractional share (determined in such reasonable and
equitable manner as the Board of Directors of the Company shall in good faith
determine), and (b) will deliver to the Holder such other securities, properties
and cash which the Holder may be entitled to receive upon such exercise, or the
proportionate part thereof if this Warrant is exercised in part, pursuant to the
provisions of this Warrant.
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2. Adjustments. Securities issuable upon exercise of this Warrant and the Share
Price shall be subject to adjustment from time to time as follows:
2.1 Reorganization, Reclassification, Consolidation, Merger or Sale;
Distributions.
(a) If any capital reorganization or reclassification of the Company,
or any consolidation or merger of the Company with another person, or the sale,
transfer or lease of all or substantially all of its assets to another person
shall be effected in such a way that holders of shares of Common Stock shall be
entitled to receive stock, securities or assets with respect to or in exchange
for their shares, then provision shall be made, in accordance with this Section
2.1, whereby the Holder hereof shall thereafter have the right to purchase and
receive, upon the basis and upon the terms and conditions specified in this
Warrant Agreement and in addition to or in exchange for, as applicable, the
Shares subject to this Warrant immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such securities
or assets as would have been issued or payable with respect to or in exchange
for the aggregate Shares immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby if exercise of the Warrant had
occurred immediately prior to such reorganization, reclassification,
consolidation, merger or sale. The Company will not effect any such
consolidation, merger, sale, transfer or lease unless prior to the consummation
thereof the successor entity (if other than the Company) resulting from such
consolidation or merger or the entity purchasing or leasing such assets shall
assume by written instrument (i) the obligation to deliver to such Holder such
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase, and (ii) all other obligations of the
Company under this Warrant. The provisions of this Section 2.1(a) shall
similarly apply to successive consolidations, mergers, exchanges, sales,
transfers or leases.
(b) If, at any time or from time to time after the date of this
Warrant, the Company shall distribute to the holders of shares of Common Stock
(i) securities, (ii) property, other than cash, or (iii) cash, without fair
payment therefor, then, and in each such case, the Holder, upon the exercise of
this Warrant, shall be entitled to receive such securities, property and cash
which the Holder would hold on the date of such exercise if, on the date of this
Warrant, the Holder had been the holder of record of the shares of Common Stock
subscribed for upon such exercise and, during the period from the date of this
Warrant to and including the date of such exercise, had retained such shares of
Common Stock and the securities, property and cash receivable by the Holder
during such period, subject, however, to the Holder agreeing to any conditions
to such distribution as were required of all other Holders of shares of Common
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Stock in connection with such distribution. If the securities to be distributed
by the Company involve rights, warrants, options or any other form of
convertible securities and the right to exercise or convert such securities
would expire in accordance with its terms prior to the exercise of this Warrant,
then the terms of such securities shall provide that such exercise or
convertibility right shall remain in effect until thirty (30) days after the
date the Holder of this Warrant receives such securities pursuant to the
exercise hereof.
(c) In addition to those adjustments set forth in Sections 2.1(a) and
(b), but without duplication of the adjustments to be made under such Sections,
if the Company:
(i) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii)combines its outstanding shares of Common Stock into a
smaller number of shares;
(iv) makes a distribution on of its Common Stock in shares of its
capital stock other than Common Stock; and/or
(v) issues, by reclassification of its Common Stock, any shares
of its capital stock;
then the number and kind of Shares purchasable upon exercise of this Warrant
shall be adjusted so that the Holder upon exercise hereof shall be entitled to
receive the kind and number of Shares or other securities of the Company (such
other securities thereafter enjoying the rights of Shares under this Warrant)
that the Holder would have owned or have been entitled to receive after the
happening of any of the events described above had this Warrant been exercised
immediately prior to the happening of such event or any record date with respect
thereto. An adjustment made pursuant to this Section 2.1(c) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or issuance. If, as a result of an
adjustment made pursuant to this Section 2.1(c), the Holder of this Warrant
thereafter surrendered for exercise shall become entitled to receive shares of
two or more classes of capital stock or shares of Common Stock and any other
class of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
all holders of this Warrant promptly after such adjustment) shall determine the
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allocation of the adjusted Share Price between or among shares of such classes
of capital stock or shares of Common Stock and such other class of capital
stock.
The adjustment to the number of Shares purchasable upon the exercise
of this Warrant described in this Section 2.1(c) shall be made each time any
event listed in paragraphs (i) through (v) of this Section 2.1(c) occurs.
(d) Simultaneously with all adjustments to the number and/or kind of
securities, property and cash to be issued in connection with the exercise of
this Warrant, the Share Price will also be appropriately adjusted so that at all
times the Holder and all subsequent holders of this Warrant (whether in whole or
in part) would not pay more than the aggregate purchase price to exercise this
Warrant in full immediately after such adjustment as the Holder and all such
subsequent holders had to pay immediately prior to such adjustment.
2.2 Other Action Affecting Shares. If the Company takes any action
affecting its shares of Common Stock after the date hereof, that would be
covered by Section 2.1 but for the manner in which such action is taken or
structured, other than an action described in any of Section 2.1, which would in
any way diminish the value of this Warrant hereunder, then this Warrant shall be
adjusted as to the Shares purchasable hereunder and the Share Price payable
hereunder in such manner as the Board of Directors of the Company shall in good
faith determine to be equitable under the circumstances.
2.3 Notice of Adjustments. Upon each adjustment or readjustment of the
Share Price or in the nature of the securities or other property receivable upon
the exercise of this Warrant, the Company at its expense will promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based. The
Company will forthwith mail, by first class mail, postage prepaid, a copy of
each such certificate addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company.
2.4 Other Notices. If at any time:
(a) the Company shall (i) offer for subscription pro rata to the
holders of shares of the Common Stock any additional equity in the Company or
other rights; (ii) pay a dividend in additional shares of the Common Stock or
distribute securities or other property to the holders of shares of the Common
Stock (including, without limitation, evidences of indebtedness and equity and
debt securities); or (iii) issue securities convertible into, or rights or
Warrants to purchase, securities of the Company;
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(b) there shall be any capital reorganization or reclassification or
consolidation or merger of the Company with, or sale, transfer or lease of all
or substantially all of its assets to, another entity; or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least 15 days' prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such subscription rights, dividend, distribution or
issuance, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 15
days' prior written notice of the date when the same shall take place if no
stockholder vote is required and at least 15 days' prior written notice of the
record date for stockholders entitled to vote upon such matter if a stockholder
vote is required. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such subscription rights, the date on which the
holders of shares of Common Stock shall be entitled to exercise their rights
with respect thereto, and such notice in accordance with the foregoing clause
(b) shall also specify the date on which the holders of shares of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be.
3. No Voting Rights. Except as otherwise provided herein, this Warrant shall not
be deemed to confer upon the Holder any right to vote or to consent to or
receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
4. Warrants Transferable.
This Warrant and all rights hereunder are transferable, in whole or in
part, at the principal offices of the Company by the Holder hereof, upon
surrender of this Warrant properly endorsed; provided, however, that without the
prior written consent of the Company, this Warrant and all rights hereunder may
be transferred only (i) to an affiliate of the initial Holder hereof or
successor in interest to any such person; or (ii) pursuant to the registration
of this Warrant or the Shares under the 1933 Act or subsequent to one year from
the date hereof an exemption under Rule 144 or other exemption from such
registration.
5. Warrants Exchangeable; Loss, Theft, Destruction, Etc. This Warrant is
exchangeable, upon surrender hereof by the Holder hereof at the principal
offices of the Company, for new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the Shares which may be
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subscribed for and purchased hereunder, each such new Warrant to represent the
right to subscribe for and purchase such Shares (not to exceed the maximum
aggregate Shares which may be purchased hereunder) as shall be designated by
such Holder hereof at the time of such surrender. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, upon
delivery of a bond or indemnity satisfactory to the Company, or, in the case of
any such mutilation, upon surrender or cancellation of this Warrant, the Company
will issue to the Holder hereof a new Warrant of like tenor, in lieu of this
Warrant, representing the right to subscribe for and purchase the Shares which
may be subscribed for and purchased hereunder.
6. Legends; Investment Representations. Any certificate evidencing the
securities issued upon exercise of this Warrant shall bear a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH
SECURITIES MAY NOT BE TRANSFERRED EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR (B) UPON RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL, WHICH
OPINION OF COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE
EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND
SUCH STATE SECURITIES LAWS.
7. Registration.
7.1 Definitions. The following additional definitions shall apply for
purposes of this Section 7:
(a) The term "Abbreviated Registration Statement" means a registration
statement on Form S-3 or any similar or successor form in which financial
statements and other detailed information about the issuer are incorporated by
reference from the issuer's periodic reports filed under Securities Exchange Act
of 1934, as amended (the "1934 Act").
(b) The term "1933 Act" means the Securities Act of 1933, as amended,
or any successor legislation thereto.
(c) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of effectiveness of such registration statement or document.
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(d) The term "Registrable Securities" means (1) the Shares issuable or
issued upon exercise of this Warrant, and (2) any securities of the Company
issued as (or issuable upon the conversion or exercise of any Warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such Shares, excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which his rights under this Section 7 are not assigned and any such securities
as to which restrictive legends restricting transfer under the 1933 Act are
lifted pursuant to Rule 144(k) under the 1933 Act (or any successor rule) or any
other exemption from registration under the 1933 Act in which the subsequent
disposition of such securities by the Holder does not require registration under
the 1933 Act.
7.2 Right to Include Registrable Stock. After six months after the date
hereof, if the Company proposes to register any of its securities under the 1933
Act for its own account for sale for cash (other than a registration on Form S-4
or Form S-8, or any successor or similar forms) (the "Offering"), it will each
such time promptly give written notice to the Holder. Upon the written request
of the Holder made within 15 days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such Holder and the intended method of distribution thereof), the Company will
use its reasonable efforts to effect the registration under the 1933 Act of all
Registrable Securities which the Company has been requested to register by the
Holder in accordance with the intended methods of distribution specified in such
request; provided that (i) if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
determines for any reason not to register such securities, the Company may, at
its election, give written notice of such determination to the Holder and,
thereupon, will be relieved of its obligation to register any Registrable
Securities in connection with such registration, (ii) in case of a determination
by the Company to delay registration of its securities, the Company will be
permitted to delay the registration of Registrable Securities for the same
period as the delay in registering such other securities, and (iii) the amount
of Registrable Securities of the Holder which will be registered shall not
exceed a pro rata portion of all shares of Common Stock owned by persons other
than the Company then being registered in accordance with Section 7.4 unless
mutually agreed upon by the Holder and the Company; provided, however, that the
provisions of this Section 7.2 will not be deemed to limit or otherwise restrict
the rights of Holder under Section 7.3 hereof.
7.3 Demand Registration. At any time commencing after six months from the
date hereof, unless Commonwealth Associates, L.P. has been unwilling or unable
to assist the Company in successfully completing a private placement as
contemplated in Schedule 1 of that certain engagement letter dated December 23,
1999 between Commonwealth and the Company, the Holder shall have the right on
three occasions to demand on each such occasion the registration of up to 50% of
all Registrable Securities originally held by the Holder, provided that if at
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the time of such request the aggregate value of all Registrable Securities held
by the Holder (based on the low end of the expected range of the offering price
of such securities) is equal to or less than $10,000,000, the Holder may demand
the registration of all of the Registrable Securities then held by the Holder.
If the Holder makes such request, the Company shall, in accordance with Section
7.5, register for sale such Registrable Securities under the 1933 Act, provided
that the Company shall be able to delay the filing (but not the preparation) of
any such registration statement for a period of not more than sixty days from
the date it would otherwise be required to be filed (but in any event not later
than the next filing of the Company's Form 10- KSB). Notwithstanding the
limitations on the Holder's right to demand registration pursuant to this
Section 7.3, if the registration statement that is required to be filed
hereunder is withdrawn for any reason (which shall not in any way diminish the
obligations of the Company under Section 7.5) before, at or after effectiveness,
if the Company shall fail to keep such registration statement current as
required by Section 7.5 or if the Company shall fail to register all Registrable
Securities requested to be registered, then in addition to any remaining demand
registration right held by the Holder under this Section 7.3, the Holder shall
have one additional demand registration right so long as the conditions herein
above set forth are satisfied.
7.4 Priority. If the managing underwriter for a registration involving an
underwritten offering advises the Company in writing that, in its opinion, the
number of securities of the Company (including Registrable Securities) requested
to be included in such registration by the holders thereof exceeds the number of
securities of the Company (the "Sale Number") which can be sold in an orderly
manner in such offering within a price range acceptable to the Company, the
Company will, subject to the registration rights agreements relating to the
Series B Preferred Stock, and the warrants issued in conjunction with the 6%
convertible debentures and the 6% convertible debentures, include (i) first, all
securities of the Company that the Company proposes to register for its own
account and (ii) second, to the extent that the number of securities of the
Company to be included by the Company is less than the Sale Number, a number of
the Registrable Securities equal to the number derived by multiplying (a) the
difference between the Sale Number and the securities proposed to be sold by the
Company, and (b) a fraction the numerator of which is the number of Registrable
Securities originally requested to be registered by the Holder and the
denominator of which shall be the aggregate number of all securities requested
to be registered by all holders of the Company's securities (other than
securities being registered by the Company itself). By way of example, if the
Holder requests registration of 500 shares and only one other holder of shares
of Common Stock requests registration and seeks to register 1000 shares and the
Company seeks to register 3000 shares and the Sale Number is 4200, then the
Holder will be entitled to register 400 shares of Common Stock. The restrictions
set forth in this Section 7.4 will no longer be applicable to the extent that
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<PAGE>
the Company grants registration rights to any other holder that are more
favorable to such holder than the registration rights granted hereunder and in
such event the Holder shall automatically receive rights no less favorable than
those granted to such other holder.
7.5 Obligations of the Company. Whenever required under this Agreement to
effect the registration of any Registrable Securities, the Company will, as
expeditiously as reasonably possible:
(a) In the case of a registration statement under Section 7.3, prepare
and file with the SEC such registration statement with respect to such of the
Registrable Securities as are set forth in the request as promptly as
practicable following the date such obligation arises (but in any event not
later than 90 days following such date), use its reasonable best efforts to
cause such registration statement to become effective and use its reasonable
best efforts to keep such registration statement effective for up to one year
(nine months in the case of a registration statement that is not an Abbreviated
Registration Statement) but not after such securities cease being Registrable
Securities.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities covered
by such registration statement.
(c) Furnish to the Holder such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as it may reasonably request in order to
facilitate the disposition of Registrable Securities owned by such Holder.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably requested by the Holder,
provided that the Company shall not be required to qualify to do business,
subject itself to taxation or to file a general consent to service of process in
any such states or jurisdictions.
(e) Notify the Holder, at any time when a prospectus relating thereto
is required to be delivered under the 1933 Act, of the happening of any event as
a result of which the prospectus included in such 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 not misleading in the light of the circumstances then
existing.
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<PAGE>
(f) Cause the securities of the Holder to be listed or designated for
trading on such securities exchange or automated quotation system as any
securities of the same class of the Company are then listed or quoted or, if no
such listing or quotation then exists, as reasonably determined by the Company.
(g) Make documents, files, books, records, officers, directors and
employees of the Company available to the Holder and provided the Holder's
underwriters, if any, shall have agreed to be bound by the provisions of this
Section 7.5(g), to such underwriters, and make such other accommodations as are
reasonably necessary for the Holder and the Holder's underwriters, if any, to
perform a due diligence review of the Company; provided, however, that all such
information ("Confidential Information") will be kept confidential and not
utilized by Holder except as contemplated herein and except as required by law
or court order. The term "Confidential Information" does not include information
which (i) is already in possession of such other party (other than that which is
subject to another confidentiality agreement), (ii) becomes generally available
to the public, or (iii) becomes available on a non-confidential basis from a
source other than the Company.
(h) Provide such opinions, certifications, indemnifications, and take
such other actions, including, without limitation, entering into such agreements
(including underwriting agreements), as are reasonably required and appropriate,
to permit the Holder to make a public offering of the Registrable Securities
requested to be registered.
7.6 Furnish Information. The Company's obligation to cause any registration
statement to become effective in connection with distribution of any Registrable
Securities pursuant to this Agreement is contingent upon the Holder, with
reasonable promptness, furnishing to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities, as is required to effect the registration of the
Registrable Securities.
7.7 Indemnification. In the event of any registration under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless the Holder and its officers, directors and affiliates (and their
officers and directors), any underwriter (as defined in the 1933 Act) for the
Holder and each person (and its officers and directors), if any, who controls
the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, or the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
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<PAGE>
alleged omission to state therein a material fact required to be stated therein,
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (iii) any violation
or alleged violation by the Company of the 1933 Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the 1933 Act, or the
1934 Act or any state securities law, and the Company will pay to the Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection (a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor will the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon (1) a Violation which occurs solely as the result
of the written information furnished expressly for use in connection with such
registration by the Holder, underwriter or controlling person or (2) with
respect to the Underwriter and controlling person of such Underwriter (and their
respective officers and directors), a Violation which results from the fact that
there was not sent or given to a person who bought Registrable Securities, at or
prior to the written confirmation of the sale, a copy of the final prospectus,
as then amended or supplemented, if the Company had previously furnished copies
of such prospectus hereunder and such prospectus corrected the misstatement or
omission forming the basis of the Violation.
(b) To the extent permitted by law, the Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the registration statement, each person, if any, who controls the Company within
the meaning of the 1933 Act, any underwriter and any controlling person of any
such underwriter or other holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the 1933 Act, or the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or action in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs solely as a result of
the written information furnished by the Holder expressly for use in connection
with such registration; and such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection (b), in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
Holder's liability pursuant to this Section 7.7(b) shall be limited to the
amount of the net proceeds received by the Holder from the sale of the
Registrable Securities sold by it, and further provided that the indemnity
agreement contained in this subsection (b) does not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld.
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<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
7.7 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 7.7, deliver to the
indemnifying party a written notice of the commencement of such action and the
indemnifying party will 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 the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) will have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of the indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between the indemnified party and any other party represented by such
counsel in the same proceeding. If the indemnifying party shall fail to defend
the action, or conducts a defense which is not reasonably adequate in light of
the circumstances, the indemnified party may conduct its own defense and shall
be entitled to reimbursement for the costs of such defense. 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 party under this Section 7, except to the extent
that the indemnifying party is materially prejudiced by such failure. The
omission so to deliver written notice to the indemnifying party does not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Section 7. No indemnifying party under this Agreement will enter into
any settlement or consent to any entry of judgment which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
indemnified party of a release from all liability in respect of such claim or
litigation.
(d) If the indemnification provided for in this Section 7 is held by a
court of competent jurisdiction to be unavailable to an indemnified party or is
insufficient to indemnify an indemnified party with respect to any loss,
liability, claim, damage, or expense referred to therein, then the indemnifying
party, in lieu of or in addition to, as appropriate, indemnifying such
indemnified party hereunder, will contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party will be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
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<PAGE>
statement or omission. The obligation of the Holder to make a contribution
pursuant to this Section 7.7(d) shall be limited to the net proceeds received by
the Holder from the sale of the Registrable Securities sold by it, less any
amounts paid pursuant to Section 7.7(b).
(e) The obligations of the Company and the Holder under this Section 7
will survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise.
7.8 Expenses of Registration. All expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 7 of this
Agreement, including, without limitation, all registration, filing and
qualification fees, printing expenses, fees and disbursements of counsel for the
Company and expenses of any special audits incidental to or required by such
registration, qualification or compliance will be borne by the Company, except
that the Company will not be required to pay underwriters' discounts,
commissions, or stock transfer taxes relating to the Registrable Securities or
the fees and disbursements of counsel to the Holder, other than as set forth in
this Section 7.
7.9 Amendments. Any term of this Section 7 may be amended only with the
written consent of the Company and the holders of a majority of the Registrable
Securities then outstanding. Any amendment effected in accordance with this
paragraph will be binding upon each holder of any Registrable Securities then
outstanding, each future holder of all such Registrable Securities, and the
Company.
8. Miscellaneous. The Company shall pay all expenses and other charges payable
in connection with the preparation, issuance and delivery of this Warrant and
all substitute Warrants other than as set forth in this Section 8. The Holder
shall pay all taxes (other than any issuance taxes, including, without
limitation, documentary stamp taxes, transfer taxes and other governmental
charges, which shall be paid by the Company) in connection with such issuance
and delivery of the Warrants and the Shares.
The Company shall maintain, at the office or agency of the Company
maintained by the Company, books for the registration and transfer of the
Warrant.
9. Reservation of Shares. The Company will use its best efforts to amend its
Articles of Incorporation to increase the number of authorized Common Stock so
that the Company will be able to reserve all shares that may be exercisable
under this Warrant. As soon as any shares of Common Stock become available to be
reserved for issuance under this Warrant (the Company agreeing to use all shares
of Common Stock that are no longer subject to the Series B Preferred Stock or 6%
Convertible Debentures upon any repurchase, termination, cancellation, amendment
or modification thereof) and in any event upon approval and filing of such
amendment to its Articles of Incorporation, the Company will immediately reserve
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<PAGE>
and keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock or its authorized and issued Common Stock
held in its treasury, solely for the purpose of enabling it to satisfy any
obligation to issue Shares upon exercise of this Warrant, the maximum number of
shares of Common Stock which may then be deliverable upon the exercise of this
Warrant and notify the Holder in writing of such reservation. Except for the
issuance of 450,000 shares to John Liviakis, the Company will not reserve for
issuance or issue any shares of Common Stock to any person (other than under
outstanding options, warrants or convertible securities for which shares have
already been reserved) until such time that it has reserved all shares of Common
Stock that may be exercised under this Warrant.
The Company or, if appointed, the transfer agent for the Common Stock
(the "Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Warrant on file with the Transfer Agent and
with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by this
Warrant. The Company will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto transmitted to the Holder pursuant
to Section 2.5 hereof.
The Company covenants that all Shares which may be issued upon
exercise of this Warrant will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
10. Obtaining Stock Exchange Listings. The Company will, from time to time, take
all actions which may be necessary so that the Shares, immediately upon their
issuance upon the exercise of this Warrant, will be listed on the principal
securities exchanges and markets within the United States of America, if any, on
which other shares of Common Stock are then listed; provided, however, that this
provision will not be construed to require registration of such Shares except as
otherwise provided in this Agreement and no listing will be required to the
extent such listing would violate applicable laws, regulations and exchange
regulations.
11. Adjustment of Number of Shares Issuable and Exercise Price. The number of
Shares issuable upon the exercise of this Warrant and the Share Price are
subject to adjustment from time to time upon the occurrence of the events
enumerated in Section 2. For purposes of this Warrant, "Common Stock" means
shares now or hereafter authorized of any class of common stock of the Company
and any other stock of the Company, however designated, that has the right
(subject to any prior rights of any class or series of preferred stock) to
participate in any distribution of the assets or earnings of the Company without
limit as to per share amount.
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<PAGE>
12. Claw-Back Provisions.
In the event that _______________________________ is unable or unwilling to
proceed, or is not proceeding in good faith, with the private placement
contemplated in the letter of intent dated December 23, 1999 (the "Term Sheet")
substantially on the terms set forth therein for a minimum amount of gross
proceeds of $15 million other than as a result of (i) a material breach by the
Company of its representations, warranties, or covenants made to _______ in the
Commitment Letter dated December 30, 1999 and otherwise complying with the Term
Sheet, (ii) the failure of the Company to otherwise proceed in good faith with
such financing, including without limitation promptly preparing a private
placement memorandum, having its officers and directors meet with prospective
investors, making its facilities and books and records available for due
diligence, and agreeing to issue securities having terms as set forth in the
Term Sheet, (iii) a bankruptcy proceeding is initiated by or commenced against
the Company, (iv) Dean Leavitt is no longer an officer or director of the
Company, (v) the Company does not increase its authorized preferred and common
stock within four months of the date hereof as contemplated hereby and by the
Term Sheet or (vi) the Company being unable to enter into agreements to redeem,
convert, modify, amend or retire within 60 days of the date hereof its Series B
Preferred Stock and 6% Convertible Debentures upon terms satisfactory to
______________________________, in its sole discretion, (a "Forfeiture Event"),
then the Holder shall pay a break-up fee to the Company of $4,545,454, which may
be paid at the option of the Holder by forfeiture of the right to purchase half
the maximum number of shares of Common Stock that the Holder may acquire and has
already acquired upon exercise of all of its rights under this Warrant (the
Holder having the Option of forfeiting any combination of shares of Common Stock
already purchased upon exercise of a portion of this Warrant or rights to
acquire shares of Common Stock under this Warrant), provided that subsequent to
a Forfeiture Event the maximum amount of shares of Common Stock that may be
purchased upon exercise of this Warrant together with all shares of Common Stock
already purchased under this Warrant shall not exceed 6,818,182 (as
proportionately adjusted to reflect any changes to the Shares under Section 2 of
this Warrant).
13. Descriptive Headings and Governing Law. The descriptive headings of the
several paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. This Warrant shall be construed and enforced
in accordance with the laws of the State of New York, and the rights of the
parties shall be governed by, the law of such State.
14. Subsequent Holders. If this Warrant is subsequently held by more than one
Holder, then each holder shall be responsible for their proportionate share of
the obligations of the Holder hereunder and the terms of this Warrant shall
apply proportionately to each such holder.
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<PAGE>
IN WITNESS WHEREOF, this Warrant Agreement has been executed as of the 30th
day of December, 1999.
U.S. WIRELESS DATA, INC.
By:
---------------------------------------
Its:
---------------------------------------
[_____________________________]
By:
---------------------------------------
Its:
---------------------------------------
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<PAGE>
PURCHASE FORM
Dated: ,
---------- ----
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing Shares and hereby makes payment of $ in payment of the
exercise price thereof.
-------------------------------------------------
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ComVest Capital Management LLC
830 Third Avenue
New York, New York 10022
December 30, 1999
US Wireless Data, Inc.
2200 Powell Street
Emeryville, CA 94603
Attn: Dean Leavitt
Re: Commitment Letter
Gentlemen:
Please be advised that in connection with the term sheet (the "Term
Sheet"), dated December 23, 1999 by and between Commonwealth Associates L.P.
("Commonwealth") and US Wireless Data, Inc. (the "Company"), we hereby agree,
subject to the terms and conditions as hereinafter provided or otherwise set
forth in the Term Sheet to make available to the Company a loan (the "Loan"), in
the aggregate principal amount of up to One Million Dollars ($1,000,000)
dollars.
The Loan will be made in separate tranches (each a "Tranche"), within three
(3) business days of receipt by us in accordance with this Letter of a request
for the funding of a Tranche (a "Request Letter") from the Company. Each Request
Letter shall set forth the exact amount of funds requested to be loaned in the
particular Tranche and the intended use of the loan proceeds from such Tranche.
Prior to and as a condition precedent to funding each requested Tranche,
the Company shall provide to us (i) a note (the "Note") executed by an
authorized officer of the Company evidencing the principal amount of funds to be
provided in the Tranche (in substantially the form of the initial $195,000 Note
attached hereto as Exhibit A); (ii) a security agreement (the "Security
Agreement") and related documents securing the loan evidenced by the Note (the
"Security Documents"), executed by an authorized officer of the Company
(substantially in the form of the Security Agreement securing the initial
$195,000 Note annexed hereto as Exhibit B); and (iii) evidence satisfactory to
us that Dean Leavitt has advanced funds to the Company in a Proportionate Amount
<PAGE>
US Wireless Data, Inc.
December 30, 1999
Page 2
to the amount requested in the Request Letter. "Proportionate Amount" shall mean
the product obtained when the amount of the requested Tranche is multiplied by a
fraction, the numerator of which is 100 and the denominator of which is 805.
Notwithstanding anything to the contrary provided herein or elsewhere, we
shall have no obligation to fund a Tranche if at the time a Request Letter is
received by us and prior to when the funds requested in the Tranche are sent,
one or more of the following events shall have occurred:
1. Dean Leavitt is no longer the President, Chief Executive Officer and a
Director of the Company or is unable to effectively act in the capacity required
to perform the required functions of such positions; or
2. The commencement by or against the Company of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, the appointment of a trustee, receiver or other
custodian for the Company or any of its assets, the making of any assignment for
the benefit of creditors or the taking of any corporate or other action
authorizing or initiating any of the foregoing; or
3. The Company shall have been unable to enter into an agreement to
convert, modify or purchase the Company's Series B Preferred Stock and 6%
Convertible Debentures on terms and conditions acceptable to us in our sole
discretion.
Notwithstanding anything to the contrary provided herein or elsewhere, we
may in our sole discretion permit a person other than us, which person must be
reasonably acceptable to the Company, to fund a portion of the Loan to the
Company requested pursuant to a Request Letter for all or a portion of one or
more Tranches on the terms and conditions provided herein, and the Company shall
provide to any such person an executed Note evidencing the principal amount of
funds provided in such Tranche and the requested Security Documents, provided
that such documents may be modified as appropriate to reflect prior security
interests of prior Tranches. The Company agrees that any employee, partner or
shareholder of Commonwealth or any of its affiliates are reasonably acceptable
for purposes of this Commitment Letter.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York without regard to the conflicts of laws
principles thereof. The parties hereto hereby agree that any suit or proceeding
arising directly and/or indirectly pursuant to or under this instrument or the
consummation of the transactions contemplated hereby, shall be brought solely in
a federal or state court located in the City, County and State of New York. By
its execution hereof, the parties hereby covenant and irrevocably submit to the
in personam jurisdiction of the federal and state courts located in the City,
County and State of New York and agree that any process in any such action may
be served upon any of them personally, or by certified mail or registered mail
upon them or their agent, return receipt requested, with the same full force and
effect as if personally served upon them in New York City. The parties hereto
waive any claim that any such jurisdiction is not a convenient forum for any
such suit or proceeding and any defense or lack of in personam jurisdiction with
respect thereto. In the event of any such action or proceeding, the party
prevailing therein shall be entitled to payment from the other party hereto of
its reasonable counsel fees and disbursements in an amount judicially
determined.
<PAGE>
US Wireless Data, Inc.
December 30, 1999
Page 3
Any notice, consent, request, or other communication given hereunder shall
be deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested addressed to the Company, at its principal office as
first provided above, Attention: Dean Leavitt and to Commonwealth at its address
provided above (or to such other address as either the Company and/or
Commonwealth shall provide in writing to the other party). Notices shall be
deemed to have been given on the date of receipt by the other party.
Very truly yours,
ComVest Capital Management LLC
By:
-------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
Accepted and agreed as of the
date first appearing above
US WIRELESS DATA, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
THIS NOTE AND THE UNDERLYING SECURITIES HAS BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") SHALL HAVE BECOME
EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION
UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS
IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE
ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.
US WIRELESS DATA, INC.
8% Senior Secured Promissory Note
$_______ December 30, 1999
$_______ December 30, 1999
FOR VALUE RECEIVED, US Wireless Data, Inc., a Colorado State corporation
(the "Company") with its principal executive office at 2200 Powell Street,
Emeryville, CA 94603 promises to pay to the order of __________________________
(the "Payee") or registered assigns the principal amount of
_____________________________ ($_______) Dollars (the "Principal Amount") on the
Maturity Date. The Maturity Date shall mean the earliest of (i) the date on
which a Change in Control occurs; (ii) the date on which any Placement occurs;
or (iii) December 30, 2000. "Change in Control" shall mean (a) a merger or
combination of the Company, (b) the sale of all or substantially all of the
assets of the Company, or (c) the purchase by a single entity or group as
defined in Section 13 of the Securities Act of 1933 of more than 50% of the
voting stock of the Company in a single transaction or a series of transactions.
A "Placement" shall mean the closing of either debt or equity financing in which
the Company receives at least five million dollars ($5,000,000) in gross
proceeds in any transaction or series of transactions after the date hereof but
excluding amounts received pursuant to the Commitment Letter (as defined below).
The Principal Amount, accrued interest and any other amounts due under this note
("Note") are payable in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts, except that in the event Commonwealth elects not to proceed with
the Private Placement (as defined below), then the Company may elect to repay
this Note in Common Stock at the Conversion Price. "Conversion Price" means an
amount equal to the average closing bid price of the shares of Common Stock on
the National Association of Securities Dealers, Inc. Bulletin Board (the
"Bulletin Board"), for the ten (10) trading days prior to the date of any
conversion. Interest on this Note shall accrue on the Principal Amount
outstanding from time to time at a rate per annum computed in accordance with
Section 4 hereof.
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<PAGE>
Each payment by the Company pursuant to this Note shall be made without
set-off or counterclaim and in immediately available funds.
The Company (i) waives presentment, demand, protest or notice of any kind
in connection with this Note and (ii) agrees, in the event of an Event of
Default (as defined below), to pay to the holder of this Note, on demand, all
costs and expenses (including reasonable legal fees) incurred in connection with
the enforcement and collection of this Note.
This Note is secured by a General Security Agreement dated the date hereof
(the "Security Agreement") of the Company in favor of the Payee covering certain
collateral (the "Collateral"), all as more particularly described and provided
therein, and is entitled to the benefits thereof. The Security Agreement, the
Uniform Commercial Code financing statements in connection with the Security
Agreement, and the Assignment of Patents and any and all other documents
executed and delivered by the Company to the Payee under which the Payee is
granted liens on assets of the Company are collectively referred to as the
"Security Documents."
This Note is being issued pursuant to a letter dated December 30, 1999 by
and between the Company and the Payee (the "Commitment Letter"), pursuant to
which, as provided in the Commitment Letter the Holder has agreed to make
available to the Company up to $1,000,000 of bridge financing (the "Bridge
Financing"). Capitalized terms used but not defined herein shall have the
meaning ascribed to such terms in the Commitment Letter.
4. Conversion Into Private Placement Units. During the period that the
Principal Amount of this Note is outstanding, if in the proposed private
placement (the "Private Placement") of the Company's securities through
Commonwealth Associates L.P. ("Commonwealth"), as contemplated by the Letter of
Intent dated December 23, 1999 by and between the Company and Commonwealth (the
"Term Sheet"), the Company completes a closing of a minimum of $2,500,000 of
gross proceeds through Commonwealth of units (the "Private Placement Units"),
the holders of this Note and of all other notes issued by the Company (the
"Other Notes"), in the Bridge Financing as contemplated by the Term Sheet),
shall, at their sole option, be entitled to convert all or any portion of this
Note or the other Notes into the Private Placement Units on the identical terms
and conditions as investors in the Private Placement purchase the Private
Placement Units. In the event of such election, all amounts due under this Note
and the Other Notes sold in the Bridge Financing so converted into the Private
Placement Units shall be counted as part of the proceeds raised in Private
Placement.
5. The Bridge Warrants. In consideration for the $195,000 loan represented
by this Note and the Commitment to lend up to another $805,000 as set forth in
the Commitment Letter, the Company shall issue to the Payee simultaneously with
the Payee's execution of this Note a seven (7) year warrant to purchase
13,636,363 shares of Common Stock, at an exercise price of $.01 per share upon
the terms and subject to the limitations contained therein (the "Bridge
Warrant") and shall execute and deliver to payee that certain Economic
Participation Agreement dated December 30, 1999 (the "Economic Participation
Agreement").
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6. Prepayment. This Note may be prepaid without penalty in whole or in part
at any time.
7. Computation of Interest.
A. Base Interest Rate. Subject to subsections 4B and 4C below, the
outstanding Principal Amount shall bear interest at the rate of eight (8%)
percent per annum.
B. Penalty Interest. In the event the Note is not repaid on the
Maturity Date, the rate of interest applicable to the unpaid Principal Amount
shall be adjusted to thirteen (13%) percent per annum from the date of default
until repayment; provided, that in no event shall the interest rate exceed the
Maximum Rate provided in Section 4C below.
C. Maximum Rate. In the event that it is determined that New York law
is not applicable to the indebtedness evidenced by this Note or that under New
York law ("Applicable Usury Laws"), the interest, charges and fees payable by
the Company in connection herewith or in connection with any other document or
instrument executed and delivered in connection herewith cause the effective
interest rate applicable to the indebtedness evidenced by this Note to exceed
the maximum rate allowed by law (the "Maximum Rate"), then such interest shall
be recalculated for the period in question and any excess over the Maximum Rate
paid with respect to such period shall be credited, without further agreement or
notice, to the Principal Amount outstanding hereunder to reduce said balance by
such amount with the same force and effect as though the Company had
specifically designated such extra sums to be so applied to principal and the
Payee had agreed to accept such extra payment(s) as a premium-free prepayment.
All such deemed prepayments shall be applied to the principal balance payable at
maturity.
8. Covenants of Company.
A. Affirmative Covenants. The Company covenants and agrees that, so
long as this Note shall be outstanding, it will perform the obligations set
forth in this Section 5A:
(i) Taxes and Levies. The Company will promptly pay and discharge
all taxes, assessments, and governmental charges or levies imposed upon the
Company or upon its income and profits, or upon any of its property, before the
same shall become delinquent, as well as all claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon such properties or
any part thereof; provided, however , that the Company shall not be required to
pay and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings and
the Company shall set aside on its books adequate reserves in accordance with
generally accepted accounting principles ("GAAP") with respect to any such tax,
assessment, charge, levy or claim so contested;
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(ii) Maintenance of Existence. The Company will do or cause to be
done all things reasonably necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and comply with all laws
applicable to the Company, except where the failure to comply would not have a
material adverse effect on the Company;
(iii) Maintenance of Property. The Company will at all times
maintain, preserve, protect and keep its property used or useful in the conduct
of its business in good repair, working order and condition, and from time to
time make all needful and proper repairs, renewals, replacements and
improvements thereto as shall be reasonably required in the conduct of its
business;
(iv) Insurance. The Company will, to the extent necessary for the
operation of its business, keep adequately insured by financially sound
reputable insurers, all property of a character usually insured by similar
corporations and carry such other insurance as is usually carried by similar
corporations;
(v) Books and Records. The Company will at all times keep true
and correct books, records and accounts reflecting all of its business affairs
and transactions in accordance with GAAP. Such books and records shall be open
at reasonable times and upon reasonable notice to the inspection of the Payee or
its agents; and
(vi) Notice of Certain Events. The Company will give prompt
written notice (with a description in reasonable detail) to the Payee of:
(a) the occurrence of any Event of Default or any event
which, with the giving of notice or the lapse of time, would constitute an Event
of Default; and
(b) the delivery of any notice effecting the acceleration of
any indebtedness which singly or together with any other accelerated
indebtedness exceeds $100,000.
B. Negative Covenants. The Company covenants and agrees that, so long
as this Note shall be outstanding, it will perform the obligations set forth in
this Section 5B:
(i) Liquidation, Dissolution. The Company will not liquidate or
dissolve, consolidate with, or merge into or with, any other corporation or
other entity, except that any wholly-owned subsidiary may merge with another
wholly-owned subsidiary or with the Company (so long as the Company is the
surviving corporation and no Event of Default shall occur as a result thereof);
(ii) Sales of Assets. The Company will not sell, transfer, lease
or otherwise dispose of, or grant options, warrants or other rights with respect
to, all or a substantial part of its properties or assets to any person or
entity, provided that this clause (ii) shall not restrict any disposition made
in the ordinary course of business and consisting of:
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(a) capital goods which are obsolete or have no remaining
useful life;
(b) finished goods inventories; and
(c) remaining credit card processing portfolios.
(iii) Redemptions. The Company will not redeem or repurchase any
outstanding equity and/or debt securities of the Company, except for (a)
repurchases of unvested or restricted shares of Common Stock at cost from
employees, consultants or members of the Board of Directors pursuant to
repurchase options of the Company (1) currently outstanding or (2) hereafter
entered into pursuant to a stock option plan or restricted stock plan approved
by the Company's Board of Directors or (b) rescission offers necessary or
appropriate to address violations of applicable securities laws;
(iv) Indebtedness. Other than (i) the Other Notes, and (ii)
indebtedness of the Company existing on the date of this Note as disclosed in
the Company's Report on Form 10- QSB for the quarter ended September 30, 1999,
the Company will hereafter not create, incur, assume or suffer to exist,
contingently or otherwise, any indebtedness except that the Company may incur
indebtedness that is expressly subordinate in all respects to this Note and the
Other Notes or additional unsecured trade debt incurred in the ordinary course
of business in an amount not to exceed $400,000 per month for the period
commencing on October 1, 1999 and ending on March 31, 2000 and in an unlimited
amount thereafter;
(v) Negative Pledge. Other than (i) with respect to the Other
Notes, and (ii) Liens existing on the date of this Note and expressly described
in the Security Agreement, the Company will not hereafter create, incur, assume
or suffer to exist any mortgage, pledge, hypothecation, assignment, security
interest, encumbrance, lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
financing lease) (each, a "Lien") upon any of its property, revenues or assets,
whether now owned or hereafter acquired, except:
(a) Liens granted to secure indebtedness incurred to finance
the acquisition (whether by purchase or capitalized lease) of tangible assets,
but only on the assets acquired with the proceeds of such indebtedness;
(b) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books;
(c) Liens of carriers, warehousemen, mechanics, materialman
and landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books;
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(d) Liens (other than Liens arising under the Employee
Retirement Income Security Act of 1974, as amended, or Section 412(n) of the
Internal Revenue Code of 1986, as amended) incurred in the ordinary course of
business in connection with workers' compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure obligations
on surety or appeal bonds; and
(e) judgment Liens in existence less than 30 days after the
entry thereof or with respect to which execution has been stayed in an amount
not to exceed $100,000 singly or in the aggregate.
(vi) Investments. The Company will not purchase, own, invest in
or otherwise acquire, directly or indirectly, any stock or other securities or
make or permit to exist any investment or capital contribution or acquire any
interest whatsoever in any other person or entity or permit to exist any loans
or advances for such purposes except for investments in direct obligations of
the United States of America or any agency thereof, obligations guaranteed by
the United States of America, certificates of deposit or other obligations of
any bank or trust company organized under the laws of the United States or any
state thereof and having capital and surplus of at least $500,000,000; and
deposit accounts maintained by the Company at Union Bank of California or
another bank having equivalent capital and surplus to such bank; provided,
however, that nothing contained in this clause (vi) shall preclude the Company
from making acquisitions, organizing subsidiaries, entering into joint ventures
or other business arrangements for the purpose of expanding its business.
(vii) Transactions with Affiliates. The Company will not enter
into any transaction, including, without limitation, the purchase, sale, lease
or exchange of property, real or personal, the purchase or sale of any security,
the borrowing or lending of any money, or the rendering of any service, with any
person or entity affiliated with the Company (including officers, directors and
shareholders owning five (5%) percent or more of the Company's outstanding
capital stock), except in the ordinary course of and pursuant to the reasonable
requirements of its business and upon fair and reasonable terms not less
favorable than would be obtained in a comparable arms-length transaction with
any other person or entity not affiliated with the Company and, where the
transaction is valued at in excess of $100,000 with the prior written consent of
the Payee. Nothing herein shall prevent the Company from issuing options to
Affiliates, issuing Liviakis up to 450,000 shares of Common Stock or renewing,
after March 15, 1999, the existing Consulting Agreement with Liviakis Financial
Communications, Inc. provided that a majority of disinterested directors approve
each such transaction.
(viii) Dividends. The Company will not declare or pay any cash
dividends or distributions on its outstanding capital stock.
(ix) Issuance of Securities. Prior to March 31, 2000, the Company
will not, without the prior written consent of the Payee, issue any securities
of the Company other than (i) as provided or disclosed in the Term Sheet, (ii)
pursuant to the exercise or conversion of securities outstanding as of the date
hereof, (iii) up to 15,000,000 of shares underlying options granted after the
date hereof and (iv) up to 450,000 shares of Common Stock to be issued to Mr.
Liviakis.
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<PAGE>
9. Events of Default.
A. The term "Event of Default" shall mean any of the events set forth
in this Section 6A:
(i) Non-Payment of Obligations. The Company shall default in the
payment of the principal or accrued interest of this Note as and when the same
shall become due and payable, whether by acceleration or otherwise.
(ii) Non-Performance of Affirmative Covenants. The Company shall
either materially default in the due observance or performance of any covenant
set forth in Section 5A, which default shall continue uncured for thirty (30)
days.
(iii) Non-Performance of Negative Covenants. The Company shall
default in the due observance or performance of any covenant set forth in
Section 5B.
(iv) Bankruptcy. The Company shall:
(a) apply for, consent to, or acquiesce in, the appointment
of a trustee, receiver, sequestrator or other custodian for the Company or any
of its property, or make a general assignment for the benefit of creditors;
(b) in the absence of such application, consent or acquiesce
in, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or for any part of its property;
(c) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Company, and, if such case or proceeding is not
commenced by the Company or converted to a voluntary case, such case or
proceeding shall be consented to or acquiesced in by the Company or shall result
in the entry of an order for relief; or
(d) take any corporate or other action authorizing, or in
furtherance of, any of the foregoing.
(v) Cross-Default. The Company shall default in the payment when
due of any amount payable under any other obligation of the Company for money
borrowed other than the Company's outstanding 6% debentures due July 21, 2000,
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<PAGE>
and the debt to RBB Bank in the principal amount of $225,000 and other
indebtedness not to exceed One Hundred Thousand Dollars ($100,000).
(vi) Cross-Acceleration. Any senior debt or any other
indebtedness of the Company in an aggregate principal amount exceeding One
Hundred Thousand Dollars ($100,000) shall be duly declared to be or shall become
due and payable prior to the stated maturity thereof other than the Company's
outstanding 6% debentures due July 21, 2000, and the debt to RBB Bank in the
principal amount of $225,000.
(vii) Other Breaches, Defaults. The Company shall materially
default and/or be in material breach of any term and/or provision in the Term
Sheet, Commitment Letter, the Bridge Warrant, the Other Notes, the Security
Documents or any other document relating to the Bridge Financing and/or the
Private Placement, or any representation and/or warranty made by the Company to
the Payee (including in this Note, the Bridge Warrant or the Other Notes) or
Commonwealth or any investor of Commonwealth who purchases securities of the
Company shall be false and/or misleading.
10. Representations of the Company. The Company represents and warrants to
the Payee that:
A. Corporate Organization: Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and has full corporate power and authority to carry on its business as
it is now being conducted and to own the properties and assets it now owns; is
duly qualified or licensed to do business as a foreign corporation in good
standing in the jurisdictions in which such qualification is required. The
copies of the articles of incorporation and by-laws and all amendments thereto
of the Company heretofore delivered to the Payee are complete and correct copies
of such instruments as presently in effect.
B. Capitalization of the Company. As of the date of this Note, the
authorized capital stock of the Company consists of 40,000,000 shares of Common
Stock, of which approximately 22,800,000 shares are issued and outstanding, and
5,000,000 shares of preferred stock $1.00 par value per share, of which
1,954,705 shares are issued and outstanding and are designated Series B 6%
Convertible Preferred Stock. As of the date hereof, approximately 2,375,000
shares of Common Stock were issuable upon the exercise of outstanding options
and approximately 6,772,000 shares of Common Stock were issuable upon the
exercise of outstanding warrants. All issued and outstanding shares of capital
stock of the Company are validly issued, fully paid and non-assessable. Except
as contemplated in the Commitment Letter, there are no outstanding (a)
securities convertible into or exchangeable for the Company's capital stock; (b)
options, warrants or other rights to purchase or subscribe to capital stock of
the Company or securities convertible into or exchangeable for capital stock of
the Company; or (c) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance of any capital stock of the
Company, any such convertible or exchangeable securities or any such options,
warrants or rights; except for the impact of anti dilution provisions in
previously issued warrants which will be activated by the issuance of the
Warrant defined herein.
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<PAGE>
C. Subsidiaries. The Company does not own, directly or indirectly, any
capital stock or other equity securities of any corporation, limited liability
company, partnership or any other entity or have any direct or indirect equity
or ownership interest in any business.
D. Authorization; No Violation.
(a) The Company has full corporate power and authority necessary
to enter into this Note, the Commitment Letter, the Bridge Warrant, the Economic
Participation Agreement and the Security Documents (collectively, the
"Documents"), and to carry out the transactions contemplated by the Documents.
The Board of Directors of the Company has taken such necessary action to
authorize the execution and delivery of the Documents and the consummation of
the transactions contemplated thereby. The Documents have been duly executed and
delivered by the Company and are legal, valid and binding obligations of the
Company enforceable against it in accordance with its terms except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefore may be brought.
(b) Neither the execution and delivery of any of the Documents
nor the consummation of the transactions contemplated thereby will violate any
provision of the articles or certificate of incorporation or by-laws or other
organizational documents of the Company, be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any debt
or obligation pursuant to, or result in the creation or imposition of any
security interest, lien or other encumbrance upon any property or assets of the
Company, any agreement or commitment to which the Company is a party or by which
the Company is bound or to which the property of the Company is subject, or
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority applicable to the Company, except that the
Company does not currently have sufficient authorized shares for the exercise of
the Bridge Warrant and the issuance of such warrant triggers certain
antidilution provisions disclosed elsewhere herein.
E. Financial Statements. The Company has heretofore delivered to the
Payee (i) a balance sheet of the Company as at June 30, in each of the years
1998 and 1999; and statements of operations, changes in shareholders' equity
(deficit) and cash flows for each of the years then ended, all audited and
certified; and (ii) an unaudited balance sheet of the Company as at September
30, 1999 (the "Balance Sheet"), and unaudited statements of operations for the
three (3) month period then ended. Such balance sheets and the notes thereto
fairly present the assets, liabilities and financial condition of the Company as
at the respective dates thereof, and such available statements of operations,
changes in shareholders' equity (deficit) and cash flows and the notes thereto
fairly present the results of operations for the periods therein referred to;
all in accordance with generally accepted accounting principles consistently
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applied throughout the periods involved except, in the case of unaudited
statements, for normally recurring year-end adjustments, which adjustments will
not be material either individually or in the aggregate.
F. No Undisclosed Liabilities, Etc. The Company has no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) not
otherwise disclosed herein which are not fully reflected or reserved against in
the Balance Sheet, which, in accordance with generally accepted accounting
principles, should have been shown or reflected in the Balance Sheet except for
accounts payable incurred in the ordinary course of business. The reserves
reflected in the Balance Sheet are adequate, appropriate and reasonable.
G. Title to Properties: Encumbrances.
(a) The Company has good, valid and marketable title to or in the
case of assets or Intellectual Property held pursuant to a lease or a license,
valid and subsisting leasehold interests, or licenses in, all properties and
assets which it uses or purports to own, use or exploit (real, personal and
mixed, tangible and intangible), including, without limitation, all the
properties and assets reflected in the Balance Sheet (except for inventory and
obsolete equipment sold since the date of the Balance Sheet in the ordinary
course of business and consistent with past practice), all intellectual
property, and all the properties and assets purchased by the Company since the
date of the Balance Sheet, except in each case for (i) liens for taxes which are
not yet due and payable or which are being contested in good faith, (ii)
statutory, common law, builder, mechanic, warehouseman, materialman, contractor,
workmen, repairmen, carrier or other liens which do not interfere with the use
by the Company of the assets relating to the business of the Company, (iii)
other restrictions on the use of property which do not materially interfere with
the conduct of the ordinary course of business of the Company or materially
impair the use or value of property, or (iv) those liens referred to in Section
5(B)(v)(ii) (collectively, "Permitted Liens"). All such properties and assets
are free and clear of all title defects or objections, liens, claims, charges,
pledges, options, security interests or other encumbrances of any kind or nature
whatsoever including, without limitation leases, chattel mortgages, deed of
trusts, conditional sales contracts, collateral security arrangements and other
title or interest retention arrangements (collectively, "Liens"), and are not,
in the case of real property subject to any rights of way, encroachments,
building use restrictions, exceptions, variances, reservations or limitations of
any nature whatsoever or other right of third parties, whether voluntarily
incurred or arising by operation of law, including without limitation, any
agreement to give any of the foregoing in the future and any contingent sale or
other title retention agreement except in each case (i) with respect to all such
properties and assets, liens as securing specified liabilities or obligations
shown on the Balance Sheet and (ii) for Permitted Liens. As used herein,
Intellectual Property means all registered or unregistered, now existing or
hereafter acquired or created (a) patents, letters patent, inventions,
copyrights, trademarks, trade names, styles, logos, source or business
identifiers, trade secrets and customer lists; (b) applications, rights, claims
and interests under licensing or other contracts pertaining to any of the
foregoing; (c) all registrations, recordings, applications, reissues,
extensions, substitutions, upgrades and renewals of any of the foregoing; (d)
all books, records, files and documents related to any of the foregoing; (e) all
goodwill ascribed or related to any of the foregoing; and (f) all products and
proceeds of any of the foregoing.
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<PAGE>
H. Material Contracts. The Company is not and has not received any
notice, or has any knowledge that it or any other party is, in or may be in
default in any respect under any material contract or that any other party
intends to terminate, breach or not renew any material contract; and to the best
knowledge of the Company, there has not occurred any event that, with the lapse
of time or the giving of notice or both, would constitute a default under any
material contracts, except with respect to overdue payables and defaults under
agreements evidencing the Company's 6% convertible debentures due July 21, 2000,
the indebtedness to RBB Bank in the amount of $225,000 and the Company's Series
B Preferred Stock.
I. Litigation. Except as disclosed in the Company's most recently
filed Form 10- KSB and Form 10-QSB, there is no action, order, writ, injunction,
judgment or decree, or any claim, suit, litigation, labor dispute, arbitrational
action, inquiry, proceeding or investigation by or before any court or
governmental or other regulatory or administrative agency or commission pending,
threatened against or involving the Company, or which questions or challenges
the validity of any of the Documents or any of the transactions contemplated
thereby or in the Commitment Letter. Except as disclosed in the Company's most
recently filed Form 10-KSB and Form 10-QSB, the Company is not subject to any
judgment, order or decree entered in any lawsuit or proceeding which would have
a material adverse effect on its business practices or on its ability to
continue to conduct its business as currently conducted.
11. Miscellaneous.
A. Parties in Interest. All covenants, agreements and undertakings in
this Note binding upon the Company or the Payee shall bind and inure to the
benefit of its successors and permitted assigns of the Company and the Payee,
respectively, whether so express or not.
B. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof. The parties hereto hereby agree that any
suit or proceeding arising directly and/or indirectly pursuant to or under this
instrument or the consummation of the transactions contemplated hereby, shall be
brought solely in a federal or state court located in the City, County and State
of New York. By its execution hereof, the parties hereby covenant and
irrevocably submit to the in personam jurisdiction of the federal and state
courts located in the City, County and State of New York and agrees that any
process in any such action may be served upon any of them personally, or by
certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon them
in New York City. The parties hereto waive any claim that any such jurisdiction
is not a convenient forum for any such suit or proceeding and any defense or
lack of in personam jurisdiction with respect thereto. In the event of any such
action or proceeding, the party prevailing therein shall be entitled to payment
from the other party hereto of its reasonable counsel fees and disbursements in
an amount judicially determined.
C. Waiver of Ju1y Trial. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
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CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PAYEE OR THE COMPANY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S PURCHASING THIS NOTE.
D. Expenses and Fees. All fees, costs and expenses of every kind and
nature, including but not limited to the reasonable attorneys fees and legal
expenses incurred by Payee in connection with the collection, administration, or
enforcement of its rights under this Note (and the Other Notes) or in defending
or prosecuting any actions or proceedings arising out of or related to any
amounts due to Payee, this Note, the Other Notes or the Commitment Letter shall
be borne and paid by the Company upon written demand by the Payee and until
paid, shall be added to the amounts due hereunder and bear interest at a rate
per annum equal to 18%.
E. Entire Agreement. This Note, the Other Notes, the Security
Documents, the Commitment Letter, the Bridge Warrant, the Economic Participation
Agreement, the Term Sheet and the other Documents set forth the entire agreement
of the parties with respect to the subject matter hereof and thereof,
superceding and replacing any agreement or understanding that may have existed
between the parties prior to the date hereof in respect to such subject matter.
12. Conversions. Notwithstanding anything to the contrary provided herein
or elsewhere, the Payee shall have the right, at its sole option, to convert all
or any part of this Note into a pro rata participation in any debt or equity
financing of the Company occurring after the date hereof in excess of one
million dollars ($1,000,000), provided such conversion shall be on the identical
terms and conditions as the other parties to the financing.
13. Board of Directors. As long as this Note and any Other Note remains
outstanding, the Board of Directors of the Company shall consist of four (4)
directors, of which one (1) director shall be appointed by ____________. In
addition, ____________ shall be entitled to have one (1) observer present at all
board meetings and that observer shall receive all information provided to
directors, provided the observer signs a confidentiality agreement. The observer
either shall be an employee, partner or shareholder of _______ or one of its
affiliates or otherwise shall be reasonably acceptable to the Company.
14. Use of Proceeds. The Company will use the $195,000 loan represented by
this Note for working capital purposes.
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IN WITNESS WHEREOF, this Note has been executed and delivered on the date
specified above by the duly authorized representative of the Company.
US WIRELESS DATA, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
-------------------------------
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GENERAL SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of December 30, 1999 (the "Agreement"),
between US Wireless Data, Inc., a Colorado corporation with offices at 2200
Powell Street, Emeryville, California 94603 (the "Debtor"), and ComVest Capital
Management LLC, a Delaware limited liability company with offices at 830 Third
Avenue, New York, New York 10022 (the "Secured Party");
W I T N E S S E T H:
WHEREAS, the Debtor and the Secured Party are parties to an 8% senior
secured promissory note issued by the Debtor in the aggregate principal amount
of $195,000 (herein, as at any time amended, extended, restated, renewed or
modified, the "Note"); and
WHEREAS, it is a condition to the willingness of the Secured Party to enter
into the Note and make the loan evidenced thereby that the Debtor enter into
this Agreement and grant to the Secured Party the security interest provided for
herein;
NOW, THEREFORE, FOR VALUE RECEIVED, IT IS AGREED:
Section 1. Terms. Unless otherwise defined herein, capitalized terms used
in this Agreement shall have the meaning specified therefor in the Note. As used
herein the following terms shall have the meanings specified and shall include
in the singular number the plural and in the plural number the singular:
"Assigned Agreement Interest" shall mean the profits, proceeds, or other
rights to payment of the Debtor under or from the performance, assignment, sale
or disposition of all contracts and agreements of the Debtor.
"Collateral" means all of the Debtor's right, title and interest in and
under or arising out of each and all of the following:
All personal property and fixtures of the Debtor of any type or
description, wherever located and now existing or hereafter arising or acquired,
including but not limited to the following:
(i) all of the Debtor's goods including, without limitation:
(a) all inventory, including without limitation, equipment held for
lease, whether raw materials, in process or finished, all material or equipment
usable in processing the same and all documents of title covering any inventory
(all of the foregoing, "Inventory"), including without limitation that located
at the locations listed on Schedule I annexed hereto;
(b) all equipment (the "Equipment") employed in connection with the
Debtor's business, together with all present and future additions, attachments
and accessions thereto and all substitutions therefor and replacements thereof,
<PAGE>
including without limitation that located at the locations listed on Schedule 1
annexed hereto;
(ii) all of the Debtor's present and future accounts, accounts receivable,
general intangibles, contracts and contract rights (herein sometimes referred to
as "Receivables"), including but not limited to the Debtor's rights to payment
and the Assigned Agreement Interest, together with
(a) all claims, rights, powers or privileges and remedies of the
Debtor relating thereto or arising in connection therewith including, without
limitation, all rights of the Debtor to make determinations, to exercise any
election (including, but not limited to, election of remedies) or option or to
give or receive any notice, consent, waiver or approval, together with full
power and authority to demand, receive, enforce, collect or receipt for any of
the foregoing or any property which is the subject of the Assigned Agreement
Interest, to enforce or execute any checks, or other instruments or orders, to
file any claims and to take any action which (in the opinion of the Secured
Party) may be necessary or advisable in connection with any of the foregoing,
(b) all liens, security, guaranties, endorsements, warranties and
indemnities and all insurance and claims for insurance relating thereto or
arising in connection therewith,
(c) all rights to property forming the subject matter of the
Receivables including, without limitation, rights to stoppage in transit and
rights to, returned or repossessed property,
(d) all writings relating thereto or arising in connection therewith
including, without limitation, all notes, contracts, security agreements,
guaranties, chattel paper and other evidence of indebtedness or security, all
powers-of-attorney, all books, records, ledger cards and invoices, all credit
information, reports or memoranda and all evidence of filings or registrations
relating thereto,
(e) all catalogs, computer and automatic machinery software and
programs, and the like pertaining, to operations by the Debtor in, on or about
any of its plants or warehouses, all sales data and other information relating
to sales or service of products now or hereafter manufactured on or about any of
its plants, and all accounting information pertaining to operations in, on or
about any of its plants, and all media in which or on which any of the
information or knowledge or data is stored or contained, and all computer
programs used for the compilation or printout of such information, knowledge,
records or data, and
(f) all accounts, contract rights, general intangibles and other
property rights of any nature whatsoever arising out of or in connection with
the foregoing, including without limitation, payments due and to become due,
whether as part of the Assigned Agreement Interest or as repayments,
reimbursements, contractual obligations, indemnities, damages or otherwise;
(iii) all of the Debtor's right, title, and market in and to any shares of
capital stock of any subsidiary corporation (collectively, the "Subsidiaries")
and the certificates representing any such shares, together with all goods,
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Inventory, Equipment, Receivables, and all other personal property of the
Subsidiaries;
(iv) all patents, trademarks, trade secrets, copyrights, rights to hardware
or software, and any other intellectual property rights of any description
whatsoever, whether owned or licensed by the Debtor;
(v) all other personal property of the Debtor of any nature whatsoever,
including, without limitation, all accounts, bank accounts, deposits, credit
balances, contract rights, inventory, general intangibles, goods, equipment,
instruments, chattel paper, machinery, furniture, furnishings, fixtures, tools,
supplies, appliances, plans and drawings, together with all customer and
supplier lists and records of the business, and all property from time to time
described in any financing statement (UCC-1) signed by the Debtor naming the
Secured Party as secured party; and
(vi) all items of collateral hereafter acquired, credited or arising and
all additions, accessions, replacements, substitutions or improvements and all
products and proceeds including, without limitation, proceeds of insurance, of
any and all of the Collateral described in clauses (i) through (iv) above.
"Instrument" shall have the meaning specified in Article 3 of the Uniform
Commercial Code, as in effect from time to time in the State of New York and
shall also include any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease and is of a type which is
in the ordinary course of business transferred by delivery with any necessary
endorsement or assignment.
"Lien" means any mortgage, pledge, hypothecation, assignment, security
interest, deposit arrangement, encumbrance (including any easement, right of
way, zoning restriction and the like), lien (statutory or other) or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges or levies
not at the time delinquent or thereafter payable without penalty or being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with generally accepted accounting principles shall have
been set aside on its books;
(b) Liens of carriers, warehousemen, mechanics, materialman and landlords
incurred in the ordinary course of business for sums not overdue or being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books;
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<PAGE>
(c) Liens (other than Liens arising under the Employee Retirement Income
Security Act of 1974, as amended, or Section 412(n) of the Internal Revenue Code
of 1986, as amended) incurred in the ordinary course of business in connection
with workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds;
(d) judgment Liens in existence less than 30 days after the entry thereof
or with respect to which execution has been stayed or which do not exceed
$100,000 in the aggregate;
(e) ground leases in respect of real property on which facilities owned or
leased by the Debtor or any of its subsidiaries are located;
(f) easements, rights-of-way, restrictions, minor defects or irregularities
in title and other similar charges or encumbrances not interfering in any
material respect with the business of the Debtor and its subsidiaries taken as a
whole;
(g) any interest or title of a lessor secured by a lessor's interest under
any lease of real property on which facilities owned or leased by the Debtor or
any of its Subsidiaries are located;
(h) leases or subleases granted to others not interfering in any material
respect with the business of the Debtor and its Subsidiaries taken as a whole;
(i) a Lien on any asset securing indebtedness (including capitalized lease
obligations) incurred or assumed for the purpose of financing the purchase price
(including capitalized lease payments in the nature thereof) of such asset,
provided that such Lien attaches only to the asset acquired with the proceeds of
such indebtedness and attaches concurrently with or within ten (10) days
following the acquisition thereof; and
(j) a Lien existing on the date hereof but only to the extent and as
expressly disclosed in the schedule of Permitted Liens annexed to the Note.
"Person" means any natural person, corporation, firm, association,
partnership, joint venture, limited liability company, joint-stock company,
trust, unincorporated organization, government, governmental agency or
subdivision, or any other entity, whether acting in an individual, fiduciary or
other capacity.
"Receivables" has the meaning specified therefor in clause (ii) of the
definition of Collateral.
"Secured Obligations" means all obligations of the Debtor, whether for
fees, expenses or otherwise, now existing or hereafter arising under this
Agreement and the Note.
Section 2. Security Interests. As security for the payment and performance
of all Secured Obligations the Debtor does hereby grant and assign to the
Secured Party a continuing security interest in all of the Collateral, whether
now existing or hereafter arising or acquired and wherever located, subject to
the priority, if any, of Permitted Liens.
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<PAGE>
Section 3. General Representations. Warranties and Covenants. The Debtor
represents, warrants and covenants, which representations, warranties and
covenants shall survive execution and delivery of this Agreement, as follows:
(a) This Agreement is made with full recourse to the Debtor and pursuant to
and upon all the warranties, representations, covenants, and agreements on the
part of the Debtor contained herein, in the Note and otherwise made in writing
in connection herewith or therewith.
(b) Except for the security interest of the Secured Party therein, the
Debtor is, and as to Collateral acquired from time to time after the date hereof
the Debtor will be, the owner of all the Collateral free from any lien, security
interest, encumbrance or other right, title or interest of any Person (other
than Permitted Liens) and the Debtor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein adverse to the Secured Party (other than Permitted Liens).
(c) There is no financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or any assignment of patent,
trademark or copyright now on file or registered in any public office covering
any interest of any kind in the Collateral, or intended to cover any such
interest, which has not been terminated or released by the secured party named
therein and so long as the Note remains outstanding or any of the Secured
Obligations of the Debtor remain unpaid, the Debtor will not execute and there
will not be on file in any public office any financing statement (or similar
statement or instrument of registration under the law of any jurisdiction) or
statements relating to the Collateral, except (i) financing statements filed or
to be filed in respect of and covering the security interest of the Secured
Party hereby granted and provided for and (ii) as specified in Schedule 2 and
(iii) with respect to Permitted Liens.
(d) The chief executive office and chief place of business of the Debtor is
located at the address of the Debtor listed on the signature page hereof, and
the Debtor will not move its chief executive office and chief place of business
except to such new location as the Debtor may establish in accordance with the
last sentence of this Section 3(d). The originals of all Assigned Agreement
Interest and all documents (as well as all duplicates thereof) evidencing all
Receivables and all other contract rights or accounts and other property of the
Debtor and the only original books of account and records of the Debtor relating
thereto are, and will continue to be, kept at such chief executive office. The
Debtor shall establish no such new location until (i) it shall have given to the
Secured Party not less than 30 days' prior written notice of its intention to do
so, clearly describing such new location and providing such other information in
connection therewith as the Secured Party may reasonably request, and (ii) with
respect to such new location, it shall have taken such action, satisfactory to
the Secured Party (including, without limitation, all action required by Section
7 hereof), to maintain the security interest of the Secured Party in the
Receivables intended to be granted at all times fully perfected and in full
force and effect.
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<PAGE>
(e) The Debtor has no Collateral located outside of the states of
California and Colorado.
(f) The name of the Debtor is as set forth on the signature page hereto and
the Debtor shall not change such name, conduct its business in any other name or
take title to the Collateral in any other name while this Agreement remains in
effect. The Debtor has never had any name, or conducted business under any name
in any jurisdiction, other than its name set forth on the signature page hereto,
during the past six years other than as set forth in Schedule 2 annexed hereto.
(g) At the Debtor's own expense, the Debtor will: (i) without limiting the
provisions of the Note, keep the Collateral fully insured at all times with
financially sound and responsible insurance carriers against loss or damage by
fire and other risks, casualties and contingencies and in such manner and to the
same extent that like properties are customarily so insured by other entities
engaged in the same or similar businesses similarly situated and keep adequate
insurance at all times against liability on account of damage to persons and
properties and under all applicable workers' compensation laws, by insurers and
in amounts approved by the Secured Party, for the benefit of the Debtor and the
Secured Party, (ii) upon request by the Secured Party, promptly deliver the
insurance policies or certificates thereof to the Secured Party, and (iii) keep
the Collateral in good condition at all times (normal wear and tear excepted)
and maintain same in accordance with all manufacturer's specifications and
requirements. Upon any failure of the Debtor to comply with its obligations
pursuant to this Section 3(g), the Secured Party may at its option, and without
affecting any of its other rights or remedies provided herein or as a secured
party under the Uniform Commercial Code, procure the insurance protection it
deems necessary and/or cause repairs or modifications to be made to the
Collateral and the cost of either or both of which shall be a lien against the
Collateral added to the amount of the indebtedness secured hereby and payable on
demand with interest at a rate per annum equal to 18%.
(h) The Debtor hereby assigns to the Secured Party all of Debtor's right,
title and interest in and to any and all moneys which may become due and payable
with respect to the Collateral under any policy insuring the Collateral (except
proceeds relating to tangible personal property which are applied to restoration
or replacement), including return of unearned premium, and shall cause any such
insurance company to make payment directly to the Secured Party for application
to amounts outstanding under the Note in accordance with the terms of the Note
and, to the extent not provided therein, in such order as the Secured Party
shall determine.
(i) The Debtor will not use the Collateral in violation of any statute or
ordinance or applicable insurance policy and will promptly pay all taxes and
assessments levied against the Collateral.
(j) The Debtor will not sell, transfer, change the registration, if any,
dispose of, attempt to dispose of, substantially modify or abandon the
Collateral or any part thereof other than sales of Inventory in the ordinary
course of business and the disposition of obsolete or worn-out Equipment in the
ordinary course of business.
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<PAGE>
(k) The Debtor will not assert against the Secured Party any claim or
defense which the Debtor may have against any seller of the Collateral or any
part thereof or against any other Person with respect to the Collateral or any
part thereof.
(l) The Debtor will indemnify and hold the Secured Party harmless from and
against any loss, liability, damage, costs and expenses whatsoever arising from
the Debtor's use, operation, ownership or possession of the Collateral or any
part thereof.
(m) The Debtor will maintain the confidentiality of all customer lists and
not sell or otherwise dispose of such lists except that the Debtor shall deliver
copies thereof to the Secured Party upon its request, which may be made at any
time and from time to time after an Event of Default.
(n) The Debtor will not enter into any agreement that is inconsistent with
the Debtor's obligations under this Agreement, without the prior written consent
of the Secured Party.
Section 4. Special Provisions Concerning the Assigned Agreement Interest.
The Debtor represents, warrants and agrees as follows:
(a) The Assigned Agreement Interest constitutes the legal, valid and
binding obligations of the Debtor and, to the best of its knowledge, the other
parties thereto, enforceable in accordance with their respective terms.
(b) The Debtor will faithfully abide by, perform and discharge each and
every material obligation, covenant and agreement to be performed by the Debtor
under the Assigned Agreement Interest.
(c) The Debtor will not act or fail to act in a manner likely (directly or
indirectly) to entitle any party thereto to claim that the Debtor is in default
under the terms thereof.
(d) The Debtor will not terminate or permit the termination of any Assigned
Agreement Interest, except in accordance with its terms, other than in the
ordinary course of business or as it deems necessary or desirable in the normal
course of its business.
(e) Without the prior written consent of the Secured Party, the Debtor will
not, other than in the ordinary course of business, waive or in any manner
release or discharge any party to any Assigned Agreement Interest from any of
the material obligations, covenants, conditions and agreements to be performed
by it under such Assigned Agreement Interest including, without limitation, the
obligation to make all payments in the manner and at the time and places
specified.
(f) If the Secured Party so requests after the occurrence of an Event of
Default and, if prior to the Maturity Date, acceleration of the Note
("Acceleration"), the Debtor will hold any payments received by it which are
assigned and set over to the Secured Party by this Agreement for and on behalf
of the Secured Party and turn them promptly over to the Secured Party forthwith
in the same form in which they are received (together with any necessary
endorsement) for application to amounts outstanding under the Note in accordance
with the terms of the Note and, to the extent not provided therein, in such
order as the Secured Party shall determine.
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<PAGE>
(g) The Debtor will appear in and defend every action or proceeding arising
under, growing out of or in any manner connected with the Assigned Agreement
Interest or the obligations, duties or liabilities of the Debtor and any
assignee thereunder.
(h) Should the Debtor fail to make any payment or to do any act as herein
provided after 15 day's notice by the Secured Party, the Secured Party may (but
without obligation on the Secured Party's part to do so and without notice to or
demand on the Debtor and without releasing the Debtor from any obligation
hereunder) make or do the same in such manner and to such extent as the Secured
Party may deem necessary to protect the security interests provided hereby,
including specifically, without limiting the general powers, the right to appear
in and defend any action or proceeding purporting to affect the security
interests provided hereby and the Debtor, and the Secured Party may also perform
and discharge each and every obligation, covenant and agreement of the Debtor
contained in any Assigned Agreement Interest and, in exercising any such powers,
pay necessary costs and expenses, employ counsel and incur and pay reasonable
attorneys' fees.
(i) Upon the request of the Secured Party, the Debtor will send to the
Secured Party copies of all notices, documents and other papers furnished or
received by it with respect to any of the Assigned Agreement Interest.
Section 5. Special Provisions Concerning Receivables.
(a) As of the time when each Receivable arises, the Debtor shall be deemed
to have warranted as to each such Receivable that such Receivable and all papers
and documents relating thereto are genuine and in all respects what they purport
to be, and that all papers and documents relating thereto:
(i) will be signed by the account debtor named therein (or such
account debtor's duly authorized agent) or otherwise be binding on the account
debtor;
(ii) will represent the genuine, legal, valid and binding obligation
of the account debtor evidencing indebtedness unpaid and owed by such account
debtor arising out of the performance of labor or services or the sale and
delivery of merchandise or both;
(iii) to the extent evidenced by writings, will be the only original
writings evidencing and embodying such obligation of the account debtor named
therein; and
(iv) will be in compliance and will conform with all applicable
federal, state and local laws (including applicable usury laws) and applicable
laws of any relevant foreign jurisdiction.
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<PAGE>
(b) The Debtor will keep and maintain at the Debtor's own cost and expense
satisfactory and complete records of the Receivables, including, but not limited
to, records of all payments received, all credits granted thereon, all
merchandise returned and all other dealings therewith, and the Debtor will make
the same available to the Secured Party, at the Debtor's own cost and expense,
at any and all reasonable times upon demand of the Secured Party. The Debtor
shall, at the Debtor's own cost and expense, deliver the Receivables (including,
without limitation, all documents evidencing the Receivables) and such books and
records to the Secured Party or to its representatives upon its demand at any
time after the occurrence of an Event of Default and, if prior to the Maturity
Date, Acceleration. If the Secured Party shall so request, the Debtor shall
legend, in form and manner satisfactory to the Secured Party, the Receivables
and other books, records and documents of the Debtor evidencing or pertaining to
the Receivables with an appropriate reference to the fact that the Receivables
have been assigned to the Secured Party and that the Secured Party has a
security interest therein.
(c) Except in the ordinary course of business prior to an Event of Default
and, if prior to the Maturity Date, Acceleration, the Debtor will not rescind or
cancel any indebtedness evidenced by any Receivable or modify any term thereof
or make any adjustment with respect thereto, or extend or renew the same, or
compromise or settle any dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable or interest therein, without the prior written
consent of the Secured Party, except that the Debtor may grant discounts in
connection with the prepayment of any Receivable in an amount which is customary
in the line of business in which the Debtor is engaged and consistent with the
Debtor's past practices.
(d) The Debtor will duly fulfill all obligations on its part to be
fulfilled under or in connection with the Receivables and will do nothing to
impair the rights of the Secured Party in the Receivables.
(e) The Debtor shall endeavor to collect or cause to be collected from the
account debtor named in each Receivable, as and when due (including, without
limitation, Receivables which are delinquent, such Receivables to be collected
in accordance with generally accepted lawful collection procedures) any and all
amounts owing under or on account of such Receivable, and credit forthwith (on a
daily basis) upon receipt thereof all such amounts as are so collected to the
outstanding balance of such Receivable. The costs and expenses (including
attorneys' fees) of collection, whether incurred by the Debtor or the Secured
Party, shall be borne by the Debtor.
(f) Upon request of the Secured Party, at any time when an Event of Default
and, if prior to the Maturity Date, Acceleration shall exist, the Debtor shall
promptly notify (in manner, form and substance satisfactory to the Secured
Party) all Persons who are at any time obligated under any Receivable that the
Secured Party possesses a security interest in such Receivable and that all
payments in respect thereof are to be made to such account as the Secured Party
directs.
Section 6. Special Provisions Concerning Equipment. The Debtor will do
nothing to impair the rights of the Secured Party in the Equipment. The Debtor
shall cause the Equipment to at all times constitute and remain personal
property. The Debtor will at all times keep all Equipment insured with
financially responsible insurance companies in favor of the Secured Party, at
the expense of the Debtor, against such perils and in such amounts as are
customary for Persons in the same general line of business as the Debtor and
operating in similar geographic locations and markets. If the Debtor shall fail
to insure the Equipment to the Secured Party's satisfaction, or if the Debtor
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shall fail so to endorse and deposit all policies or certificates with respect
thereto, the Secured Party shall have the right (but shall be under no
obligation) to procure such insurance and the Debtor agrees to reimburse the
Secured Party for all costs and expenses of procuring such insurance, together
with interest at a rate per annum equal to 18%. The Secured Party may apply any
proceeds of such insurance when received by it pursuant to the terms of this
Section 6 or Section 3(h) hereof toward the payment of any of the Secured
Obligations, whether or not the same shall then be due. The Debtor retains all
liability and responsibility in connection with the Equipment and the liability
of the Debtor to pay the Secured Obligations shall in no way be affected or
diminished by reason of the fact that such Equipment may be lost, destroyed,
stolen, damaged or for any reason whatsoever unavailable to the Debtor.
Section 7. Financing Statements; Documentation; Stamp Taxes.
(a) The Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Secured Party from time to time such
lists, descriptions and designations of Inventory, warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Secured Party deems
appropriate or advisable to perfect, preserve or protect its security interest
in the Collateral. The Debtor hereby constitutes the Secured Party its
attorney-in-fact to execute and file in the name and on behalf of the Debtor
such additional financing statements as the Secured Party may request, such acts
of such attorney being hereby ratified and confirmed; such power, being coupled
with an interest, is irrevocable until the Secured Obligations are paid in full.
Further, to the extent permitted by applicable law, the Debtor authorizes the
Secured Party to file any such financing statements without the signature of the
Debtor. The Debtor will pay all applicable filing fees and related expenses in
connection with any such financing statements.
(b) The Debtor agrees to procure, pay for, affix to any and all documents
and cancel any documentary tax stamps required by and in accordance with,
applicable law and the Debtor will indemnify and hold the Secured Party harmless
against any liability (including interest and penalties) in respect of such
documentary stamp taxes.
Section 8. Special Provisions Concerning Remedies and Sale. In addition to
any rights and remedies now or hereafter granted under applicable law and not by
way of limitation of any such rights and remedies, upon the occurrence of an
Event of Default and, if prior to the Maturity Date, Acceleration, the Secured
Party shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code as enacted in any applicable jurisdiction in addition to
the rights and remedies provided herein, in the Note and in any other agreement
executed in connection with the Note whereby the Debtor has granted any Lien to
the Secured Party. Without in any way limiting the foregoing, upon the giving of
notice to the Debtor of Secured Party's intent to pursue any one or all of the
following or any other remedies:
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(a) Upon the occurrence of an Event of Default and, if prior to the
Maturity Date, Acceleration, the Secured Party shall have all of the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in any
applicable jurisdiction in addition to the rights and remedies provided herein,
in the Note and any other document whereby the Debtor has granted any Lien to
the Secured Party. The Secured Party shall have the right, without further
notice to, or assent by, the Debtor, in the name of the Debtor or in the name of
the Secured Party or otherwise:
(i) to ask for, demand, collect, receive, compound and give
acquittance for the Receivables or any part thereof;
(ii) to extend the time of payment of, compromise or settle for cash,
credit or otherwise, and upon any terms and conditions, any of the Receivables;
(iii) to endorse the name of the Debtor on any checks, drafts or other
orders or instruments for the payment of moneys payable to the Debtor which
shall be issued in respect of any Receivable;
(iv) to file any claims, commence, maintain or discontinue any
actions, suits or other proceedings deemed by the Secured Party necessary or
advisable for the purpose of collecting or enforcing payment of any Receivable;
(v) to make test verifications of the Receivables or any portion
thereof,
(vi) to notify any or all account debtors under any or all of the
Receivables to make payment thereof directly to the Secured Party for the
account of the Secured Party and to require the Debtor to forthwith give similar
notice to the account debtors;
(vii) to require the Debtor forthwith to account for and transmit to
the Secured Party in the same form as received all proceeds (other than physical
property) of collection of Receivables received by the Debtor and, until so
transmitted, to hold the same in trust for the Secured Party and not commingle
such proceeds with any other funds of the Debtor;
(viii) to take possession of any or all of the Collateral and, for
that purpose, to enter, with the aid and assistance of any Person or Persons and
with or without legal process, any premises where the Collateral, or any part
thereof, are, or may be, placed or assembled, and to remove any of such
Collateral;
(ix) to execute any instrument and do all other things necessary and
proper to protect and preserve and realize upon the Collateral and the other
rights contemplated hereby;
(x) upon notice to such effect, to require the Debtor to deliver, at
the Debtor's expense, any or all Collateral to the Secured Party at a place
designated by the Secured Party; and
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(xi) without obligation to resort to other security, at any time and
from time to time, to sell, re-sell, assign and deliver all or any of the
Collateral, in one or more parcels at the same or different times, and all
right, title and interest, claim and demand therein and right of redemption
thereof, at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices and on such terms as the Secured Party may
determine, with the amounts realized from any such sale to be applied to the
Secured Obligations in the manner determined by the Secured Party.
The Debtor hereby agrees that all of the foregoing may be effected without
demand, advertisement or notice (except as otherwise provided herein or as may
be required by law), all of which (except as otherwise provided) are hereby
expressly waived, to the extent permitted by law. The Secured Party shall not be
obligated to do any of the acts hereinabove authorized, but in the event that
the Secured Party elects to do any such act, the Secured Party shall not be
responsible to the Debtor except for its gross negligence or willful misconduct.
(b) The Secured Party may take legal proceedings for the appointment of a
receiver or receivers (to which the Secured Party shall be entitled as a matter
of right) to take possession of the Collateral pending the sale thereof pursuant
either to the powers of sale granted by this Agreement or to a judgment, order
or decree made in any judicial proceeding for the foreclosure or involving the
enforcement of this Agreement. If, after the exercise of any or all of such
rights and remedies, any of the Secured Obligations shall remain unpaid, the
Debtor shall remain liable for any deficiency. After the indefeasible payment in
full of the Secured Obligations, any proceeds of the Collateral received or held
by the Secured Party shall be turned over to the Debtor and the Collateral shall
be reassigned to the Debtor by the Secured Party without recourse to the Secured
Party and without any representations, warranties or agreements of any kind.
(c) Upon any sale of any of the Collateral, whether made under the power of
sale hereby given or under judgment, order or decree in any judicial proceeding
for the foreclosure or involving the enforcement of this Agreement:
(i) the Secured Party may, to the extent permitted by law, bid for and
purchase the property being sold, and upon compliance with the terms of sale may
hold, retain and possess and dispose of such property in its own absolute right
without further accountability, and may, in paying the purchase money therefor,
deliver any Note or claims for interest thereon and any other instruments
evidencing the Secured Obligations or agree to the satisfaction of all or a
portion of the Secured Obligations in lieu of cash in payment of the amount
which shall be payable thereon, and the Note and such instruments, in case the
amounts so payable thereon shall be less than the amount due thereon, shall be
returned to the Secured Party after being appropriately stamped to show partial
payment;
(ii) the Secured Party may make and deliver to the purchaser or
purchasers a good and sufficient deed, bill of sale and instrument of assignment
and transfer of the property sold;
(iii) the Secured Party is hereby irrevocably appointed the true and
lawful attorney-in-fact of the Debtor in its name and stead, to make all
necessary deeds, bills of sale and instruments of assignment and transfer of the
property thus sold and for such other purposes as are necessary or desirable to
effectuate the provisions (including, without limitation, this Section 8) of
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<PAGE>
this Agreement, and for that purpose it may execute and deliver all necessary
deeds, bills of sale and instruments of assignment and transfer, and may
substitute one or more Persons with like power, the Debtor hereby ratifying and
confirming all that its said attorney, or such substitute or substitutes, shall
lawfully do by virtue hereof; but if so requested by the Secured Party or by any
purchaser, the Debtor shall ratify and confirm any such sale or transfer by
executing and delivering to the Secured Party or to such purchaser all property,
deeds, bills of sale, instruments or assignment and transfer and releases as may
be designated in any such request;
(iv) all right, title, interest, claim and demand whatsoever, either
at law or in equity or otherwise, of the Debtor of, in and to the property so
sold shall be divested; such sale shall be a perpetual bar both at law and in
equity against the Debtor, its successors and assigns, and against any and all
Persons claiming or who may claim the property sold or any part thereof from,
through or under the Debtor, its successors or assigns;
(v) the receipt of the Secured Party or of the officer thereof making
such sale shall be a sufficient discharge to the purchaser or purchasers at such
sale for his or their purchase money, and such purchaser or purchasers, and his
or their assigns or personal representatives, shall not, after paying such
purchase money and receiving such receipt of the Secured Party or of such
officer therefor, be obliged to see to the application of such purchase money or
be in any way answerable for any loss, misapplication or non-application
thereof; and (vi) to the extent that it may lawfully do so, and subject to any
legal requirement that the Secured Party act in a commercially reasonable
manner, the Debtor agrees that it will not at any time insist upon, or plead, or
in any manner whatsoever claim or take the benefit or advantage of, any
appraisement, valuation, stay, extension or redemption laws, or any law
permitting it to direct the order in which the Collateral or any part thereof
shall be sold, now or at any time hereafter in force, which may delay, prevent
or otherwise affect the performance or enforcement of this Agreement, the Note
or any other agreement executed in connection with the Note whereby the Debtor
has granted any Lien to the Secured Party, and the Debtor hereby expressly
waives all benefit or advantage of any such laws and covenants that it will not
hinder, delay or impede the execution of any power granted or delegated to the
Secured Party in this Agreement, but will suffer and permit the execution of
every such power as though no such laws were in force. In the event of any sale
of Collateral pursuant to this Section, the Secured Party shall, at least 10
days before such sale, give the Debtor written, telecopied or telex notice of
its intention to sell.
Section 9. Application of Moneys.
(a) Except as otherwise provided herein or in the Note, all moneys which
the Secured Party shall receive, in accordance with the provisions hereof, shall
be applied (to the extent thereof) in the following manner: First, to the
payment of all costs and expenses reasonably incurred in connection with the
administration and enforcement of, or the preservation of any rights under, this
Agreement or any of the reasonable expenses and disbursements of the Secured
Party (including, without limitation, the fees and disbursements of its counsel
and agents); Second, to the payment of all Secured Obligations arising out of
the Note in accordance with the terms of the Note and, if not therein provided,
in such order as the Secured Party may determine; and Third, to the payment of
all other Secured Obligations in such order as the Secured Party may determine.
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<PAGE>
(b) If after applying any amounts which the Secured Party has received in
respect of the Collateral any of the Secured Obligations remain unpaid, the
Debtor shall continue to be liable for any deficiency, together with interest.
Section 10. Fees and Expenses, etc. Any and all fees, costs and expenses of
whatever kind or nature, including but not limited to the reasonable attorneys'
fees and legal expenses incurred by the Secured Party in connection with the
collection, administration or enforcement of its rights under this Agreement,
the filing or recording of any documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes, counsel
fees, maintenance fees, fees and other costs relating to the encumbrances or
otherwise protecting, maintaining, preserving the Collateral, or in defending or
prosecuting any actions or proceedings arising out of or related to the
Collateral, shall be borne and paid by the Debtor on written demand by the
Secured Party and until so paid shall be added to the principal amount of the
Secured Obligations and shall bear interest at a rate per annum equal to 18%. In
addition, the Debtor will pay, and indemnify and hold the Secured Party harmless
from and against, any and all liabilities, obligations, losses, damages
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the Collateral, including (without
limitation) claims of patent or trademark infringement and any claim of unfair
competition or anti-trust violation.
Section 11. Miscellaneous.
(a) All notices, communications and distributions hereunder shall be in
writing (including telecopied communication) and mailed by certified mail,
telecopied, personally delivered or delivered by Federal Express or other
reputable overnight courier service, if to the Debtor addressed to it at its
address set forth opposite its signature below, if to the Secured Party,
addressed to it at its address set forth opposite its signature below, or as to
either party at such other address as shall be designated by such party in a
written notice to such other party complying as to delivery with the terms of
this Section. All such notices and other communications shall be effective (i)
if mailed by certified mail, three days after the date of deposit thereof with
the U.S. Postal Service, properly addressed with postage prepaid, (ii) if
telecopied, upon receipt by the addressee, (iii) if personally delivered, upon
such delivery and (iv) if delivered by overnight courier service, on the
business day following delivery thereof to such courier service in time for
next-business-day delivery.
(b) No delay on the part of the Secured Party in exercising any of its
rights, remedies, powers and privileges hereunder or partial or single exercise
thereof, shall constitute a waiver thereof. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by the Debtor and the Secured Party. No
notice to or demand on the Debtor in any case shall entitle the Debtor to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Secured Party to any other or
further action in any circumstances without notice or demand.
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<PAGE>
(c) The obligations of the Debtor hereunder shall remain in full force and
effect without regard to, and shall not be impaired by, (i) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or the like of the Debtor; (ii) any exercise or non-exercise, or any waiver of,
any right, remedy, power or privilege under or in respect of the Note, this
Agreement or any other agreement executed in connection with the Note whereby
the Debtor has granted any Lien to the Secured Party or any other agreement
executed in connection with any of the foregoing, the Secured Obligations or any
security for any of the Secured Obligations; or (iii) any amendment to or
modification of any of the foregoing; whether or not the Debtor shall have
notice or knowledge of any of the foregoing. The rights and remedies of the
Secured Party herein provided are cumulative and not exclusive of any rights or
remedies which the Secured Party would otherwise have.
(d) This Agreement shall be binding upon the Debtor and its successors and
assigns and shall inure to the benefit of the Secured Party and its successors
and assigns, except that the Debtor may not transfer or assign any of its
obligations, rights or interest hereunder without the prior written consent of
the Secured Party and any such purported assignment by the Debtor shall be void.
All agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement.
(e) The descriptive headings of the several sections of this Agreement are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
(f) Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(g) All rights, remedies and powers provided by this Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and the provisions hereof are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited to the extent necessary so that they will not render this
Agreement invalid, unenforceable in whole or in part or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
(h) This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and be governed by the laws of the State
of New York except to the extent that matters of title, or creation, perfection
and priority of the security interests created hereby, or procedural issues of
foreclosure are required to be governed by the laws of the state in which the
Collateral, or part thereof, is located. EACH PARTY HERETO KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION BASED ON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTE OR ANY
FINANCING DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
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<PAGE>
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY SUCH PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE SECURED PARTY'S ENTERING INTO THIS AGREEMENT.
(i) It is expressly agreed, anything herein, in the Note or in any other
agreement or instrument executed in connection with the Note to the contrary
notwithstanding, that the Debtor shall remain liable to perform all of the
obligations, if any, assumed by it with respect to the Collateral and the
Secured Party shall not have any obligations or liabilities with respect to any
Collateral by reason of or arising out of this Agreement, nor shall the Secured
Party be required or obligated in any manner to perform or fulfill any of the
obligations of the Debtor under or pursuant to any or in respect of any
Collateral.
(j) This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which counterparts taken
together shall be deemed to constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
US WIRELESS DATA, INC., as Debtor
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
COMVEST CAPITAL MANAGEMENT
LLC, as Secured Party
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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<PAGE>
Schedule 1
LOCATION OF CERTAIN INVENTORY AND EQUIPMENT COLLATERAL
Current place(s) of business of the Debtor:
Intellectual Property Registrations
<PAGE>
Schedule 2
EXISTING FINANCING STATEMENTS
Number of Description Amount of
Date of Indebtedness Financing Financing Location
Secured Party Statement Statement Filed Collateral Of Secured
- ------------- ------------- ----------- ----------- ---------- ----------
OTHER NAMES UNDER WHICH DEBTOR HAS CONDUCTED BUSINESS
ECONOMIC PARTICIPATION AGREEMENT
This Economic Participation Agreement (the "Agreement") dated December 30,
1999 is made by and between U.S. Wireless Data, Inc., a Colorado corporation
(the "Company") and ComVest Capital Management LLC ("ComVest").
W I T N E S S E T H:
WHEREAS, ComVest is concurrently herewith making available to the Company a
secured loan (the "Loan") in an amount up to $1.0 million, which amount will be
funded $195,000 on the date hereof and the balance may be borrowed upon the
satisfaction or waiver of certain conditions; and
WHEREAS, as an inducement for ComVest to make the Loan the Company has
agreed to issue warrants (the "Warrant") to ComVest to purchase 13,636,363
shares; and
WHEREAS, the Company does not have sufficient authorized shares of Common
Stock as would be required to be reserved under the Warrant to enable the
Warrant to be exercised in full; and
WHEREAS, the Company's Board of Directors will approve as soon as possible
an amendment (the "Amendment") to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock so that the Company,
among other things, will be able to reserve all shares that may be exercisable
under the Warrants and the Company has agreed to use its best efforts to obtain
shareholder approval of the Amendment; and
WHEREAS, the Company is entering into this Agreement to grant ComVest the
economic equivalent of ownership of those shares of Common Stock as to which the
Warrant is not then exercisable; and
WHEREAS, once the Company has obtained the requisite shareholder approval
for the Amendment and has amended its Certificate of Incorporation thereby, this
Agreement shall be cancelled in consideration of the Company reserving for
issuance under the Warrant sufficient shares of Common Stock such that the
Warrant may be exercised in full.
NOW, THEREFORE, for and in consideration of ten dollars and other good and
valuable consideration, including the premises, promises, covenants and
agreements made herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Economic Participation. Upon any sale, liquidation, dividend (other
than mandatory dividends payable under the Company's Series B Preferred
Stock as in effect as the date hereof), distribution, merger,
consolidation, restructuring, reorganization or other similar transaction
involving the Company, or upon a sale, lease, license or transfer of all or
at least a majority of the assets of the Company, or if any person or group
(as defined in Section 13 of the Securities Exchange Act of 1934, as
amended), acquires or receives any shares of Common Stock so that after
such acquisition or receipt such person or group owns at least a majority
of the outstanding shares of Common Stock in each case in one or a series
of transactions, the Company will pay (in cash or at ComVest's option if
applicable in the form of consideration received by such common
shareholder) to ComVest an amount equal to the product of (A) the amount
paid or received by a common shareholder of the Company in respect of each
share held in connection with the transaction triggering the payment to
ComVest and (B) the Adjusted Shares. For purposes of this Agreement,
"Adjusted Shares" shall mean 13,636,363 shares of Common Stock which amount
<PAGE>
shall be decreased by (i) the aggregate number of shares of Common Stock
hereafter reserved for issuance by the Company under the Warrant (adjusted
for any adjustments in the number of shares subject to the Warrant) and
(ii) 6,818,182 shares (which number shall be reduced by 1 for each two
shares of Common Stock hereafter reserved for issuance under the Warrant
and further proportionately adjusted to take into effect any changes to the
shares of Common Stock subject to the Warrant) in the event of a Forfeiture
Event as defined in the Warrant.
2. Termination of This Agreement. At such time as the number of shares
of Common Stock that are reserved for issuance upon exercise of the Warrant
are sufficient to allow the Warrant to be exercised in full (with all
adjustments as may be made pursuant to the terms of the Warrant), this
Agreement shall automatically terminate, unless ComVest shall have already
exercised its right to liquidated damages pursuant to Section 3 hereof, in
which event the termination of this Agreement shall be governed by Section
3.
3. Liquidated Damages. If this Agreement should not have been
automatically terminated as contemplated by Section 2 hereof within 120
days of the date of this Agreement, then the Company shall pay to ComVest
on such 120th day a nonconversion fee of $500,000 and, in addition, until
such time as this Agreement is terminated as provided in such section,
ComVest may elect to receive in cash in consideration of canceling this
Agreement the greater of (A) $2.0 million or (B) the product of (1) the
Adjusted Shares and (2) the remainder of (x) the closing asking price of
the Common Stock on the last trading date prior to the exercise by ComVest
of its liquidation right and (y) $0.01. ComVest may exercise its right to
receive a liquidated damage payment by delivering a written notice to the
Company by facsimile transmission, by hand, by overnight courier or by U.S.
mail and such notice will be deemed received by the Company on the date
sent by ComVest unless the Company can thereafter prove no delivery
thereafter actually occurred.
4. Complete Agreement. This Agreement constitutes the complete
understanding among the parties with respect to its subject matter and
prior agreements and understandings among any of the parties hereto are
hereby superseded and terminated and shall have no further force or effect.
5. Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
6. Successors and Assigns. All of the terms of this Agreement shall
inure to the benefit of and shall be binding upon the successors and
assigns of the parties hereto except that the Company may not assign any of
its obligations hereunder.
7. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to the provisions, policies or principles thereof respecting
conflict or choice of laws.
8. Modification; Amendment. Except as otherwise provided herein,
neither this Agreement nor any provision hereof can be modified, amended,
changed, discharged or terminated except by an instrument in writing signed
by the parties hereto.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
taken together shall constitute one and the same agreement.
2
<PAGE>
10. Severability. If at any time subsequent to the date of this
Agreement, any provision of this Agreement shall be held by any court of
competent jurisdiction to be illegal, void or unenforceable, such provision
shall be of no force or effect but the illegality or enforceable of such
provision shall have no effect upon or impair the enforceability of any
other provision.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
U.S. WIRELESS DATA, INC.
By:
--------------------------------
Name:
-------------------------------
Title:
------------------------------
COMVEST CAPITAL MANAGEMENT LLC
By:
--------------------------------
Name:
-------------------------------
Title:
------------------------------
3
December 30, 1999
ComVest Capital Management LLC
830 Third Avenue
New York, NY 10022
Re: Advancement of Funds
Gentlemen:
Reference is made to that certain Commitment Letter dated December 30, 1999
(the "Letter") between ComVest Capital Management LLC ("ComVest") and U.S.
Wireless Data, Inc. (the "Company"). Capitalized terms used herein without
definition are used as defined or referred to in the Letter.
This letter is to confirm that I, as a lender, will subject to ComVest
first having funded $195,000 under the Letter, advance funds to the Company in a
proportionate amount to that funded to the Company by ComVest pursuant to the
Letter. For each $1 advanced by ComVest after such initial $195,000 is advanced
I will advance a fraction of such dollar, the numerator of which is 100 and the
denominator of which is 805.
Sincerely,
/s/ Dean Leavitt
Dean Leavitt
