Exhibit 10.1
DEBENTURE AGREEMENT
-------------------
THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE OR FOREIGN LAW. THE DEBENTURES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (i) THEY SHALL HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE AND
FOREIGN SECURITIES ACT OR OTHER LAW OR (ii) THE CORPORATION SHALL HAVE BEEN
FURNISHED WITH AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION, THAT
REGISTRATION OR OTHER COMPLIANCE IS NOT REQUIRED UNDER ANY OF SUCH ACTS OR LAWS.
U.S. WIRELESS DATA, INC.
8% ADJUSTABLE RATE CONVERTIBLE SUBORDINATED
DEBENTURES DUE DECEMBER 31, 1999
This Debenture Agreement is entered into between U. S. Wireless Data,
Inc., a Colorado corporation (the "Corporation") and purchasers of the
Corporation's 8% Adjustable Rate Convertible Subordinated Debentures Due
December 31, 1999 (the "Debentures"). The Debentures are due in one payment of
principal and any and all accrued but unpaid interest then due, on December 31,
1999 (the "Maturity Date"), unless earlier converted pursuant to the terms
hereof. Interest shall accrue on the Debentures at the initial rate of eight
percent (8%) per annum, subject to adjustment of such rate as provided for
herein, the primary rate of interest in effect at any time being referred to as
the "Applicable Interest Rate."
The Debentures shall be evidenced by Debenture Certificates annexed
hereto as Exhibit 1, which shall be valid only when countersigned by an
authorized representative of the Corporation.
The Debentures are issued as part of a series of 8% Adjustable Rate
Convertible Subordinated Debentures privately issued by the Corporation and
known as the "8% Adjustable Rate Convertible Subordinated Debentures, Due
December 31, 1999," each of which has been or will be issued to a Holder who has
or will represent to the Corporation that he, she or it is an accredited
investor, as that term is defined in Rule 501(a) of the Securities Act of 1933,
as amended (the "1933 Act"). The Holder of a Debenture hereby reaffirms such
representation to the Corporation and each other Holder of Debentures. The
minimum principal dollar amount of the Debentures is $2,000,000 and the maximum
principal amount may be up to $4,000,000.
-1-
Any principal or interest on any Debenture which is payable, but is not
punctually paid or duly provided for at the Maturity Date or any Interest
Payment Record Date (herein called "Default Interest") shall bear compound
interest at a rate of two percent (2%) over the Applicable Interest Rate from
the date of default until paid.
I. Interest Payments and Adjustment of Interest Rate.
--------------------------------------------------
A. The Debentures shall accrue interest from the date of original
issuance by the Corporation at the initial rate of eight percent (8%) per annum,
based on a 360 day year and 90 day quarters. The interest rate shall be reduced
to four percent (4%) per annum upon initial effectiveness of a registration
statement with the United State Securities and Exchange Commission (the "SEC")
covering the shares of Common Stock into which the Debentures (or the Preferred
Stock into which the Debentures will automatically convert upon authorization of
such Preferred Stock by the Corporation) are convertible and shall continue at
such rate until maturity, unless Default Interest becomes applicable.
B. Interest shall be payable quarterly to Debentureholders of record as
of March 31, June 31, September 30 and December 31 of each year (the "Interest
Payment Record Dates"), commencing December 31, 1997. The payment date for each
interest payment shall be on or before the 15th of the month following each
Interest Payment Record Date, or the next Business Day thereafter if such day is
not a Business Day.
C. Interest on the Debentures shall be payable in shares of the
Corporation's Common Stock, provided the Corporation has an adequate number of
authorized shares of Common Stock from which to make interest payments. Interest
payments may be paid in authorized and unissued shares of Common Stock or in
shares of Common Stock in the treasury of the Corporation. As of the date of
initial issuance of the Debentures, the Corporation has 12,000,000 shares of
Common Stock authorized and does not have an adequate number of authorized and
unissued shares of Common Stock or treasury shares of Common Stock available
from which to make interest payments on the Debentures. The Corporation shall
submit an amendment to its Articles of Incorporation to shareholders at its next
Annual Meeting of Shareholders (tentatively scheduled for December 17, 1997)
pursuant to which it shall request an increase in authorized Common Stock to
40,000,000 shares (the "Increase Amendment"). The Corporation shall use its best
efforts to secure approval for the Increase Amendment by shareholders. Following
approval of the Increase Amendment by shareholders, the Corporation shall
continuously maintain a sufficient number of authorized and unissued shares of
Common Stock to allow interest on the Debentures to be paid in shares of Common
Stock. Unless and until the Corporation obtains approval of the Increase
Amendment by shareholders, interest on the Debentures shall be payable in cash.
D. If the Corporation pays interest in shares of its Common Stock, the
number of shares of Common Stock issuable at each Interest Payment Record Date
shall be calculated as follows: The amount of the interest payment owing on the
Debenture at the Interest Payment Record Date (in dollars) shall be divided by
the average closing bid price of the Common Stock over the last five trading
days prior to the Interest Payment Record Date as quoted on the OTC Electronic
Bulletin Board or such other quotation service as is quoting
-2-
bid and asked prices for the Common Stock. If the Common Stock is then listed on
the NASDAQ Stock Market or any other national exchange, the five day average of
the closing bid price for the Common Stock for such days as reported on NASDAQ
or such other national securities exchange shall be substituted for the five day
average closing bid price as reported by the OTC Electronic Bulletin Board or
other quotation service. In the event the Common Stock is not quoted on any
exchange or quotation service, then the Board of Directors, acting in good
faith, shall adopt a resolution valuing the Common Stock for purposes of
determining the number of shares of Common Stock issuable as interest on the
Debentures at each Interest Payment Record Date. Absent fraud, the determination
of the Board of Directors shall be binding and conclusive. The value of the
Common Stock used for purposes of determining the number of shares issuable as
interest on the Debentures or for purposes of conversion of Debentures into
Common Stock pursuant to Sections IV and/or V of this Debenture Agreement is
hereafter referred to as the "Market Price." When computed in connection with a
conversion transaction, the average shall be computed using the five trading
days prior to the Common Stock Conversion Date.
E. The Corporation shall use its best efforts to maintain the listing
of the Common Stock on the OTC Electronic Bulletin Board or such other quotation
service or exchange on which the Common Stock may be listed for trading, and
shall not take any action at any time while Debentures are Outstanding which
would result in the delisting of the Common Stock from any quotation service or
exchange upon which the Common Stock may be so listed. The Corporation shall
file all reports required to be filed by it with the SEC pursuant to the
Securities Exchange Act of 1934 (the "1934 Act") and/or the 1933 Act and shall
not take any action which would result in the deregistration of the Common Stock
under Section 12(g) of the 1934 Act.
F. No fractional shares of Common Stock will be issued as interest on
the Debentures; rather, a Debentureholder otherwise entitled to a fractional
share may receive, at the sole option of the Corporation, either (i) cash in
lieu of such fractional share, or (ii) the next higher whole number of shares of
Common Stock if the fractional share to which the Debentureholder is otherwise
entitled is equal to 0.5 or greater, or the next lower whole number of shares of
Common Stock if the fractional share to which the Debentureholder is otherwise
entitled is less than 0.5.
G. The Corporation shall provide Debentureholders with a statement
showing the manner in which it calculated the interest payable at each Interest
Payment Record Date, including the calculation used to determine the Market
Price and the number of shares of Common Stock issued as interest on the
Debenture.
H. Principal and interest on the Debentures will be payable, and
transfer of the Debentures will be registrable at the Principal Office of the
Corporation. Upon the request of the Debentureholder, payment of principal and
interest shall be made by delivery of a check and/or Common Stock certificates
(as applicable) representing interest to the registered holder mailed to such
holder's address as it appears on the Debenture register.
-3-
I. Notwithstanding the number of Debenture certificates which may be
issued to a single Debentureholder, the Corporation shall be entitled to
aggregate the principal amounts of all Debentures held by such Holder for
purposes of calculating interest payable to such Holder.
II. Events of Default. The following shall constitute Events of Default
------------------- hereunder:
A. Default in the payment of any interest or principal upon any Debenture
when the same becomes due and payable, and continuance of such default for a
period of 30 days; or
B. Default in the performance, or breach, of any other covenant or warranty
of the Corporation in the Debentures, and continuance of such default or breach
for a period of 60 days after notice of such breach or default has been given by
any Debentureholder by registered or certified mail, to the Corporation; or
C. The entry of a decree or order by a court having proper jurisdiction
adjudging the Corporation a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Corporation under the Bankruptcy Code or any other
applicable Federal or state law, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) (hereafter a
"Trustee") for the Corporation or for any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60 consecutive
days; or
D. The institution by the Corporation of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under the Bankruptcy Code or any
other applicable Federal or state law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the taking of corporate action
by the Corporation in furtherance of any such action.
III. Acceleration.
-------------
Within 45 days after the occurrence of any Event of Default hereunder,
the Corporation shall mail notice of such default to all Debentureholders,
unless such default shall have been cured or waived.
If an Event of Default occurs and is continuing, then the Holder of any
Debenture then Outstanding may declare the principal and all accrued interest on
such Debenture to be
-4-
immediately due and payable, by a notice in writing to the Corporation, and upon
any such declaration such principal shall become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of money due has been obtained, the
Holder declaring such default may, by written notice to the Corporation and any
trustee appointed for the Corporation, may rescind and annul such declaration
and its consequences if the Corporation has paid or deposited with such trustee
a sum sufficient to pay all principal and accrued interest, including any
Default Interest, on the Debentures.
IV. Automatic Conversion of Debentures.
-----------------------------------
A. Into Shares of Series A Preferred Stock. This Debenture will
automatically convert into one share of the Corporation's no par value Series A
Cumulative Convertible Redeemable Preferred Stock, stated value $1.00 per share
(the "Preferred Stock") for each $1.00 of Debentures, at any time prior to
maturity, unless previously redeemed or converted into Common Stock, upon
effectiveness of an amendment to the Corporation's Articles of Incorporation
authorizing the Corporation to issue the Preferred Stock (the "Preferred Stock
Amendment"). The Preferred Stock Amendment will be submitted to the
Corporation's shareholders at the next Annual Shareholder Meeting (tentatively
scheduled for December 17, 1997). The Corporation will use its best efforts to
obtain approval for the Preferred Stock Amendment. Debentureholders will be
notified as soon as practicable upon effectiveness of the Preferred Stock
Amendment.
B. Into Shares of Common Stock. The Debentures will automatically
convert into fully paid and non-assessable shares of Common Stock of the
Corporation, at the then applicable Conversion Price (as defined below),
immediately prior to the closing of a firm commitment underwritten public
offering of the shares of Common Stock of the Corporation pursuant to a
registration statement filed under the 1933 Act at an offering price per share
of not less than ten dollars ($10.00) per share (prior to underwriter
commissions and expenses and adjusted for stock splits, stock dividends,
reorganizations and the like) and with aggregate gross offering proceeds to the
Corporation of not less than Five Million Dollars ($5,000,000) (a "Qualified
Public Offering").
C. Any accrued but unpaid interest owing on the Debentures to the date
of conversion will be payable by the Corporation as described in Article I
above, either in cash or shares of Common Stock. In the case of automatic
conversion into Preferred Stock, accrued interest to the date of conversion will
be carried over and paid on the next dividend payment date applicable to the
Preferred Stock into which the Debentures have been converted. In the case of
automatic conversion into Common Stock, accrued interest to the date of
conversion will be paid at the same time as the Common Stock issuable upon
conversion of the Debenture is delivered to the Holder.
-5-
D. The Corporation shall provide notice to the Holders as soon as
practicable after the date of the effectiveness of the Preferred Stock
Amendment. The Corporation shall provide notice to the Holders as soon as is
practicable of the time when the Corporation will close a Qualified Public
Offering. At the same time that it notifies the Debentureholder of the
effectiveness of the Preferred Stock Amendment or the closing date for a
Qualified Public Offering, the Corporation shall include a notice to the
Debentureholder of the amount of interest accrued on the Debenture to the date
of conversion, in dollars, and the manner in which it calculated the number of
shares issuable upon conversion.
E. As soon as practicable after conversion, the Debentureholder shall
surrender the Debenture Certificate representing the shares being converted to
the Corporation at the Corporation's Principal Office. The Debentures shall be
deemed to have been converted into Preferred Stock on the date of effectiveness
of the Preferred Stock Amendment (the "Preferred Stock Conversion Date") and
into Common Stock on the closing date of the Qualified Public Offering,
irrespective of the date upon which the Debenture Certificate is surrendered to
the Corporation in exchange for a certificate representing the shares of
Preferred Stock or Common Stock, as the case may be, issuable upon conversion
(the "Surrender Date"). On the Conversion Date, the Holder shall be treated for
all purposes as the record holder of the Preferred Stock or Common Stock , as
the case may be, issuable upon such conversion. As promptly as practicable on or
after the Surrender Date, the Corporation shall issue a certificate or
certificates for the number of shares of Preferred Stock or Common Stock, as the
case may be, issuable upon conversion.
F. Unless specifically requested to do otherwise by a Debentureholder
in writing, the Corporation shall be entitled to aggregate the principal amounts
of all Debentures owned by such Debentureholder and issue a single certificate
of Preferred Stock or Common Stock, as the case may be, to such Holder upon
automatic conversion.
V. Optional Conversion into Shares of Common Stock.
------------------------------------------------
A. Holder may, at any time, and from time to time on or after (1)
approval by the shareholders of the Corporation of the Increase Amendment and
(2) the earlier of (i) effectiveness of a registration statement with the SEC
covering the shares of Common Stock into which the Debenture is convertible or
(ii) the expiration of 150 days from the Initial Closing Date (as hereafter
defined), convert all or any whole number multiple of one thousand dollars
($1000) of the principal amount of Debentures, plus any accrued but unpaid
interest thereon, to whole shares of the Corporation's Common Stock. The number
of shares of Common Stock issuable upon such conversion shall be the result of
dividing (a) the dollar amount of the principal of, and accrued interest on, the
Debenture being converted by (b) the lesser of (i) $6.00 or (ii) 80% of the
Market Price (the "Conversion Price"). Notwithstanding the foregoing, for the
first 270 days following the initial closing of the offering by which any of the
Debentures were first sold (the "Initial Closing Date"), the Conversion Price
shall not be less than $4.00 per share, which $4.00 price shall be appropriately
adjusted in the event of any stock splits or other transactions affecting the
-6-
Common Stock (the "Minimum Conversion Price"). After such 270 day period, the
Minimum Conversion Price shall be eliminated.
B. The Corporation has agreed under terms contained in a separate
agreement entered between the Corporation and the Debentureholders to register
the shares of Common Stock issuable by the Corporation as interest on, and upon
conversion of, Debentures with the SEC. In the event such registration is not
declared effective by the SEC within 150 days of the Initial Closing Date, the
Conversion Price and the Minimum Conversion Price shall thereafter be reduced by
two percent (2%) from the Conversion Price or Minimum Conversion Price, as the
case may be, otherwise in effect at the time of conversion. The Conversion Price
shall be reduced an additional two percent (2%) off the then applicable
Conversion Rate for each additional 30 days (or any fractional part of such
30-day period) during which such registration is not effective. Such reduced
Conversion Price shall remain in effect for the remainder of the time the
Debentures remain outstanding.
C. In order to effect conversion, the Holder shall surrender the
Debenture Certificate representing the Debentures being converted to the
Corporation at its principal office, accompanied by written notice (the
"Conversion Notice") to the Corporation that the Holder elects to convert the
Debentures. The Conversion Notice shall be in the form attached to the Debenture
Certificate(s) being converted. The Holder may submit an irrevocable Conversion
Notice to the Corporation in advance of physical delivery of a Debenture
Certificate(s) by transmitting a copy of the completed Conversion Notice
relating to the Debenture Certificate(s) to be tendered to the Corporation by
facsimile (the "Advance Conversion Notice"). Physical delivery of the Debenture
Certificates which are the subject of the Advance Conversion Notice shall be
made to the Corporation within three (3) business days thereafter. The
Debentures tendered for conversion shall be deemed to have been converted on the
date the Corporation receives the Advance Conversion Notice for such Debentures,
provided the Advance Conversion Notice is received by 6:00 p.m. (Eastern Time)
on a Business Day (the "Common Stock Conversion Date"), and provided further,
that the original Conversion Notice and the Debenture Certificate representing
the Debentures then being converted is actually delivered to the Corporation
within such three (3) business day period. If the Advance Conversion Notice is
received on a day that is not a Business Day or after 6:00 p.m. (Eastern Time)
on a day that is a Business Day, then the Common Stock Conversion Date shall be
the next day that is a Business Day. The Company will cause its transfer agent
to issue certificates for the shares of Common Stock issuable upon conversion
and will transmit the certificates representing such shares (together with
certificates or instruments representing the balance of Debentures not being so
converted) to the Holder via express courier, by electronic transfer, or
otherwise, within three (3) business days after receipt by the Company of the
original Conversion Notice and the Debenture certificates for the Debentures
being converted (the "Delivery Date"). On the Common Stock Conversion Date, such
Holder shall be treated for all such purposes as the record Holder of the Common
Stock issuable upon such conversion.
-7-
D. The Company understands that a delay in the issuance of the shares
of Common Stock beyond the Delivery Date could result in economic loss to the
Holder. As compensation to the converting Holder for such loss, the Company
agrees to pay a late payment penalty to the Holder for late delivery of such
shares of Common Stock deliverable upon conversion in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
business days beyond five (5) business days from the Delivery Date):
Late Payment for Each $10,000
of Debenture Principal Amount
No. Business Days Late Being Converted to Common Stock
---------------------- -------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 1,000 + $200 for each Business
Day Late beyond 10 days
The Company shall pay any penalties incurred under this Subsection in
immediately available funds upon demand. Nothing herein shall limit the
converting Holder's right to pursue actual damages for the Company's failure to
issue and deliver the Common Stock to the converting Holder. Furthermore, in
addition to any other remedies which may be available to the converting Holder,
in the event the Company fails for any reason to effect delivery of such shares
of Common Stock within five (5) business days after the Delivery Date (other
than as a result of an event in the nature of a force majeure which is totally
beyond the control of the Company), the converting Holder shall be entitled to
revoke the relevant Conversion Notice by delivering a notice to that effect to
the Company, whereupon the Company and the Holder shall be restored to their
respective positions immediately prior to delivery of the Conversion Notice. Any
shares of Common Stock delivered to Holder after such revocation shall be
forthwith returned to the Company and a new Debenture Certificate shall be
forthwith issued in replacement for the Debenture for which conversion has been
so revoked.
-8-
E. Only whole shares of the Corporation's Common Stock will be issued
on any conversion. In the event that a Holder of Debentures is entitled to a
fraction of a share of Common Stock, the Corporation shall, at its sole option,
either (i) pay such holder the cash equivalent of that fractional share,
computed by multiplying the fraction by the applicable Conversion Price or (ii)
the next higher whole number of shares of Common Stock if the fractional share
to which the Debentureholder is otherwise entitled is equal to 0.5 or greater,
or the next lower number of whole shares of Common Stock if the fractional share
to which the Debentureholder is otherwise entitled is less than 0.5.
F. Subject to the foregoing, no payment or adjustment shall be made
upon any conversion in respect of any interest accrued on any Debenture
surrendered for conversion prior to a Interest Payment Record Date, or for any
dividends on the Common Stock delivered upon conversion.
G. Following effectiveness of the Increase Amendment, the Corporation
covenants that it will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Common
Stock or its issued Common Stock held in its treasury, or both, for the purpose
of effecting conversions of Debentures, the full number of shares of Common
Stock then deliverable upon the conversion of all Outstanding Debentures not
theretofore converted; and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
said Outstanding Debentures, the Corporation will use its best efforts to take
such corporate action as may in the opinion of its counsel be necessary to
increase its authorized but unissued Common Stock to such number of shares as
shall be sufficient for that purpose.
H. The Corporation will pay any and all United States Federal, state or
local documentary stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on conversions of Debentures
pursuant hereto; provided, however, that the Corporation shall not be required
to pay any tax which may be payable in respect of any registration of transfer
involved in the issue or delivery of Common Stock in a name other than that of
the Holder of the Debentures to be converted and no such issue or delivery shall
be made unless and until the person requesting such issue has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
VI. Reorganization. If any capital reorganization or reclassification of the
capital stock of the Corporation, or consolidation or merger of the Corporation
with another corporation, or the sale of all or substantially all of its assets
to another corporation shall be affected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the Holder of Debentures shall thereafter have the right
to (but not be obligated to) receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of the Common Stock of the
Corporation immediately theretofore
-9-
receivable upon the conversion of Debentures, such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
outstanding shares of such Common Stock of the Corporation, and in any such case
appropriate provision shall be made with respect to the rights and interest of
the Debentureholders to the end that the provisions hereof (including without
limitation provisions for the number of shares receivable upon the conversion of
the Debentures and the method for calculation of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter receivable upon the conversion of such
Debentures. The Corporation shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof the successor corporation (if
other than the Corporation) resulting from such consolidation or merger or the
Corporation purchasing such assets shall assume by written instrument executed
and mailed to the Holders, the obligation to deliver to such Holders such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
such Holders may be entitled to receive.
VII. Notice of Certain Events. If, at any time:
-------------------------
A. The Corporation shall declare any cash dividend on its Common Stock;
B. the Corporation shall pay any dividend payable in stock upon its Common
Stock or make any distribution (other than the regular cash dividends) to the
holders of its Common Stock;
C. the Corporation shall offer for subscription (including by grants of
rights or warrants) pro rata to the holders of its Common Stock any additional
shares of stock of any class or other rights;
D. there shall be any capital reorganization, reclassification of the
capital stock of the Corporation (other than a subdivision or combination or
change in the par value of its Common Stock), or consolidation or merger of the
Corporation with, or sale or lease of all or substantially all of its assets to,
another corporation requiring the approval of any shareholders of the
Corporation (in their capacity as shareholders) if such consolidation, merger,
sale or lease will result in a change in the shares held by the holders of
Common Stock; or
E. there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, addressed to the Holders of the Debentures, of the date on which (i) the
books of the Corporation shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, lease, dissolution, liquidation
or winding up shall take place, as the case may be. Such notice shall also
specify the date as of which the holders of Common Stock of record shall
participate in such
-10-
dividend distribution or subscription rights, or shall be entitled to exchange
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, lease,
dissolution, liquidation or winding up, as the case may be. Such written notice
shall be at least twenty days prior to the record date or the date on which the
Corporation's transfer books are closed in respect thereto or the effective date
of such event.
VIII. Subordination.
--------------
A. In the event and during the continuation of any default in the
payment of the principal of, or premium or sinking fund installments, if any,
due, with respect to, or interest on, any Superior Indebtedness (as hereinafter
defined in Section XII), or any default, or any event which, with notice or
lapse of time or both, would constitute a default, in any other agreement, term
or condition contained in any agreement under which any Superior Indebtedness is
issued, no cash payment of principal or interest shall be made on the Debentures
unless and until such default shall have been remedied, nor shall any such
payment be made if after giving effect, as if paid, to such payment, any such
default would exist in the performance or observance of any covenant or
agreement of the Corporation contained in any agreement under which any Superior
Indebtedness shall have been issued or pursuant to which Superior Indebtedness
shall have been incurred.
B. Upon any payment by the Corporation, or distribution of assets of
the Corporation of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding-up or total or partial
liquidation or reorganization of the Corporation, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due or to become due upon all Superior Indebtedness shall first be paid
in full, or payment thereof provided for, in money or money's worth, in
accordance with its terms, before any payment is made on account of the
principal (and premium, if any) or interest on the Debentures; and upon any such
dissolution or winding-up or liquidation or reorganization, any payment by the
Corporation, or distribution of assets of the Corporation of any kind or
character, whether in cash, property or securities, to which the
Debentureholders would otherwise be entitled but for the provisions of this
Section VIII, shall be paid by the Corporation or by any receiver, trustee in
bankruptcy, liquidating trustee, custodian, agent or other person making such
payment or distribution directly to the holders of Superior Indebtedness or
their representative or representatives or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Superior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay all Superior Indebtedness in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of Superior Indebtedness, before any payment or distribution is made to
the Holders of the Debentures.
C. In the event that notwithstanding the preceding paragraphs, any
payment or distribution of assets of the Corporation of any kind or character,
whether in cash, property or securities, prohibited by the preceding paragraphs
shall be received by the holders of the
-11-
Debentures, such payment or distribution shall be paid over or delivered to the
holders of Superior Indebtedness of their representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Superior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Superior
Indebtedness remaining unpaid to the extent necessary to pay all Superior
Indebtedness in full in money or money's worth in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
holders of such Superior Indebtedness.
D. For purposes of this Section VIII, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Corporation as
reorganized or readjusted, or securities of the Corporation or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Section
VIII with respect to the Debentures to the payment of all Superior Indebtedness
which may at the time be outstanding; provided that (i) the Superior
Indebtedness is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of the
Superior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the Corporation with,
or the merger of the Corporation into, another corporation or the liquidation or
dissolution of the Corporation following the conveyance, lease or transfer of
its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided in Section VIII hereof shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance, lease or transfer, comply with the conditions
stated in Section VIII hereof.
E. Subject to the payment in full of all Superior Indebtedness, the
rights of the holders of the Debentures shall be subrogated to the rights of the
holders of Superior Indebtedness to receive payments or distributions of cash,
property or securities of the Corporation applicable to the Superior
Indebtedness until the principal of (and premium, if any) and interest on the
Debentures shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of the Superior Indebtedness of any
cash, property or securities to which the Holders of the Debentures or a Trustee
would be entitled except for the provisions of this Section, and no payment over
pursuant to the provisions of this Section to the holders of Superior
Indebtedness by Holders of the Debentures or the Trustee, shall, as between the
Corporation, its creditors other than holders of Superior Indebtedness, and the
Holders of the Debentures, be deemed to be a payment by the Corporation to or on
account of the Superior Indebtedness. It is understood that the provisions of
this Section are and are intended solely for the purpose of defining the
relative rights of the Holders of the Debentures, on the one hand, and the
holders of the Superior Indebtedness, on the other hand.
F. The terms "paid in full" and "payment in full" as used in this
Section with respect to Superior Indebtedness mean the receipt, in cash or
securities (taken at their market
-12-
value at the time of the receipt thereof), of the principal amount of the
Superior Indebtedness (and any premium due thereon) and full interest thereon to
the date of such payment of principal and all other amounts due to holders of
Superior Indebtedness pursuant to the provisions of the instruments providing
therefor.
G. Nothing herein shall be construed as preventing a Debentureholder
from converting Debentures to Common Stock during any period of continuing
default respecting Superior Indebtedness, nor shall a Debentureholder be
prohibited from selling any shares of Common Stock issued upon such conversion
which are otherwise saleable.
IX. Redemption.
-----------
A. The Debentures may be redeemed in whole or in part at the election
of the Corporation upon not less than 30 nor more than 60 days prior written
notice by mail, at any time up to 270 days following the Initial Closing Date,
if, during such 270 day period, the closing bid price for the Common Stock for
any 20 trading days within any 30 consecutive trading day period as quoted on
the OTC Electronic Bulletin Board (or such other quotation service as is quoting
bid and asked prices for the Common Stock), or the closing bid price for the
Common Stock as reported by the NASDAQ Stock Market or any other national
exchange upon which the Common Stock is listed for trading which has closing bid
reporting, is less than the Minimum Conversion Price per share. Notwithstanding
the foregoing, if the 20 day period during which the price of the Common Stock
is less than the Minimum Conversion Price falls totally with the last 60 days of
the 270 days following the Initial Closing Date, the Corporation shall have a
full 60 days from the end of such 270 day period to exercise its rights of early
redemption.
B. To redeem the Debentures, the Corporation shall pay the Holders 118%
of the principal face amount of the Debentures being redeemed, together with
accrued but unpaid interest owing to the date of redemption. Any Debentures
which are redeemed in part only shall be redeemed in principal amounts of $1,000
or whole multiples of $1,000.
C. The notice of redemption to be sent to all Debentureholders (the
"Redemption Notice") shall state the Redemption Date, the Paying Agent with whom
funds sufficient to make the redemption have been deposited, and the dollar
amount of principal and interest to be redeemed from each such holder. Any
partial redemption shall be pro rata as between the Debenture holders.
D. Notwithstanding the above, any Debentureholder may convert the
principal and accrued interest so called for redemption into shares of the
Corporation's Common Stock at any time prior to the Redemption Date if, prior to
such date, the Increase Amendment has been approved by shareholders of the
Corporation.
X. Periodic Reports.
------------------
Debentureholders shall be sent the same reports of the Corporation as
holders of Common Stock are sent, at the same time as sent to holders of Common
Stock.
-13-
XI. Debenture Register.
------------------
The Corporation shall cause to be kept at its principal office a register
in which, subject to such reasonable regulations as it may prescribe, the
Corporation shall provide for the registration of Debentures and the
registration of transfers of Debentures.
At the option of the Holder, Debentures may be exchanged for other
Debentures, of a like aggregate principal amount upon surrender of the
Debentures to be exchanged. Whenever any Debentures are so surrendered for
exchange, the Corporation shall execute the Debentures which the Debentureholder
making the exchange is entitled to receive.
Subject to reasonable bonding, indemnification or other requirements as
the Corporation may determine, the Corporation shall replace lost, stolen or
mutilated Debenture certificates with replacement certificates.
XII. Definitions.
------------
In addition to the terms defined elsewhere in this Debenture Agreement, the
following terms have the meanings stated herein:
"Advance Conversion Notice" means the notice of conversion to be delivered
in advance of actual physical delivery of a Debenture Certificate as specified
in Subsection V.C. of this Debenture Agreement.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means each day which is neither a Saturday, Sunday nor other
day on which banking institutions in Emeryville, California are authorized by
law to remain closed.
"Common Stock" means the Common Stock of the Corporation of the class
authorized at the date of issuance of the Debentures and stock of any other
class into which such presently authorized Common Stock may be changed, and any
other shares of stock of the Corporation which do not have any priority in the
payment of dividends or upon liquidation over any other class of stock.
"Common Stock Conversion Date" means the date a Debentureholder surrenders
a Debenture certificate to the Corporation at its Principal Office, accompanied
by the "Conversion Notice", or the first Business Day thereafter if such date is
not a Business Day.
"Conversion Notice" means a written notice from the Debentureholder
addressed to the Corporation advising the Corporation that a Debentureholder is
converting the Debenture
-14-
into shares of the Corporation's Common Stock, accompanied by the Debenture
certificate being so converted.
"Conversion Price" means the per share price of the Common Stock then
applicable to determine the number of shares of Common Stock issuable upon
conversion of the Debenture into Common Stock.
"Corporation" means the person named as the "Corporation" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions hereof, and thereafter "Corporation"
shall mean such successor corporation.
"Debentureholder" or "Holder" when used with respect to any Debenture
means the person in whose name such Debenture is registered in the Corporation's
books of record.
"Default Interest" means two percent (2%) per annum over the Applicable
Interest Rate, as defined in the first paragraph of this Debenture Agreement.
"Delivery Date" means the date three (3) business days after the date
on which the Company receives an original Conversion Notice and Debenture
Certificate as described in Subsection V.C. of this Debenture Agreement.
"Increase Amendment" means the proposed amendment to the Corporation's
Articles of Incorporation by which approval from shareholders for an increase in
authorized Common Stock to 40,000,000 shares is to be sought by the Corporation
at the next Annual meeting of Shareholders of the Corporation after the date of
first issuance of the Debentures.
"Initial Closing Date" means the date upon which any Debentures were
first sold, and consideration therefor received by, the Corporation.
"Interest Payment Record Dates" mean March 31, June 30, September 30
and December 31 of each year.
"Market Price" means the price of the Common Stock as calculated
pursuant to the formula contained in Paragraph I.D of this Debenture Agreement.
"Maturity Date" means December 31, 1999, or the first Business Day
thereafter.
"Minimum Conversion Price" means the minimum Conversion Price
applicable over the first 270 days following the Initial Closing Date, which
price shall be not less than $4.00 per share, subject to appropriate adjustment
in the event of any stock splits or other transactions affecting the Common
Stock.
-15-
"Outstanding" when used with respect to Debentures means, as of the
date of determination, all the 8% Adjustable rate Convertible Subordinated
Debentures due December 31, 1999 theretofore authenticated and delivered,
except:
A. Debentures theretofore cancelled or delivered to the
Corporation for cancellation;
B. Debentures for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Paying Agent
in trust for the Holders of such Debentures, provided that, if such
Debentures are to be redeemed, notice of such redemption has been duly
given pursuant to this Debenture Agreement or satisfactory provision
therefor has been made; and
C. Debentures in exchange for or in lieu of which other
Debentures have been authenticated and delivered; provided, however,
that in determining whether the Holders of the requisite principal
amount of Debentures Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder,
Debentures owned by the Corporation or any other obligor upon the
Debentures or any Affiliate of the Corporation or such other obligor
shall be disregarded and deemed not to be outstanding. Debentures so
owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the
Corporation the pledgee's right so to act with respect to such
Debentures and that the pledgee is not the Corporation or any other
obligor upon the Debentures or any Affiliate of the Corporation or such
other obligor.
"Paying Agent" means any person (which may include the Corporation)
authorized by the Corporation to pay the principal of (and premium, if any) or
interest on any Debentures on behalf of the Corporation.
"Place of Payment" means the principal office or agency of the
Corporation, presently located in Emeryville, California, which may be changed
by the Corporation by written notice to Debentureholders.
"Preferred Stock" means the Corporation's no par value Series A
Cumulative Convertible Redeemable Preferred Stock, stated value $1.00 per share,
to be designated by the Corporation's Board of Directors following approval of
the Preferred Stock Amendment by the Corporation's shareholders.
"Preferred Stock Amendment" means the proposed amendment to the
Corporation's Articles of Incorporation by which approval from shareholders for
authority to issue up to a total of 15,000,000 shares of preferred stock
(4,000,000 of which are to be designated by the Board of Directors as no par
value Series A Cumulative Convertible Redeemable Preferred Stock, stated value
$1.00 per share) is to be sought by the Corporation at the next Annual meeting
of Shareholders of the Corporation after the date of first issuance of the
Debentures.
-16-
"Preferred Stock Conversion Date" means the effective date of the
Preferred Stock Amendment upon which the Debentures shall be deemed
automatically converted into shares of the Corporation's Preferred Stock without
any further action by the Debentureholders.
"Principal Office" means the offices of the Corporation in Emeryville,
California, or such other office as designated by the Corporation through notice
to the Debentureholders.
"Qualified Public Offering" has the meaning ascribed to it in Section IV.B.
"Redemption Date" when used with respect to any Debenture to be
redeemed means the date fixed for such redemption.
"Redemption Notice" means the written notice of redemption to be sent
to all Debentureholders advising that the Corporation is exercising its right of
redemption and stating the Redemption Date, the Paying Agent with whom funds
sufficient to make the redemption have been deposited, and the dollar amount of
principal and interest to be redeemed from each Debentureholder.
"SEC" means the United States Securities and Exchange Commission, or any
successor thereto.
"Subsidiary" means any corporation of which the Corporation, and one or
more Subsidiaries, or any one or more Subsidiaries, directly or indirectly own
more than 50% of the outstanding capital stock having under ordinary
circumstances (not dependent upon the happening of a contingency) voting power
in the election of members of the board of directors, managers or trustees of
such corporation.
"Superior Indebtedness" means (a) the principal of, premium, if any,
and accrued and unpaid interest on (i) indebtedness of the Corporation for money
borrowed, whether outstanding on the date of execution of this Indenture or
thereafter created, incurred or assumed, (ii) guarantees by the Corporation of
indebtedness for money borrowed by any other person, whether outstanding on the
date of execution of this Indenture or thereafter created, incurred or assumed,
(iii) indebtedness evidenced by notes, Debentures, bonds or other instruments of
indebtedness for the payment of which the Corporation is responsible or liable,
by guarantees or otherwise, whether outstanding on the date of execution of this
Indenture or thereafter created, incurred or assumed, (iv) obligations of the
Corporation under any agreement to lease, or lease of, any real or personal
property, whether outstanding on the date of execution of this Indenture or
thereafter created, incurred or assumed, (b) any other indebtedness, liability
or obligation, contingent or otherwise, of the Corporation and any guarantee,
endorsement or other contingent obligation in respect thereof, whether
outstanding on the date of execution of this Indenture or thereafter created,
incurred or assumed, and (c) modifications, renewals, extensions and refundings
of any such indebtedness, liabilities or obligations; unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is provided that such indebtedness,
-17-
liabilities or obligations, or such modification, renewal, extension or
refunding thereof, or the obligations of the Corporation pursuant to such a
guarantee, are not superior in right of payment to the Debentures; provided,
however, that Superior Indebtedness shall not be deemed to include (i) the
obligation of the Corporation to OMRON SYSTEMS, INC., under that certain Secured
Installment Note dated March 27, 1995 in the principal amount of $387,866 (as of
June 30, 1997), (ii) any obligation of the Corporation to any Subsidiary, (iii)
obligations in respect of shares of capital stock of the Corporation (except for
obligations to issue capital stock outstanding as of the date of issuance of the
Debentures) and (iv) obligations specifically subordinate to the Debentures.
"Surrender Date" means the date upon which Debentures are physically
surrendered to the Corporation in exchange for a certificate representing the
shares of Preferred Stock or Common Stock, as the case may be, issuable upon
conversion of the Debenture.
XIII. Miscellaneous.
--------------
A. There is no Indenture or Indenture Trustee in respect of the
Debentures.
B. The terms and conditions of this Debenture Agreement, including but
not limited to the payment of interest hereunder, shall at all times be
construed so as to conform to the laws of the State of Colorado, without regard
to provisions regarding conflict or choice of laws.
C. In the event any term or provision of this Debenture Agreement or
the Debentures is declared to be illegal or invalid, for any reason, this
Debenture Agreement and the Debentures shall remain in full force and effect and
the same shall be interpreted as though such invalid or illegal provision were
not a part thereof.
D. In the event that suit is instituted to enforce any provision of
this Debenture Agreement, the parties agree that the exclusive proper venue
shall be in any court of competent jurisdiction in a judicial district (Federal
or state) in Denver, Colorado. Further, the parties agree that, in the event an
attorney is engaged to enforce the terms of this Debenture Agreement and/or the
Debentures, the prevailing party shall be reimbursed by the other party for all
its reasonable costs and attorney's fees.
E. Elections and demands hereunder are irrevocable. Elections, notices
and demands to Debentureholders by the Corporation are deemed made when sent by
the Corporation and election, notices and demands hereunder by a Holder to the
Corporation are deemed made when received by the Corporation.
F. The principal and the Redemption Price of, and interest on, the
Debentures shall be payable at the Principal Office of the Corporation ("Place
of Payment"), provided, that principal and interest may be paid, at the option
of the Corporation, by check or share
-18-
certificate mailed to the Person entitled thereto at such Person's address last
appearing on the Corporation's records.
G. Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Debenture shall bind the Holder of
every Debenture issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or suffered to be done
by the Corporation in reliance thereon, whether or not notation of such action
is made upon such Debenture.
H. In any case where notice to Debentureholders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Debentureholder shall affect the sufficiency of such notice
with respect to other Debentureholders.
I. In any case where the date of Redemption Date, or the Stated
Maturity of any Debenture shall not be a Business Day, then (notwithstanding any
other provision of this Debenture Agreement) payment of the principal of (and
premium, if any) or interest on, or conversion of, any Debentures need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the nominal date of any such Redemption
Date, or on such last date for conversion, and no interest shall accrue for the
period from and after any such nominal date.
J. No right or remedy herein conferred upon or reserved to the
Debentureholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
K. No recourse under or upon any obligation, covenant or agreement of
this Debenture Agreement or the Debentures, or for any claim based thereon or
otherwise in respect thereof, shall be had against any incorporator,
stockholder, officer, director or agent, as such, past, present or future, of
the Corporation or of any successor corporation, either directly or through the
Corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that the obligations hereunder are solely corporate obligations of
the Corporation, and that no such personal liability whatever shall attach to,
or is or shall be incurred by, the incorporators, stockholders, officers,
directors or agents, as such, of the Corporation or of any successor
corporation, or any of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Debenture Agreement or the Debentures or implied therefrom;
and that any and all such personal liability, either at common law or in equity
or by constitution or statute, of, and any and all such rights and claims
against, every such incorporator, stockholder, officer or director, as such,
because of the creation of the indebtedness hereby
-19-
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Debenture Agreement or the Debentures, or implied therefrom,
are hereby expressly waived and released as a condition of and as a
consideration for, the issue of such Debentures.
U.S. WIRELESS DATA, INC.,
a Colorado corporation
ATTEST:
By /s/ Xxxx X. Xxxxx
--------------------------
Chief Executive Officer
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Secretary or Assistant Secretary Date December 8, 1997
----------------
-20-
EXHIBIT 1
Debenture Number: [SAMPLE]
--------
THIS DEBENTURE IS SUBJECT TO ALL TERMS AND CONDITIONS OF THAT CERTAIN DEBENTURE
AGREEMENT DATED AS OF ____________________, 1997, BETWEEN THE UNDERSIGNED AND
THE HOLDERS OF DEBENTURE CERTIFICATES EVIDENCED HEREBY.
THIS DEBENTURE CERTIFICATE IS NOT VALID UNLESS COUNTERSIGNED BY AN AUTHORIZED
REPRESENTATIVE OF THE CORPORATION.
THE DEBENTURES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY STATE OR FOREIGN LAW. THE DEBENTURES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS (i) THEY SHALL HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND ANY APPLICABLE STATE AND FOREIGN SECURITIES ACT OR OTHER LAW OR (ii)
THE CORPORATION SHALL HAVE BEEN FURNISHED WITH AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION, THAT REGISTRATION OR OTHER COMPLIANCE IS NOT
REQUIRED UNDER ANY OF SUCH ACTS OR LAWS.
[LEGENDS REQUIRED BY STATE LAWS]
U.S. WIRELESS DATA, INC.
8% ADJUSTABLE RATE CONVERTIBLE SUBORDINATED
DEBENTURES DUE DECEMBER 31, 1999
Amount: $ ________________ Emeryville, California
U. S. Wireless Data, Inc., a Colorado corporation (the "Corporation"), for value
received, promises to pay to or registered assigns, the principal sum of ($ ),
payable in one payment of principal --------------------------------------
------------------------ and all accrued but unpaid interest then due, on
December 31, 1999 (the "Maturity Date"), unless earlier converted pursuant to
the terms of this Debenture.
Interest shall accrue on this Debenture at the initial rate of eight percent
(8%) per annum, subject to adjustment of such rate as provided for herein, the
primary rate of interest in effect at any time being referred to as the
"Applicable Interest Rate."
This Debenture is issued as part of a series of 8% Adjustable Rate Convertible
Subordinated Debentures privately issued by the Corporation and known as the "8%
Adjustable Rate Convertible Subordinated Debentures, Due December 31, 1999,"
each of which has been or will be issued to a Holder who has or will represent
to the Corporation that he, she or it is an accredited investor, as that term is
defined in Rule 501(a) of the Securities Act of 1933, as amended (the "1933
Act"). The Holder of this Debenture hereby re-affirms such representation to the
Corporation and each other Holder of Debentures. All such Debentures are
collectively known as the "Debentures". The minimum principal dollar amount of
the Debentures is $2,000,000 and the maximum principal amount may be up to
$4,000,000.
Any principal or interest on this Debenture which is payable, but is not
punctually paid or duly provided for at the Maturity Date or any Interest
Payment Record Date (herein called "Default Interest") shall bear compound
interest at a rate of two percent (2%) over the Applicable Interest Rate from
the date of default until paid.
Transfers and/or conversions of this Debenture must be accompanied by the form
attached hereto, duly completed by the Holder.
Duly executed, authorized and witnessed by the undersigned authorized officers
of the Corporation:
U.S. WIRELESS DATA, INC.,
a Colorado corporation
ATTEST:
By ______________________________
Chief Executive Officer
________________________________
Secretary or Assistant Secretary Date ____________________________
-2-
U.S. WIRELESS DATA, INC.
8% ADJUSTABLE RATE CONVERTIBLE SUBORDINATED
DEBENTURES DUE DECEMBER 31, 1999
--------------------------------------------------------------------------------
FORM REQUIRED FOR TRANSFERS
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO
__________________________________ WHOSE ADDRESS IS:__________________________,
__________________________________ DOLLARS OF THE DEBENTURES REPRESENTED BY THE
WITHIN CERTIFICATE NO. , AND DOES HEREBY APPOINT THE SECRETARY OF THE
CORPORATION ATTORNEY TO TRANSFER THE SAID DEBENTURES ON THE BOOKS OF THE WITHIN
NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
SIGNATURE:______________________________
PRINT NAME AND ADDRESS: _______________________________________________________
_______________________________________________________________________________
DATED:
------------------------------------------------------------------------
WITNESS:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
FORM REQUIRED FOR CONVERSION
THE UNDERSIGNED HEREBY CONVERTS A TOTAL OF ______________________ DOLLARS OF THE
DEBENTURES REPRESENTED BY THE WITHIN CERTIFICATE NO.___________________ , AND
DOES HEREBY APPOINT THE SECRETARY OF THE CORPORATION ATTORNEY TO CANCEL THE
DEBENTURES BEING SO CONVERTED AND, IF LESS THAN ALL DEBENTURES REPRESENTED
HEREBY ARE BEING CONVERTED, TO TRANSFER ANY REMAINING PORTIONS OF THE DEBENTURES
OF THE WITHIN NAMED CORPORATION, WITH FULL POWER OF SUBSTITUTION IN THE
PREMISES.
SIGNATURE:
---------------------------------------------------------------------
PRINT NAME AND ADDRESS:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
DATED:
--------------------------------------------------------------------------
WITNESS:
-----------------------------------------------------------------------
-------------------------------------------------------------------------------
COMPANY USE ONLY:
DATE NOTICE RECEIVED FOR CONVERSION:__________________________________________
DATE ORIGINAL DEBENTURE CERTIFICATE AND NOTICE RECEIVED:______________________
SIGNATURE OF COMPANY REPRESENTATIVE:__________________________________________
CALCULATION OF CONVERSION PRICE AND NUMBER OF SHARES ISSUABLE UPON CONVERSION:
DATE INSTRUCTION SENT TO TRANSFER AGENT: ____________________________________
DEBENTURE CERTIFICATE REISSUE (CERTIFICATE NUMBER AND AMOUNT):________________
------------------------------------------------------------------------------
