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Exhibit 10.02
EXHIBIT A
FORM OF SECURED CONVERTIBLE NOTE
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THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES
AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES
ACT, OR (C) IF REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES
PURCHASE AGREEMENT, DATED AS OF THE
DATE HEREOF, A COPY OF WHICH MAY BE
OBTAINED FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICE, CONTAINS CERTAIN
ADDITIONAL AGREEMENTS AMONG THE PARTIES,
INCLUDING, WITHOUT LIMITATION, PROVISIONS
WHICH (A) LIMIT THE CONVERSION RIGHTS
OF THE HOLDER, (B) SPECIFY VOLUNTARY AND
MANDATORY REPAYMENT, PREPAYMENT AND
REDEMPTION RIGHTS AND OBLIGATIONS AND (C)
SPECIFY EVENTS OF DEFAULT FOLLOWING
WHICH THE REMAINING BALANCE DUE AND OWING
HEREUNDER MAY BE ACCELERATED.
No. 1
$1,285,000
SECURED CONVERTIBLE NOTE
of
ERF Wireless, Inc.
ERF Wireless, Inc., a Nevada corporation (together with its
successors,
the "Company"), for value received hereby
promises to pay to:
GLOBAL CAPITAL FUNDING GROUP, L.P.
(the "Holder") and registered assigns, the
principal sum of One Million Two
Hundred Eighty-five Thousand ($1,285,000)
or, if less, the principal amount of
this Note then outstanding, on the Maturity
Date by wire transfer of immediately
available funds to the Holder 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, and to pay
interest, which shall begin to accrue on
the date of this Secured Note ("Note"),
quarterly in arrears, on (i) the last
day of March, June, September and December
of each year until the Maturity Date,
commencing September 30, 2005 (unless such
day is not a Business Day, in which
event on the next succeeding Business Day)
(each an "Interest Payment Date"),
(ii) the Maturity Date, and (iii) the date
the principal amount of the Note
shall be declared to be or shall
automatically become due and payable, on the
principal sum hereof outstanding in like
coin or currency, at the rates per
annum set forth below, from the most recent
Interest Payment Date to which
interest has been paid on this Note, or if
no interest has been paid on this
Note, from the date of this Note until
payment in full of the principal sum
hereof has been made.
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The interest rate shall be six percent (6%) per annum (the
"Interest
Rate") or, if less, the maximum rate
permitted by applicable law. At the option
of the Company, interest may be paid in
cash or in shares of Common Stock. The
number of shares of Common Stock issued as
interest shall be determined by
dividing the dollar amount of interest due
on the applicable Interest Payment
Date by the Market Price then in effect.
"Market Price" shall mean the VWAP for
the Common Stock as reported by Bloomberg,
L.P., for five trading days
immediately prior to the date such interest
becomes due. Past due amounts
(including interest, to the extent
permitted by law) will also accrue interest
at the Interest Rate plus 4% per annum or,
if less, the maximum rate permitted
by applicable law, and will be payable on
demand (`Default Interest"). Interest
on this Note will be calculated on the
basis of a 360-day year of twelve 30 day
months. All payments of principal and
interest hereunder shall be made for the
benefit of the Holder pursuant to the terms
of the Agreement (hereafter
defined).
This Note (this "Note") is secured by a Security Agreement (the
"Security Agreement") of even date herewith
made by the Company (or one of its
subsidiaries, as applicable) and Holder
creating a security interest in favor of
Holder in certain of the assets described
in the Security Agreement (the
"Collateral").
This Note is a duly authorized issuance of $1,285,000.00
aggregate
principal amount of Notes of the Company
dated as of the date hereof of the
Company referred to in that certain
Securities Purchase Agreement dated as of
the date hereof between the Company and the
Purchaser named therein (the
"Agreement"). The Agreement and the
Security Agreement contain certain
additional agreements among the parties
with respect to the terms of this Note,
including, without limitation, definitions
and provisions which (A) specify
voluntary and mandatory repayment,
prepayment and redemption rights and
obligations and (B) specify Events of
Default following which the remaining
balance due and owing hereunder may be
accelerated. All such definitions and
provisions are an integral part of this
Note and are incorporated herein by
reference. This Note is transferable and
assignable to one or more Persons, in
accordance with the limitations set forth
in the Agreement.
The Company shall keep a register (the "Register") in which shall
be
entered the names and addresses of the
registered holder of this Note and
particulars of this Note held by such
holder and of all transfers of this Note.
References to the Holder or "Holders" shall
mean the Person listed in the
Register as registered holder of such
Notes. The ownership of this Note shall be
proven by the Register.
1. CERTAIN TERMS DEFINED. All terms defined
in the Agreement and not otherwise
defined herein shall have for purposes
hereof the meanings provided for in the
Agreement.
2. COVENANTS. The Company covenants and
agrees to observe and perform each of
its covenants, obligations and undertakings
contained in the Agreement, which
obligations and undertakings are expressly
assumed herein by the Company and
made for the benefit of the holder
hereof.
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3. PAYMENT OF PRINCIPAL.
3.1 PREPAYMENT OF NOTE. For so long as no Event of Default shall
have
occurred and is continuing and the Company is not in receipt of
a
Notice of Conversion from the Holder of the Note, the Company may,
at
its option, prepay, in whole or in part, this Convertible Note for
a
pre-payment price (the "Prepayment Price") equal to (i) 102% of
the
Principal Amount of the Note, plus all accrued but unpaid
interest
until the first anniversary of the date of this Convertible Note;
and
(ii) 101% of the Principal Amount of the Note, plus all accrued
and
unpaid interest on any day following the first anniversary of
this
Convertible Note. Any partial prepayment of the Convertible Note,
at
any time after issuance, shall be credited to the principal amount
of
the Convertible Note equal to such partial prepayment amount.
The
Company shall not be entitled to send any notice of prepayment
and
begin the prepayment procedure unless it has (i) the
appropriate
Prepayment Price, in cash, available in a demand or other
immediately
available account in a bank or similar financial institution or
(ii)
immediately available credit facilities, in the amount of the
appropriate Prepayment Price, with a bank or similar financial
institution on the date the prepayment notice is sent to the
Holders of
this Convertible Note. Provided, however, the Company will process
any
Notice of Conversion received prior to the issuance of a notice
of
prepayment; and further provided that, after a notice of prepayment
has
been issued, the Holder may issue a Notice of Conversion which will
not
be honored unless the Company fails to make the prepayment payment
when
due. In the event of such failure, the Notice of Conversion will
be
honored as of the date of the Notice of Conversion
3.2 PAYMENT ON MATURITY DATE. The Company shall repay the
remaining
unpaid balance of this Convertible Note on the Maturity Date.
4. CONVERSION.
4.1 CONVERSION
OF CONVERTIBLE NOTE. Subject to Section 5 hereof, the
Holder shall have the right, at its option, at any time from and
after
the date of this Convertible Note to convert into Common Stock of
the
Company. This Convertible Note shall be convertible into that
number of
fully paid and nonassessable shares of Common Stock (as such
shares
shall then be constituted) determined pursuant to this Section 4.1.
The
number of shares of Common Stock to be issued upon each conversion
of
this Convertible Note shall be determined by dividing the
Conversion
Amount (as defined below) by the Conversion Price in effect on the
date
(the "Conversion Date") a Notice of Conversion is delivered to
the
Company, as applicable, by the Holder by facsimile or other
reasonable
means of communication dispatched prior to 5:00 p.m., E.S.T. The
term
"Conversion Amount" means, with respect to any conversion of
this
Convertible
Note, the sum of (1) the principal amount of this
Convertible Note to be converted in such conversion plus (2)
accrued
and unpaid interest, if any, on such principal amount at the
interest
rates provided in this Convertible Note to the Conversion Date plus
(3)
Default Interest, if any, on the interest referred to in the
immediately preceding clause (2) plus (4) at the Holder's option,
any
amounts owed to the Holder pursuant to Section 4.3 hereof, Section
10.1
of the Agreement or Section 10.4 of the Agreement.
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4.2 CONVERSION PRICE. At the option of the Holder, any portion or
all
of the outstanding principal amount of this Convertible Note shall
be
converted into a number of shares of Common
