Document:

exv4w1

Exhibit
4.1

     ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, THE REPAYMENT OF THE OBLIGATIONS EVIDENCED BY
THIS NOTE, THE LIENS AND SECURITY INTERESTS SECURING THE OBLIGATIONS EVIDENCED BY THIS NOTE, THE
EXERCISE OF ANY RIGHT OR REMEDY WITH RESPECT THERETO, AND CERTAIN OF THE RIGHTS OF THE HOLDER
HEREOF ARE SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF
MARCH 12, 2007 (AS AMENDED, RESTATED, SUPPLEMENTED, OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
“INTERCREDITOR AGREEMENT”), BY AND BETWEEN WELLS FARGO FOOTHILL, INC., AS SENIOR AGENT, AND
NEWCASTLE PARTNERS, L.P., AS SUBORDINATED CREDITOR. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS
OF THE INTERCREDITOR AGREEMENT AND THIS NOTE, THE TERMS OF THE INTERCREDITOR AGREEMENT SHALL GOVERN
AND CONTROL. THIS NOTE AND THE SECURITIES UNDERLYING THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
AND QUALIFICATION WITHOUT, EXCEPT AS OTHERWISE AGREED BY MAKER, AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO MAKER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

SECOND AMENDED AND RESTATED

CONVERTIBLE PROMISSORY NOTE

			
	 	 	 
	$11,137,321
	 	June 13, 2008

     FOR VALUE RECEIVED, each of the undersigned, BELL INDUSTRIES, INC., a California corporation
(the “Maker” or the “Company”) and BELL INDUSTRIES, INC., a Minnesota corporation (together with
Maker, referred to herein collectively as the “Obligors”), hereby jointly and severally promise to
pay to the order of Newcastle Partners, L.P. a Texas limited partnership, or its assigns (the
“Payee”), at such place as the Payee may designate in writing, the principal sum of $11,137,321
(Eleven Million One Hundred Thirty Seven Thousand Three Hundred Twenty One Dollars), or such other
amount as shall equal the outstanding principal amount hereof, under the terms set forth herein.
Capitalized terms used but not defined herein shall have the respective meanings given to such
terms in the Purchase Agreement, dated as of January 31, 2007 (the “Purchase Agreement”), between
the Maker and the Payee, unless the provisions of this Note indicate otherwise. This Second
Amended and Restated Convertible Promissory Note is referred to herein as the “Note”.

     1. Interest. Except as otherwise provided herein, the unpaid principal balance hereof
from time to time outstanding shall bear interest from the date hereof at the rate of four percent
(4%) per annum unless otherwise provided in this Note. Interest shall accrue on the outstanding
unpaid principal amount (as increased pursuant to Section 2(a) below) until such principal amount
is paid (or converted as provided herein) from the date hereof. Interest on this Note shall be
computed on the basis of a 365-day year.

 

 

     2. Payment of Interest and Principal. Except as otherwise provided herein (including,
without limitation, Section 5 hereof), and subject to any default hereunder, the principal and
interest hereof is payable as follows:

     (a) Interest shall be paid in kind and shall accrete as additional principal on this Note on
the applicable interest payment date; provided that, following January 31, 2009, if the Current
Market Price at the date of election (which shall be on or following January 31, 2009) is at least
200% of the Conversion Price (as defined in Section 3(b)), interest on the then outstanding
principal balance of this Note may be paid in cash at the election of Maker; provided further that,
if such election to pay cash interest is made, the interest rate set forth in Section 1 hereof
shall be increased to the lesser of (a) eight percent (8%) or (b) the highest lawful interest rate
permitted by applicable law; and provided further that any accrued interest as of the date of such
election shall accrete as additional principal on this Note as of such election date. Interest
shall be payable in arrears on December 31, March 31, June 30 and September 30 of each year. All
references herein to the “principal” of this Note shall include all interest accreted thereon as
additional principal pursuant to the foregoing sentence.

     (b) The entire outstanding principal amount of the Note together with all accrued but unpaid
interest shall be due in cash on January 31, 2017 (the “Maturity Date”) from the Obligors.

     (c) On and following January 31, 2010, so long as the Current Market Price (determined on the
date of prepayment) is greater than 200% of the Conversion Price, the Maker will have right of
early prepayment of this Note at an amount equal to 105% of the aggregate outstanding principal on
this Note. For the purposes of this Note, the “Current Market Price” on any date means the average
of the daily Closing Prices per share of Common Stock for all Trading Days included in 90
consecutive calendar days preceding the date in question. For purposes of the foregoing, (i) the
“Closing Price” shall be the last reported sales price or, if no such reported sale takes place on
any particular date, the average of the reported closing bid and asked prices on the principal
exchange on which the Common Stock is listed (or if the Common Stock is not so listed, the average
of the closing bid and asked prices furnished by any two members of the Financial Industry
Regulatory Authority (FINRA) as selected by Payee for such purpose) on the date in question and
(ii) “Trading Days” shall mean any day on which the market on which the Common Stock is then traded
is open for trading. Any such prepayment under this Section 2(c) shall be on 30 days advance
notice to Payee.

     3. Conversion at the Option of Payee.

     (a) At any time while any portion of the principal or interest of this Note is outstanding,
the Payee may give the Maker written notice of its intention to convert all or any portion of the
outstanding principal and/or accrued but unpaid interest on this Note into such number of shares of
the Maker’s common stock (the “Common Stock”), equal to the amount to be converted divided by the
Conversion Price in effect at such time. Upon receipt of the Payee’s written notice, the Maker
shall cause certificates representing those shares to be delivered to Payee within three business
days of Maker’s receipt of such notice. The person or persons entitled to receive the shares of
Common Stock issuable upon a conversion of this Note shall be

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treated for all purposes as the record holder or holders of such shares of Common Stock on the
date the applicable conversion notice is given.

     (b) The “Conversion Price” shall be $0.20 per share of Common Stock, subject to any
adjustment. The Conversion Price shall be adjusted proportionally for any subsequent stock
dividend or split, stock combination or other similar recapitalization, reclassification or
reorganization of or affecting Maker’s Common Stock. In addition, the Conversion Price shall also
be appropriately adjusted in the event that Maker issues shares of Common Stock (or issues
securities, including warrants or similar rights, entitling holders to exercise, convert or
exchange into, or otherwise subscribe for, shares of Common Stock) at a price per share less than
the Current Market Price as of the date of such issuance, as follows: the new Conversion Price
shall be reduced to equal (x) the prevailing Conversion Price (i.e., prior to any adjustment
hereunder) multiplied by (y) the quotient obtained by dividing (a) the Market Value Share Number by
(b) the total number of shares of Common Stock that would be outstanding after giving effect to the
exercise, conversion or exchange of any rights or other derivative Company securities outstanding
(determined pro forma for the applicable issuance giving rise to the adjustment in the Conversion
Price hereunder). For purposes of the foregoing, the “Market Value Share Number” shall equal the
sum of (i) the total number of shares of Common Stock that would be outstanding after giving effect
to the exercise, conversion or exchange of any rights or other derivative Company securities
outstanding (determined prior to the applicable issuance giving rise to the adjustment in the
Conversion Price) plus (ii) the quotient obtained by dividing (A) the aggregate consideration
received by the Company in the applicable issuance (or, in the case of the issuance of any rights
or other derivative Company securities giving rise to the adjustment in the Conversion Price
hereunder, such aggregate consideration to be received upon the exercise, conversion or exchange of
any such rights or derivative Company securities) by (B) the Current Market Price. Notwithstanding
the foregoing, there shall be no adjustment in the Conversion Price pursuant to this Section 3(b)
in connection with shares of Common Stock (or issues of securities, including warrants or similar
rights, entitling holders to exercise, convert or exchange into, or otherwise subscribe for, shares
of Common Stock: (i) issuable or issued to employees, consultants or directors of the Maker (or any
subsidiary thereof) in an aggregate amount representing not more than 40% of the shares of Common
Stock outstanding on the date hereof and pursuant to a stock option plan or other equity incentive
plan approved by the Board of Directors of Maker or (ii) issuable or issued in connection with bona
fide acquisitions, mergers, strategic transactions, joint ventures or similar transactions, the
terms of which are approved by the Board of Directors of Maker.

     (c) In case of a Change of Control, instead of receiving shares of Maker’s Common Stock upon
conversion of this Note, Payee shall have the right thereafter to receive the kind and amount of
shares of stock and other securities, cash and property which the Payee would have owned or have
been entitled to receive immediately after such Change of Control had the same portion of this Note
been converted immediately prior to the effective date of such Change of Control and, in any such
case, if necessary, appropriate adjustment shall be made in the application of the provisions set
forth in this Section with respect to the rights and interests thereafter of the Payee, to the end
that the provisions set forth in this Section shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to any shares of

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stock and other securities, cash and property thereafter deliverable in connection with this
Note. The provisions of this subsection shall similarly apply to successive Changes of Control.

     (d) “Change of Control” means that the Maker shall, directly or indirectly, in one or more
related transactions, (i) consolidate or merge with or into (whether or not the Maker is the
surviving corporation) another person, (ii) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the Maker to another person, (iii) allow
another person to make a purchase, tender or exchange offer that is accepted by the holders of more
than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held
by the person or persons making or party to, or associated or affiliated with the persons making or
party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization or
spin-off) with another person whereby such other person acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock held by the other person or other
persons making or party to, or associated or affiliated with the other persons making or party to,
such stock purchase agreement or other business combination); provided, however, that a transaction
in which Newcastle Partners, L.P. or any of its affiliates is the acquiring party shall not be
deemed to constitute a Change of Control.

     (e) No fractional shares of Maker’s Common Stock shall be issued upon conversion of the Note.
In lieu of any fractional shares to which Payee would otherwise be entitled, the Maker shall pay
cash equal to the product of such fraction multiplied by the average of the closing prices of the
Common Stock on the principal exchange on which the Common Stock is listed (or the exchange on
which Maker’s Common Stock trades) for the five consecutive trading days immediately preceding the
date of the conversion.

     (f) In the event of an adjustment to the Conversion Price, the Maker shall promptly deliver to
the Payee a certificate, signed by its Chief Financial Officer, setting forth the new Conversion
Price and a calculation in reasonable detail of the adjustment to the Conversion Price.

     (g) The Maker shall pay any and all taxes that may be payable with respect to the issuance and
delivery of Common Stock upon conversion of this Note; provided that the Maker shall not be
required to pay any tax that may be payable in respect of any issuance of Common Stock to any
person other than the Payee or with respect to any income tax due by the Payee with respect to such
Common Stock.

     (h) Notwithstanding anything to the contrary contained in this Note, in no event shall this
Note be converted by Payee into a number of shares of Common Stock which, when added together with
any other outstanding shares of Common Stock and any shares of Common Stock into which derivative
securities of Maker are then convertible or exercisable, exceed the maximum number of authorized
shares of Common Stock of Maker under its existing Certificate of Incorporation; provided that,
following Maker’s 2008 Annual Meeting of Stockholders, if the convertibility of this Note would be
limited in any respect by the foregoing restriction (assuming for this purpose that Payee then
elected to convert the entire principal balance of the Note but without any obligation of Payee to
actually convert all or any portion of

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the Note), the interest rate on the Excess Outstanding Principal Balance for purposes of Section 1 shall be increased
to the lesser of (i) 14% per annum or (ii) the highest lawful interest rate permitted by applicable
law. For purposes the foregoing, the “Excess Outstanding Principal Balance” shall mean the
principal balance of the Note, determined as of the first day of every calendar quarter, in excess
of the Convertible Principal Balance, and “Convertible Principal Balance” means the principal
balance of the Note, determined as of the first day of every calendar quarter, that converts into a
number of shares of Common Stock which, when added together with any other then outstanding shares
of Common Stock and any shares of Common Stock into which any then outstanding derivative
securities of Maker (including but not limited to all options, warrants, convertible securities and
other securities) are convertible or exercisable, results in the precise number of authorized
shares of Common Stock of Maker. Maker agrees to seek an amendment to its Certificate of
Incorporation at the 2008 Annual Meeting of Stockholders (and any subsequent meeting if necessary)
to increase its authorized shares of Common Stock to permit the full convertibility of this Note
such that the foregoing restriction would not apply.

     4. Redemption Upon Change of Control. No sooner than 15 days nor later than 10 days
prior to the consummation of a Change of Control, the Maker shall deliver written notice of such
Change of Control to the Payee (a “Change of Control Notice”). At any time during the period
beginning after the Payee’s receipt of a Change of Control Notice and ending on the day immediately
preceding the consummation of such Change of Control, the Payee may require the Maker to redeem all
or any portion of this Note by delivering written notice thereof (a “Change of Control Redemption
Notice”) to the Maker, which Change of Control Redemption Notice shall indicate the portion of the
outstanding principal amount of this Note that the Payee is electing to redeem. The portion of this
Note subject to redemption pursuant to this Section 4 shall be redeemed by the Maker at a price
equal to 110% of the principal amount being redeemed, plus accrued but unpaid interest on such
principal amount (the “Change of Control Redemption Price”). Redemptions required by this Section
4 shall be made on the date of the consummation of the Change of Control and shall have priority to
payments to shareholders of the Maker in connection with such Change of Control. Notwithstanding
anything to the contrary in this Section 4, until the Change of Control Redemption Price is paid in
full, the principal amount submitted for redemption under this Section 4 (together with any accrued
but unpaid interest thereon) may be converted, in whole or in part, by the Payee into Common Stock
pursuant to Section 3. If the cash funds of Maker then legally available for payment of the Change
of Control Redemption Price are insufficient to pay in full the Change of Control Redemption Price,
those funds which are legally available will be used to redeem the maximum portion of this Note
subject to redemption, with the remaining portion of the Note remaining outstanding and entitled to
the rights and benefits provided for herein.

     5. Conversion On Maturity Date. On the Maturity Date, in lieu of receiving the
payment required by Section 2(b), the Payee may elect to have Maker issue to the Payee a
certificate representing such number of shares of Common Stock as is equal to the quotient obtained
by dividing the entire principal amount of this Note then outstanding, plus all accrued but unpaid
interest thereon, by the Conversion Price in effect at such time, in full satisfaction of this Note
(the “Maturity Date Conversion”). The applicable provisions of Section 3 shall apply with equal
force to the Maturity Date Conversion. In the event that the Shareholder Approval

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has not then been obtained, Payee may elect to receive both (1) such number of shares as the Maker shall be permitted to issue under exchange rules in the absence of a shareholder vote
and (2) cash in lieu of any remaining principal balance.

     6. Representations of the Obligors. In order to induce the Payee to enter into this
Note, each Obligor makes the following representations and warranties to the Payee which shall be
true, correct, and complete, in all material respects, as of the date hereof and such
representations and warranties shall survive the execution and delivery of this Note:

     (a) Each Obligor is duly organized and existing and in good standing under the laws of the
jurisdiction of its organization and qualified to do business in any state where the failure to be
so qualified reasonably could be expected to result in a Material Adverse Change. Each Obligor and
its subsidiaries have all requisite power and authority, and has all material governmental
licenses, authorizations, consents and approvals necessary, to own its assets and to carry on its
business as now conducted, and is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where failure to have such power,
authority, licenses, authorizations, consents, approvals and qualifications could not reasonably be
expected to have a Material Adverse Change.

     (b) The execution, delivery, and performance by such of this Note and the Loan Documents to
which it is a party have been duly authorized by all necessary action on the part of each Obligor.

     (c) The execution, delivery, and performance by each Obligor of this Note and the other Loan
Documents to which it is a party do not and will not (i) violate any provision of federal, state,
or local law or regulation applicable to any Obligor, the bylaws or articles of incorporation of
any Obligor, or any order, judgment, or decree of any court or other governmental authority binding
on any Obligor, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse
of time or both) a default under any material contract of any Obligor or any subsidiary thereof,
(iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of any Obligor or any subsidiary thereof, other than Permitted Liens, or (iv)
require any approval of any Obligor’s interestholders or any approval or consent of any person
under any material contract of any Obligor or any subsidiary thereof, other than consents or
approvals that have been obtained and that are still in force and effect, or as contemplated by
Section 3(h) of this Note.

     (d) This Note and the other Loan Documents to which each Obligor is a party, and all other
documents contemplated hereby and thereby, when executed and delivered by such Obligor will be the
legally valid and binding obligations of such Obligor, enforceable against such Obligor in
accordance with their respective terms.

     (e) No Material Adverse Change. All financial statements relating to Obligors and
their subsidiaries that have been delivered by Obligors to the Payee have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and present fairly in all material
respects, Obligors’ and their subsidiaries’ financial condition as of the date thereof and results
of operations for the period then ended. Except for information otherwise known to Payee, there

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has not been a Material Adverse Change with respect to Obligors and their subsidiaries since
March 31, 2008.

     (f) SkyTel Sale. The SkyTel Sale Agreements comply with, and the transactions
thereunder have been consummated in accordance with, all applicable laws. Except for the consent
of the Federal Communications Communication to transfer the wireless spectrum licenses that are
subject to the SkyTel Sale Agreements, the execution, delivery, and performance by the Company of
the SkyTel Sale Agreements do not and will not require any material registration with, consent, or
approval of, or notice to, or other action with or by any governmental authority, other than
consents or approvals that have been obtained and that are still in full force and effect.

     7. Dividends. If, at any time while any portion of the principal or interest on the
Note is outstanding, Maker declares a distribution in cash, property (including securities) or a
combination thereof, whether by way of dividend or otherwise, with respect to its Common Stock, the
Payee shall participate pro rata in such distribution on an as-converted basis with holders of
Maker’s Common Stock.

     8. Security; Subordination. THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A
SECURITY AGREEMENT EXECUTED BY THE OBLIGORS IN FAVOR OF PAYEE. ADDITIONAL RIGHTS OF THE PAYEE ARE
SET FORTH IN THE SECURITY AGREEMENT. This Note will rank senior to all existing and future secured
or unsecured indebtedness of Maker; provided that, notwithstanding anything to the contrary, the
Indebtedness evidenced by this Note is hereby expressly subordinated in the manner set forth in the
Intercreditor Agreement.

     9. Certain Defined Terms. The following terms in this Note shall have the meanings
specified below. Any terms in this Section 9 that are not specified below or otherwise defined in
this Note or in Purchase Agreement shall have the meaning ascribed thereto in the California
Uniform Commercial Code, as in effect from time to time (the “Code”).

     “Adjusted EBITDA” means, with respect to any fiscal period, the Company’s and its’
subsidiaries’ consolidated net earnings (or loss), minus extraordinary gains and interest income,
plus interest expense, income taxes, depreciation and amortization, and all non-cash charges for
such period, and excluding (x) any SkyTel EBITDA included in the calculation thereof and (y) any
gain or loss resulting from the consummation of the SkyTel Disposition in the calculation thereof,
in each case, determined on a consolidated basis in accordance with GAAP.

     “Agent” means Wells Fargo Foothill, Inc., in its capacity as the arranger and
administrative agent for the Lenders, together with its successors and assigns, if any, in such
capacity.

     “Borrowers” means, individually and collectively, jointly and severally, Bell
Industries, Inc., a California corporation, and Bell Industries, Inc., a Minnesota corporation, and
any subsidiaries thereof.

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     “Capital Expenditures” means, with respect to any entity for any period, the aggregate
of all expenditures by such entity and its subsidiaries during such period that are capital
expenditures as determined in accordance with GAAP, whether such expenditures are paid in cash or
financed.

     “Capital Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

     “Closing Date” The date that this Second Amended and Restated Promissory Note is
executed.

     “IBM Debt” means Indebtedness owed by Maker to International Business Machines
Corporation (“IBM”) in connection with those certain Agreements for Wholesale Financing entered
into prior to the Closing Date by and between Maker, on the one hand, and IBM, on the other hand.

     “Indebtedness” means (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all obligations as a lessee under capital leases, (d) all obligations or
liabilities of others secured by a Lien on any asset of a Person or its subsidiaries, irrespective
of whether such obligation or liability is assumed, (e) all obligations to pay the deferred
purchase price of assets (other than trade payables incurred in the ordinary course of business and
repayable in accordance with customary trade practices), (f) all obligations owing under hedge
agreements, and (g) any obligation guaranteeing or intended to guarantee (whether directly or
indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any
other Person that constitutes Indebtedness under any of clauses (a) through (f) above.

     “Insolvency Proceeding” means any proceeding commenced by or against any Person under
any provision of title 11 of the United States Code (as in effect from time to time) or under any
other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.

     “Investment” means, with respect to any Person, any investment by such Person in any
other Person (including Affiliates) in the form of loans, guarantees, advances, or capital
contributions (excluding (a) commission, travel, and similar advances to officers and employees of
such Person made in the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practice), purchases or other acquisitions of
Indebtedness, capital stock, or all or substantially all of the assets of such other Person (or of
any division or business line of such other Person), and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.

     “GE Debt” means the Indebtedness owed by Maker to GE Commercial Distribution Finance
Corporation or Deutsche Financial Services Corporation in connection with those certain Agreements
for Wholesale Financing entered into prior to the Closing Date by and

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between Parent, on the one hand, and GE Commercial Distribution Finance Corporation or Deutsch
Financial Services Corporation, on the other hand.

     “Lenders” means, individually and collectively, the lenders from time to time party to
the Senior Credit Agreement.

     “Lien” means any interest in an asset securing an obligation owed to, or a claim by,
any Person other than the owner of the asset, irrespective of whether (a) such interest is based on
the common law, statute, or contract, (b) such interest is recorded or perfected, and (c) such
interest is contingent upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances. Without limiting the generality of the foregoing, the term
“Lien” includes the Lien or security interest arising from a mortgage, deed of trust, encumbrance,
notice of Lien, levy or assessment, pledge, hypothecation, assignment, deposit arrangement,
security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment
for security purposes and also includes reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and
encumbrances affecting real property.

     “Loan Documents” means this Note, the Waiver and Amendment Agreement, and any other
agreement previously or in the future entered into by the Company or any of its subsidiaries and
the Payee in connection with this Note or in connection with the amended and restated convertible
promissory note dated March 12, 2007 in the original principal amount of $10,000,000.

     “Material Adverse Change” means (a) a material adverse change in the business,
operations, results of operations, assets, liabilities or condition (financial or otherwise) of the
Company and its subsidiaries, taken as a whole, (b) a material impairment of the Company and its
subsidiaries ability to perform their obligations under the Loan Documents to which they are
parties or of the Payee’s ability to enforce the Obligations or realize upon the Collateral, or (c)
a material impairment of the enforceability or priority of the Payee’s Liens with respect to the
Collateral as a result of an action or failure to act on the part of the Company or any of its
subsidiaries.

     “Net Debt” means, as of the date of determination, the total Indebtedness of the
Borrowers minus the total cash and cash equivalents of the Borrowers, each determined on a
consolidated basis in accordance with GAAP.

     “Obligations” means (a) all loans, debts, principal, interest (including any interest
that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding) owing by Borrowers to
the Payee pursuant to the Loan Documents, and (b) all liabilities, guaranties, covenants, and
duties of any kind and description owing by Borrowers to the Payee pursuant to the Loan Documents.

     “Paid in Full” means the payment in full in cash of all Senior Debt and the
termination of all commitments of the holders of the Senior Debt to extend further credit to
Borrowers, or, in the case of Senior Debt consisting of contingent obligations in respect of
letters of credit,

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hedging obligations, bank product obligations, or other reimbursement obligations, the setting
apart of cash sufficient to discharge such portion of the Senior Debt in an account for the
exclusive benefit of the holders thereof, in which account such holders shall be granted a first
priority perfected security interest in a manner reasonably acceptable to such holders.

     “Permitted Dispositions” means (a) sales or other dispositions of equipment that is
substantially worn, damaged, or obsolete in the ordinary course of business, (b) sales of inventory
to buyers in the ordinary course of business, (c) the use or transfer of money or cash equivalents
in a manner that is not prohibited by the terms of this Note or the other Loan Documents, (d) the
licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual
property rights in the ordinary course of business, and (e) transfers or dispositions not in excess
of $500,000 for fair value and other than to any affiliate of the Company.

     “Permitted Investments” means (a) Investments in cash and cash equivalents, (b)
Investments in negotiable instruments for collection, (c) advances made in connection with
purchases of goods or services in the ordinary course of business, (d) Investments received in
settlement of amounts due to a Borrower effected in the ordinary course of business or owing to a
Borrower as a result of insolvency proceedings involving an account debtor or upon the foreclosure
or enforcement of any Lien in favor of a Borrower, and (e) loans or advances or the repayment of
loans or advances from one Borrower to another Borrower.

     “Permitted Liens” means (a) Liens held by Payee, (b) Liens for unpaid taxes,
assessments, or other governmental charges or levies that either (i) are not yet delinquent, or
(ii) do not have priority over the Payees’s Liens and the underlying taxes, assessments, or charges
or levies are the subject of Permitted Protests, (c) judgment Liens that do not otherwise
constitute an Event of Default under this Note, (d) the interests of lessors under operating
leases, (e) purchase money Liens or the interests of lessors under Capital Leases to the extent
that such Liens or interests secure Permitted Purchase Money Indebtedness, so long as (i) such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, and (ii) such Lien only
secures the Indebtedness that was incurred to acquire the asset purchased or acquired or any
Refinancing Indebtedness in respect thereof, (f) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the
ordinary course of business and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted Protests, (g)
Liens on amounts deposited in connection with obtaining worker’s compensation or other unemployment
insurance, (h) Liens on amounts deposited in connection with the making or entering into of bids,
tenders, or leases in the ordinary course of business and not in connection with the borrowing of
money, (i) Liens on amounts deposited as security for surety or appeal bonds in connection with
obtaining such bonds in the ordinary course of business, (j) with respect to any Real Property,
easements, rights of way, and zoning restrictions that do not materially interfere with or impair
the use or operation thereof; (k) Liens held by the holders of the Senior Debt; and (l) Liens in
respect of GE Debt and the IBM Debt.

     “Permitted Protest” means the right of a Borrower to protest any Lien (other than any
Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject
of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect
to such

10

 

obligation is established on the Company’s or its subsidiaries’ books and records in such
amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by a Borrower, as applicable, in good faith, and (c) Payee is satisfied that, while any
such protest is pending, there will be no impairment of the enforceability, validity, or priority
of any of the Payee’s Liens.

     “Permitted Purchase Money Indebtedness” means Indebtedness (other than the
Obligations, but including obligations under Capital Leases), incurred at the time of, or within 20
days after, the acquisition of any fixed assets for the purpose of financing all or any part of the
acquisition cost thereof in an aggregate principal amount outstanding at any one time not in excess
of $5,000,000.

     “Person” means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they are legal entities,
and governments and agencies and political subdivisions thereof.

     “Refinancing Indebtedness” means refinancings, renewals, or extensions of Indebtedness
so long as: (a) the terms and conditions of such refinancings, renewals, or extensions do not, in
Payee’s reasonable judgment, materially impair the prospects of repayment of the Obligations by
Borrowers or materially impair Borrowers’ creditworthiness, (b) such refinancings, renewals, or
extensions do not result in a material increase in the principal amount of the Indebtedness so
refinanced, renewed, or extended, (c) such refinancings, renewals, or extensions do not result in a
material increase in the interest rate with respect to the Indebtedness so refinanced, renewed, or
extended, (d) such refinancings, renewals, or extensions do not result in a material shortening of
the average weighted maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are materially more burdensome or restrictive to
Borrowers, (e) if the Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or
extension must include subordination terms and conditions that are at least as favorable to the
Payee and the Lenders as those that were applicable to the refinanced, renewed, or extended
Indebtedness, and (f) the Indebtedness that is refinanced, renewed, or extended is not recourse to
any Person that is liable on account of the Obligations other than those Persons which were
obligated with respect to the Indebtedness that was refinanced, renewed, or extended.

     “Security Agreement” means that certain Security Agreement, dated as of March 12, 2007
and certain related agreements made by the Borrowers to grant Payee a security interest in the
assets of Borrowers.

     “Senior Credit Agreement” means that certain Credit Agreement, dated as of January 31,
2007, by and among Borrowers, the lenders party thereto from time to time, and Agent, as amended,
restated, supplemented, or otherwise modified from time to time.

     “Senior Debt” means all obligations (whether now outstanding or hereafter incurred,
contingent or non-contingent, liquidated or unliquidated, or primary or secondary) of Borrowers in
respect of (a) principal under the Senior Credit Agreement or any other Senior Loan Document (or
any refinancing agreement entered into with respect thereto), (b) all interest and

11

 

premium, if any, in respect of the Indebtedness referred to in clause (a) above, (c) all fees
(including attorneys fees) and expenses payable pursuant to any Senior Loan Document (or a
refinancing agreement entered into with respect thereto), (d) all other Obligations (as defined in
the Senior Credit Agreement) or other payment obligations (including costs, expenses, letter of
credit reimbursement obligations, hedging obligations, bank product obligations, or otherwise) of
Borrowers to Agent or Lenders under or arising pursuant to any Senior Loan Document (or to third
persons under provisions of a refinancing agreement entered into with respect thereto), including
contingent reimbursement obligations with respect to outstanding letters of credit, all costs and
expenses incurred by Agent or any Lender in connection with its or their enforcement of any rights
or remedies under the Senior Loan Documents, including, by way of example, attorneys fees, court
costs, appraisal and consulting fees, auctioneer fees, rent, storage, insurance premiums, and like
items, and irrespective of whether allowable as a claim against Borrowers in any Insolvency
Proceeding, (e) post-petition interest on the Indebtedness referred to in clauses (a) through (d)
above, at the rate provided for in the instrument or agreements evidencing such Indebtedness,
accruing subsequent to the commencement of an Insolvency Proceeding (whether or not such interest
is allowed as a claim in such Insolvency Proceeding), and (f) any refinancings, renewals, or
extensions of the Indebtedness referred to in clauses (a) through (e) above.

     “Senior Loan Documents” means the Senior Credit Agreement and the other Loan Documents
(as defined in the Senior Credit Agreement), each as amended, restated supplemented, or otherwise
modified from time to time, including any agreement extending the maturity of, consolidating, or
otherwise restructuring (including adding subsidiaries of Borrowers thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender, or group and whether or not increasing the amount of
Indebtedness that may be incurred thereunder.

     “SkyTel Disposition” means the sale transaction contemplated by the Skytel Sale
Agreements.

     “SkyTel EBITDA” means, with respect to any fiscal period, Company’s consolidated net
earnings (or loss), minus extraordinary gains and interest income, plus interest expense, income
taxes, depreciation and amortization, and all non-cash charges for such period, in each case, to
the extent attributable to the results of operations of the SkyTel business which is being sold
pursuant to the Skytel Sale Agreements and determined on a consolidated basis in accordance with
GAAP.

     “SkyTel Sale Agreements” means the Asset Purchase Agreement, dated as of March 30,
2008 and as amended by Amendment No. 1 to the Asset Purchase Agreement dated as of June 11, 2008,
by and between Maker and Velocita Wireless LLC, and any and all other documents entered into to
give effect thereto.

     “Waiver and Amendment Agreement” means that certain Waiver and Amendment Agreement
entered into as of June 11, 2008 by and between the Obligors and Newcastle Partners, L.P.

12

 

     10. Affirmative Covenants. Each Obligor covenants and agrees that, until termination
of all of the Obligations, the Obligors will and will cause their respective subsidiaries to:

     (a) Compliance with Applicable Laws. Comply in all respects with the requirements of
all applicable statutes, laws, rules, regulations and orders of any governmental authority, except
where contested in good faith and by proper proceedings, other than statutes, laws, rules,
regulations and orders the noncompliance with which, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Change.

     (b) Licenses. Obtain and maintain all licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its properties or to the conduct of its
business, except where the failure to maintain such license, permits, franchises or other
governmental authorizations, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Change.

     (c) Financial Reporting. Deliver to Payee each of the financial statements, reports,
or other items set forth on Schedule 10(c) hereto at the times specified therein. In addition, the
Company agrees that no subsidiary of the Company will have a fiscal year different from that of the
Company.

     (d) Inspection. Permit Payee and its duly authorized representatives or agents to
visit any of its properties and inspect any of its assets or books and records, to examine and make
copies of its books and records, and to discuss its affairs, finances, and accounts with, and to be
advised as to the same by, its officers and employees at such reasonable times and intervals as
Payee or any such Lender may designate and, so long as no Default or Event of Default exists, with
reasonable prior notice to such Obligor.

     (e) Taxes. Cause all assessments and taxes, whether real, personal, or otherwise, due
or payable by, or imposed, levied, or assessed against Borrowers, their subsidiaries, or any of
their respective assets to be paid in full, before delinquency or before the expiration of any
extension period, except to the extent that the validity of such assessment or tax shall be the
subject of a Permitted Protest. Borrowers will and will cause their subsidiaries to make timely
payment or deposit of all tax payments and withholding taxes required of them by applicable laws,
including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Payee with proof satisfactory to Payee indicating
that the applicable Borrower or subsidiary of a Borrower has made such payments or deposits.

     (f) Insurance.

          (i) At Borrowers’ expense, maintain insurance respecting their and their subsidiaries’ assets
wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and
risks as ordinarily are insured against by other Persons engaged in the same or similar businesses.
Borrowers also shall maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation. All
such policies of insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Payee. Borrowers shall deliver copies of

13

 

all such policies to Payee with an endorsement naming Payee as the sole loss payee (under a
satisfactory lender’s loss payable endorsement) or additional insured, as appropriate. Each policy
of insurance or endorsement shall contain a clause requiring the insurer to give not less than 30
days prior written notice to Payee in the event of cancellation of the policy for any reason
whatsoever.

          (ii) The Company shall give Payee prompt notice of any loss exceeding $250,000 covered by such
insurance. So long as no Event of Default has occurred and is continuing, Borrowers shall have the
exclusive right to adjust any losses payable under any such insurance policies which are less than
$250,000. Following the occurrence and during the continuation of an Event of Default, Payee shall
have the exclusive right to adjust any losses payable under any such insurance policies, without
any liability to Borrowers whatsoever in respect of such adjustments. In the case of any losses
payable under such insurance exceeding $250,000, Payee shall have the exclusive right to adjust any
losses payable under any such insurance policies after consulting with the Company regarding such
adjustment, without any liability to a Borrower whatsoever in respect of such adjustments;
provided, however, that the failure of Payee to so consult with the Company shall not result in a
breach by Payee of this Note

          (iii) For so long as the Obligations (as defined in the Senior Credit Agreement) remain
outstanding, the Obligors shall not be required to take any action under this Section 10(f) which
conflicts with the Senior Credit Agreement.

     (g) Accounting System. Maintain a system of accounting that enables Borrowers to
produce financial statements in accordance with GAAP and maintain records pertaining to the
Collateral that contain information as from time to time reasonably may be requested by Payee.
Borrowers also shall keep a reporting system that shows all additions, sales, claims, returns, and
allowances with respect to their and their subsidiaries’ sales.

     (h) Maintenance of Existence. Do all things necessary to preserve and keep in full
force and effect its existence as a corporation in the jurisdiction of its incorporation and in
each jurisdiction in which the nature of their respective activities and of their respective
properties (both owned and lease) makes such qualification necessary, except for those
jurisdictions in which failure to be qualified and in good standing would not have a Material
Adverse Change.

     (i) Environmental.

          (i) Use its commercially reasonable efforts to keep any property either owned or operated by
any Borrower or any subsidiary of a Borrower free of any liens in favor of a governmental authority
for environmental liabilities or post bonds or other financial assurances sufficient to satisfy the
obligations or liability evidenced by such environmental liens, and

          (ii) Use its commercially reasonable efforts to comply, in all material respects, with
environmental laws and provide to Payee documentation of such compliance which Payee reasonably
requests.

14

 

     (j) Formation of Subsidiaries. At the time that any Borrower forms any direct or
indirect subsidiary or acquires any direct or indirect subsidiary after the Closing Date, such
Borrower shall (a) cause such new subsidiary to provide to Payee a guaranty in a form reasonably
satisfactory to Payee (or, if such guaranty has already been provided, then provide to Payee a
joinder to the guaranty) and a joinder to the Loan Documents, together with such other security
documents (including mortgages with respect to any real property of such new subsidiary), as well
as appropriate financing statements (and with respect to all property subject to a mortgage,
fixture filings), all in form and substance satisfactory to Payee (including being sufficient to
grant Payee a first priority Lien (subject to Permitted Liens) in and to the assets of such newly
formed or acquired subsidiary), provided that for so long as Senior Debt remains outstanding, upon
the granting of any guaranty pursuant to the terms hereof, Obligors shall also cause a guaranty to
be provided in favor of the Agent with respect of the holders of the Senior Debt, (b) provide to
Payee a pledge agreement and appropriate certificates and powers or financing statements,
hypothecating all of the direct or beneficial ownership interest in such new subsidiary, in form
and substance satisfactory to Payee, and (c) provide to Payee all other documentation, including
one or more opinions of counsel satisfactory to Payee, which in its opinion is appropriate with
respect to the execution and delivery of the applicable documentation referred to above (including
policies of title insurance or other documentation with respect to all property subject to a
mortgage). Any document, agreement, or instrument executed or issued pursuant to this paragraph
shall be a Loan Document.

     (k) Further Assurances. Except to the extent prohibited by the Senior Loan Documents,
Borrowers shall execute or deliver to Payee, and shall cause their subsidiaries to execute or
deliver to Payee, any and all financing statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, mortgages, deeds of trust, opinions of counsel,
and all other documents (collectively, the “Additional Documents”) that Payee may request in form
and substance reasonably satisfactory to Payee, to create, perfect, and continue perfected or to
better perfect the Payee’s Liens in all of the properties and assets of Borrowers and their
subsidiaries (whether now owned or hereafter arising or acquired, tangible or intangible, real or
personal), to create and perfect Liens in favor of Payee in any real property acquired by Borrowers
or their subsidiaries after the Closing Date, and in order to fully consummate all of the
transactions contemplated hereby and under the other Loan Documents. To the maximum extent
permitted by applicable law, Borrowers authorize Payee to execute any such Additional Documents in
Borrowers’ or their subsidiaries’ names, as applicable, and authorizes Payee to file such executed
Additional Documents in any appropriate filing office.

     (l) Copyrights. Maintain the registration of each of its copyrights with the United
States Copyright Office.

     (m) In the case of the Maker, solicit the requisite approval of its shareholders at the 2008
Annual Meeting of Shareholders (and any subsequent meeting if necessary) to the amendment to the
Maker’s Articles of Incorporation in order to effect the increase to its authorized shares of
Common Stock to permit the full convertibility of this Note.

     11. Negative Covenants. Each Obligor covenants and agrees that, until termination of
all of the Obligations, the Obligors will not and will not permit any of their respective
subsidiaries to do any of the following:

15

 

     (a) Indebtedness. Create, incur, assume, suffer to exist, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any Indebtedness except the
following:

          (i) Senior Debt under Senior Credit Agreement in an aggregate principal amount not to exceed
$10.5 million;

          (ii) Indebtedness for borrowed money that is not secured by a Lien on any assets, property or
capital stock owned by the Company or any of its subsidiaries in an aggregate amount not to exceed
$500,000;

          (iii) Permitted Purchase Money Indebtedness and any Refinancing Indebtedness in respect of
such Indebtedness;

          (iv) endorsement of instruments or other payment items for deposit;

          (v) Indebtedness composing Permitted Investments;

          (vi) Indebtedness that is subject to a subordination agreement that has been approved in
writing by Payee or otherwise subordinate to the Obligations as a matter of law;

          (vii) Accounts payable and related accrued liabilities incurred in the ordinary course of
business consistent with past practice; and

          (viii) GE Debt and IBM Debt in an aggregate amount not to exceed $5,000,000 at any one time.

     (b) Liens. Create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or hereafter acquired, or any
income or profits therefrom, except for Permitted Liens.

     (c) Material Asset Sales. Sell, lease, transfer, license or otherwise dispose of any
of its assets or property including securities (collectively, a “Transfer”), whether now owned or
hereafter acquired, except Permitted Dispositions.

     (d) Mergers, Etc. (i) enter into any merger, consolidation, reorganization, or
recapitalization, other than any transaction constituting a Change of Control; provided that the
foregoing carveout shall not apply if Payee elects to require a redemption of the Note under
Section 4 but the cash funds then legally available to Maker are insufficient to pay in full the
Change of Control Redemption Price, (ii) reclassify its capital stock, (iii) liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution), (iv) suspend or go out of a substantial
portion of its or their business, or (v) change any Borrower’s name, organizational identification
number, state of organization or organizational identity; provided, however, that a Borrower may
change its name upon at least 15 days prior written notice to Payee of such change and so long as
such Borrower provides any financing statements necessary to perfect and continue perfected the
Payee’s Liens.

16

 

     (e) Prepayments and Amendments. Except in connection with Refinancing Indebtedness
permitted by this Note or as otherwise set forth in the Waiver and Amendment Agreement, make any
payment on account of Indebtedness that has been contractually subordinated in right of payment if
such payment is not permitted at such time under the subordination terms and conditions.

     (f) Distributions. Make any distribution or declare or pay any dividends (in cash or
other property, other than common stock) on, or purchase, acquire, redeem, or retire any of any
Borrower’s stock, of any class, whether now or hereafter outstanding.

     (g) Investments. Except for Permitted Investments, directly or indirectly, make or
acquire any Investment or incur any liabilities (including contingent obligations) for or in
connection with any Investment; provided, however, that a Borrower shall not have Permitted
Investments in deposit accounts or securities accounts in an aggregate amount in excess of $100,000
at any one time unless such Borrower and the applicable securities intermediary or bank have
entered into a control agreement with Payee governing such Permitted Investments in order to
perfect (and further establish) the Payee’s Liens in such Permitted Investments.

     (h) Inactive Subsidiaries. Permit any of the inactive subsidiaries to own any assets,
incur any liabilities, or engage in any business activity.

     12. Financial Covenants. Bell California, on a consolidated basis, covenants and
agrees that, until termination of all of the Obligations, the Obligors will not and will not permit
any of their respective subsidiaries to do any of the following:

     (a) Minimum Adjusted EBITDA. As of any date of determination from and after April 1,
2008, if Borrowers do not have Net Debt in an amount less than $4,000,000 at all times during the
most recently completed fiscal quarter, then Borrowers shall not fail to achieve Adjusted EBITDA,
measured on a quarter-end basis, of at least the required amount set forth in the following table
for the applicable period set forth opposite thereto (and the failure to do so shall be deemed an
Event of Default):

	 	 	 
	Applicable Amount	 	Applicable Period
	$(1,234,000)

	 	For the 3 month period ending

March 31, 2008
	$(1,246,000)

	 	For the 6 month period ending

June 30, 2008
	$(200,000)

	 	For the 9 month period ending

September 30, 2008
	$(839,000)

	 	For the 12 month period ending

December 31, 2008
	$(750,000)

	 	For the 12 month period ending

March 31, 2009

17

 

	 	 	 
	Applicable Amount	 	Applicable Period
	$(500,000)

	 	For the 12 month period ending

June 30, 2009
	$(150,000)

	 	For the 12 month period ending

September 30, 2009
	$150,000

	 	For the 12 month period ending

December 31, 2009
	$350,000

	 	For the 12 month period ending

March 31, 2010
	$550,000

	 	For the 12 month period ending

June 30, 2010
	$750,000

	 	For the 12 month period ending

September 30, 2010
	$950,000

	 	For the 12 month period ending

December 31, 2010 and

for each 12 month period

ending as of the last day of

each fiscal quarter thereafter

     (b) Capital Expenditures. Make Capital Expenditures in any fiscal year in excess of
the amount set forth in the following table for the applicable period without the prior written
consent of Payee:

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Fiscal Year 2010 and
	Fiscal Year 2008	 	Fiscal Year 2009	 	thereafter
	$2,400,000
	 	$	1,500,000	 	 	$	1,500,000	 

     13. Default. The occurrence of any one or more of the following events shall
constitute an event of default (each, an “Event of Default”), upon which Payee may declare the
entire principal amount of this Note, together with all accrued but unpaid interest, to be
immediately due and payable in cash:

     (a) The Obligors shall fail to make any payment of principal (including, but not limited to,
upon any conversion pursuant to Section 5 hereof or the maturity of the Note) and/or accrued but
unpaid interest (at the applicable rate) on the Note when due and payable, and such failure, in the
case of any interest payment, shall continue for a period of at least five business days.

18

 

     (b) The Obligors shall fail to perform or observe any covenant or other agreement contained in
any of Sections 11 and 12 of this Note or Section 6 of the Security Agreement;

     (c) The Obligors shall be in material default of any term or provision of this Note (other
than any such term that is the subject of another provision of this Section 13, in which event such
other provision of this Section 13 shall govern), the Purchase Agreement, the Registration Rights
Agreement (as that term is defined in the Purchase Agreement), the Security Agreement, the Senior
Loan Agreement and the Waiver and Amendment Agreement, and such failure shall continue through 15
days after Payee gives written notice of such material default to Maker.

     (d) Any representation or warranty of the Maker contained in this Note shall have been false
in any material respect on the Closing Date.

     (e) Maker or any of its subsidiaries shall (i)(A) fail to make any payment when due under the
terms of any bond, debenture, note or other evidence of indebtedness, including the Senior Debt, to
be paid by such Person (excluding this Note but including any other evidence of indebtedness of
Maker or any of its subsidiaries to the Payee) and such failure shall continue beyond any period of
grace provided with respect thereto, or (B) default in the observance or performance of any other
agreement, term or condition contained in any such bond, debenture, note or other evidence of
indebtedness, and (ii) in each case, the effect of such failure or default is to cause, or permit
the holder or holders thereof to cause, indebtedness in an aggregate amount of one million dollars
($1,000,000) or more to become due prior to its stated date of maturity, unless such acceleration
shall have been rescinded and such failure to pay cured within thirty (30) days from the date of
such acceleration.

     (f) A final judgment or order for the payment of money in excess of one million dollars
($1,000,000) (exclusive of amounts covered by insurance issued by an insurer not an affiliate of
Maker) shall be rendered against the Maker or any of its subsidiaries and the same shall remain
undischarged for a period of thirty (30) days during which execution shall not be effectively
stayed, or any judgment, writ, assessment, warrant of attachment, or execution or similar process
shall be issued or levied against a substantial part of the property of the Maker or any of its
subsidiaries and such judgment, writ, or similar process shall not be released, stayed, vacated or
otherwise dismissed within thirty (30) days after issue or levy.

     (g) If any Obligor or any subsidiary of an Obligor is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of its business
affairs.

     (h) If a binding arbitration or final judgment or order renders that (i) any Obligor is in
default of the SkyTel Sale Agreements that causes an order for the payment of greater than five
hundred thousand ($500,000), or (ii) any Obligor must pay an indemnity claim of greater than five
hundred thousand ($500,000) under the SkyTel Sale Agreements, and such claim shall remain
undischarged for a period of thirty (30) days.

19

 

     (i) Any Liens of Payee in any of the assets of Maker or its subsidiaries shall cease to be or
shall not be valid and perfected Liens or the Maker or any subsidiary shall assert that such Liens
are not valid and perfected Liens.

     (j) The Maker or any of its subsidiaries, pursuant to or within the meaning of Title 11, U.S.
Code, or any similar federal, foreign or state law for the relief of debtors (collectively,
“Bankruptcy Law”), (i) commences a voluntary case, (ii) consents to the entry of an order for
relief against it in an involuntary case, (iii) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official (a “Custodian”), (iv) makes a general assignment for the
benefit of its creditors or (v) admits in writing that it is generally unable to pay its debts as
they become due.

     (k) A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that
(i) is for relief against the Maker or any of its subsidiaries in an involuntary case, (ii)
appoints a Custodian of the Maker or any of its subsidiaries or (iii) orders the liquidation of the
Maker or any of its subsidiaries.

     Without limiting the above, the Maker acknowledges that payments (including but not limited to
upon conversion of this Note) on the various scheduled due dates are of essence and that any
failure to timely make any applicable payment of the principal or interest (within any permitted
grace period) permits Payee to declare this Note immediately due in cash in its entirety without
any prior notice of any kind to Maker, except for the specific notices provided above. Upon the
occurrence and during the continuance of an event of default, the interest rate under this Note
shall be increased to the lesser of (a) sixteen percent (16%) or (b) the highest lawful interest
rate permitted by applicable law. In the event that such event of default is subsequently cured,
the adjustment referred to in the preceding sentence shall cease to be effective as of the date of
such cure; provided that the interest as calculated and unpaid at such increased rate during the
continuance of such event of default shall continue to apply to the extent relating to the days
after the occurrence of such event of default through and including the date of cure of such event
of default.

     14. Applicable Law; Forum. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF. EACH OF PAYEE AND MAKER CONSENTS TO SUBMIT TO THE PERSONAL JURISDICTION
OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF TEXAS, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS NOTE, AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT, AND AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS NOTE IN ANY OTHER COURT. EACH OF THE PARTIES TO THIS AGREEMENT AGREES
NOT TO ASSERT IN ANY ACTION OR PROCEEDING ARISING OUT OF RELATING TO THIS NOTE THAT THE VENUE IS
IMPROPER, AND WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR
PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY
OTHER PARTY WITH RESPECT THERETO.

20

 

     15. Waivers. The Maker hereby waives presentment for payment, notice of dishonor,
protest and notice of payment and all other demands and notices of any kind in connection with the
enforcement of this Note. Any provision of this Note may be amended, waived or modified upon the written consent of Maker and Payee. No failure or delay on the part of the Payee in
the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other power, right or privilege.

     16. Effect of Shareholder Vote. No term of this Note shall be modified or voided as a
result of any vote of the Company’s shareholders (or failure to obtain any such vote) unless the
approval of the Company’s shareholders is required by state law to make such term of this Note
effective.

     17. No Setoffs. The Maker shall pay (and, if applicable, this Note shall
automatically accrete in respect of) principal and interest under the Note without any deduction
for any setoff or counterclaim.

     18. Costs of Collection. If this Note is not paid when due, the Maker shall pay
Payee’s reasonable costs of collection, including reasonable attorneys’ fees.

     19. Notices. Whenever notice is required to be given under this Note, such notice
shall be given in accordance with Section 7.7 of the Purchase Agreement.

     20. Transferability. This Note shall be transferable by Payee. Neither this Note,
nor any obligations hereunder, shall be assignable by Maker without Payee’s express written
consent.

     21. Inspection Rights. The Holder and its representatives shall have the right, at
any time during normal business hours, upon reasonable prior notice, to visit and inspect the
properties of Maker and its corporate, financial and operating records, and make abstracts
therefrom.

     22. Severability. The invalidity, illegality or unenforceability of one or more of
the provisions of this Note in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Note in such jurisdiction or the validity, legality or
enforceability of this Note, including any such provision, in any other jurisdiction, it being
intended that all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law. Payee does not agree or intend to contract for, charge, collect,
take, reserve or receive any amount in the nature of interest or otherwise which would in any way
or event (including demand, prepayment or acceleration) cause Payee to collect more on its loan
that the maximum amount Payee would be permitted to charge or collect by federal law or the law of
the State of Texas (as applicable). Any such excess interest shall instead of anything to the
contrary, be applied first to reduce the outstanding principal balance of this Note, and when the
principal balance has been paid in full, be refunded to Maker.

     23. This Note is a replacement, consolidation, amendment and restatement of the amended and
restated convertible promissory note by Maker to Payee dated March 12, 2007 in

21

 

the original
principal amount of $10,000,000 (the “Prior Note”) and IS NOT A NOVATION. Maker shall also pay,
and this Note shall also evidence, any and all unpaid interests on all outstanding principal
pursuant to the Prior Note, and at the interest rate specified therein, for which this Note has been issued as replacement therefor. Payee confirms that the
representations and warranties made in Section 4 of the Purchase Agreement are true and correct as
of the date hereof with respect to this Note and the securities underlying this Note.

(SIGNATURE PAGE FOLLOWS)

22

 

     IN WITNESS WHEREOF, the undersigned Obligors have hereunto affixed their signatures.

	 	 	 	 	 
	BELL INDUSTRIES, INC., a California corporation	 	 
	 
	 	 	 	 
	By

	 	/s/ Kevin Thimjon	 	 
	 

	 	 	 	 
	Its

	 	President and Chief Executive Office	 	 
	 
	 	 	 	 
	BELL INDUSTRIES, INC., a Minnesota corporation	 	 
	 
	 	 	 	 
	By

	 	/s/ Kevin Thimjon	 	 
	 

	 	 	 	 
	Its

	 	President and Chief Executive Office	 	 

23exv10w1

Exhibit 10.1

AMENDMENT NO. 1

TO THE

ASSET PURCHASE AGREEMENT

     This Amendment No. 1 to the Asset Purchase Agreement (this “Amendment”) is made as of
June 13, 2008 and amends that certain Asset Purchase Agreement dated as of March 30, 2008, by and
between Bell Industries, Inc., a California corporation and Velocita Wireless LLC, a Delaware
limited liability company (the “Agreement”). Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to such terms in the Agreement.

     The Agreement is hereby amended as follows:

     1. Amendment to Section 5.9(a) of the Disclosure Schedules.

     Schedule 5.9(a) of the Disclosure Schedules is hereby amended by deleting the information on
patents set forth on Annex I attached hereto.

     2. Amendment to Exhibit A-1 of the Agreement.

     The form of the Note in Exhibit A-1 of the Agreement is hereby deleted in its entirety, and
the form of secured promissory note and form of promissory note attached as Exhibit A to
this Amendment are hereby substituted in its place.

     3. Amendment to Section 3.1 (ii) of the Agreement.

     Section 3.1(ii) of the Agreement is hereby deleted in its entirety and replaced with the
following language: “(ii) Purchaser shall deliver to Seller a Secured Promissory Note in the
principal amount of Three Million Dollars ($3,000,000.00) and a Promissory Note in the principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) (together, the “Note”) and”.

     4. Other Provisions. All other provisions of the Agreement shall remain in full force
and effect.

     5. Counterparts. This Amendment may be executed in counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the same instrument.

     6. Governing Law. This Amendment shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and performed in such State
without giving effect to the choice of law principles of such State that would require or permit
the application of the laws of another jurisdiction.

 

 

     This Amendment is executed as of the date first set forth above.

	 	 	 	 	 
	 	VELOCITA WIRELESS LLC

 	 
	 	By:  	/s/
Mark Hull 	 
	 	 	Name:  	Mark Hull 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	BELL INDUSTRIES, INC.

 	 
	 	By:  	/s/
Kevin Thimjon 	 
	 	 	Name:  	Kevin Thimjon 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 

 

 

ANNEX I

Patents

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Internal	 	 	 	Appl’n	 	 	 	Appl’n	 	Filing	 	 	 	 	 	 	 	Term	 	 	 	 	 	Owning	 	 
	Reference	 	Country	 	Type	 	Status	 	Serial No.	 	Date	 	Patent No.	 	Issue Date	 	Adjustments	 	Title	 	Inventors	 	Division	 	Owner
	SKY03003

	 	United States
	 	Ordinary
	 	Issued
	 	10/758,213
	 	16-Jan-04
	 	 	7,164,986	 	 	16-Jan-07
	 	patent term
adjustment of 282
days
	 	Method and System
for Tracked Device
Location and Route
Adherence Via
Geofencing
	 	Ngo, Huey J.;
Humphries, Laymon
Scott
	 	AVL
	 	Bell
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SKY03003

	 	United States
	 	Ordinary
	 	Pros. Closed
	 	10/758,213
	 	16-Jan-04
	 	see above
	 	see above
	 	 	 	Method and System
for Tracked Device
Location and Route
Adherence Via
Geofencing
	 	Ngo, Huey J.;
Humphries, Laymon
Scott
	 	AVL
	 	Bell

 

 

Exhibit A

SECURED PROMISSORY NOTE

			
	 	 	 
	$3,000,000.00
	 	June 13, 2008

          FOR VALUE RECEIVED, the undersigned, Velocita Wireless LLC, a Delaware limited liability
company (“Borrower”), HEREBY PROMISES TO PAY to the order of Bell Industries, Inc., a
California corporation (“Holder”), at Holder’s offices at 8888 Keystone Crossing,
Indianapolis, Indiana, or at such other place as may be designated by Holder, the principal amount
of Three Million Dollars ($3,000,000.00) (the “Principal Amount”) with interest thereon
until the Principal Amount is paid in full, whether by acceleration or otherwise, at the simple
interest rate of six percent (6%) per annum (the “Applicable Rate”) in accordance with the
terms hereof. This Secured Promissory Note (this “Note”) is being delivered as partial
consideration for the purchase by Borrower of certain assets of Holder pursuant to the terms and
conditions of that certain Asset Purchase Agreement between Holder and Borrower dated as of March
30, 2008 (the “Asset Purchase Agreement”), as amended. Capitalized terms not defined
herein shall have the meanings ascribed to them in the Asset Purchase Agreement.

          1. The entire Principal Amount plus all interest accrued and unpaid on the unpaid Principal
Amount shall be due and payable on July ___, 2008, thirty (30) days after the Closing Date (the
“Maturity Date”), unless otherwise accelerated in accordance with the terms hereof. All
payments under this Note shall be in immediately available United States funds, without setoff or
counterclaim, except as specifically set forth in Section 10 hereof. If any payment under this
Note shall be payable on a day other than a Business Day such payment shall be extended to the next
succeeding Business Day and interest shall be payable at the rate specified in this Note during
such extension. This Note may be prepaid in full or in part at any time without penalty or
premium.

          2. Upon and after the occurrence of an Event of Default (as such term is defined below) (and
only while such Event of Default continues) Holder may, at its election, and upon written notice to
the Borrower, do any one or more of the following: (1) declare all obligations under this Note
immediately due and payable; and (2) exercise any one or more of the rights and remedies granted to
Holder by the Asset Purchase Agreement or any other agreement between Holder and Borrower or
applicable law.

          3. To secure the prompt payment and performance of this Note, Borrower hereby grants to Holder
a continuing security interest in all of its right, title, and interest in and to the Collateral
(as such term is defined below). Borrower hereby agrees to execute and deliver such further
documentation and take such further action as Holder may reasonably request in order to enforce and
protect the aforesaid security interest in the Collateral. Borrower hereby authorizes Holder to
file one or more financing statements or continuation statements in respect thereof, and amendments
thereto, relating to all or any part of the Collateral without the signature of Borrower where
permitted by law. It is understood that, in addition to the Collateral, Holder is receiving a
security interest in the Membership Collateral as such term is defined in that certain Membership
Pledge Agreement, dated of even date herewith (the “Pledge Agreement”), made by United
Spectrum Management Services LLC in favor of Holder. Upon payment in full of the entire Principal
Amount, together with all interest which has accrued and is unpaid to the date of payment, Holder’s
security interest in and to the Collateral and the Membership

 

 

Collateral shall automatically terminate and be released, whereupon Borrower shall have the
right, without further notice to or consent by Holder, to file terminations of all financing
statements, continuation statements and amendments thereto which have been filed in order to
perfect Holder’s security interest in and to the Collateral and the Membership Collateral.

          4. Definitions.

     4.1 “Accounts Receivable” shall mean all accounts, trade or otherwise, contract
rights, monies, general intangibles, chattel paper, instruments, and all forms of obligations owing
to Borrower arising from goods sold or services rendered by Borrower under any Contract (as such
term is defined in the Contracts Security Agreement), including those under any trade names,
through any divisions and through any selling agent, including (i) all proceeds thereof, (ii)
rights against carriers of said merchandise; (iii) rights of replevin and reclamation and stoppage
in transit and all other rights of an unpaid seller of merchandise or services and (iv) all rights,
title, interest, including security interests, and guarantees with respect to any and all of the
foregoing.

     4.2 “Acceptable Intercreditor Agreement” shall mean a binding agreement among any
Person (the “Subordinate Lender”) to whom Borrower desires to grant a Lien (as such term is
defined below) in any of the Collateral that satisfies each of the following conditions, as Holder
may determine in its reasonable, good faith discretion:

     (a) As between such Subordinate Lender and the Holder with respect to the Collateral,
Holder shall have a first priority security interest in and Lien on the Collateral to secure
Borrower’s obligations under this Note and such Subordinate Lender shall have a junior and
subordinate security interest in and Lien on the Collateral. Furthermore, Holder shall have
a first priority security interest in any cash proceeds or other consideration generated by
the disposition of the Collateral.

     (b) Such Subordinate Lender shall agree that, in any insolvency proceeding involving
Borrower, such Subordinate Lender will not contest (or support any other person contesting):
(i) any request by the Holder for adequate protection (whether in the form of payments,
liens, a priority administrative expense claim, or otherwise) with respect to the
Collateral; (ii) the payment of interest, reasonable fees, expenses, or other amounts to the
Holder under applicable law; or (iii) any commercially reasonable disposition of the
Collateral if such disposition is supported by Holder in writing.

     (c) Such Subordinate Lender and Holder shall each agree to give prompt written notice
to the other of the occurrence, under their respective debt instruments which are secured by
Liens in the Collateral, of (i) any event of default which has continued beyond any
applicable grace or cure period and which has not been waived if, as a result of the
existence of such event of default, such notifying party would have the right to accelerate
the indebtedness owed by Borrower, to demand payment thereof and exercise its rights as a
secured party with respect to the Collateral, or (ii) the acceleration of or demand for
payment of the outstanding indebtedness under such debt instruments.

- 2 -

 

     (d) Such Subordinate Lender shall agree that it shall not commence, prosecute, or
participate in any action to exercise its rights with respect to the Collateral until such
Subordinate Lender has provided a notice to the Holder and thereafter, a standstill period
of not less than forty (40) Business Days has elapsed from the date of such notice.

     (e) Such Subordinate Lender shall agree that following a standstill period, it shall
not contest (or support any other person contesting) a plan for the disposition of the
Collateral supported in writing by Holder unless such Subordinate Lender is proposing or
supporting in writing an alternative plan that is conditioned on the concurrent discharge of
all of Borrower’s obligations to Holder. Furthermore, Holder shall agree not to contest any
commercially reasonable plan for the disposition of the Collateral that is conditioned on
the concurrent discharge of all of Borrower’s obligations to Holder.

     (f) In the event Holder shall sell or transfer the Collateral or any portion thereof,
Holder shall remit any proceeds from such sale or transfer which are in excess of the amount
necessary to discharge all of Borrower’s obligations hereunder or under that certain
promissory note made by Borrower in favor of Holder in the principal amount of One Million
Five Hundred Thousand Dollars ($1,500,000.00), dated as of even date herewith, to such
Subordinate Lender.

     4.3 “Liens” shall mean any mortgage, deed of trust, pledge, security interest,
assignment, deposit arrangement, charge or encumbrance, lien, or other type of preferential
arrangement, but excluding (i) statutory liens for current Taxes, assessments or other governmental
charges not yet delinquent; (ii) mechanics’, carriers’, workers’, repairers’ and similar Liens
arising or incurred in the ordinary course of business; (iii) zoning, entitlement and other land
use and environmental regulations.

     4.4 “Business” shall mean the business of Borrower consisting of the production, sale,
development and operation of one-way and two-way paging services, air-to-ground wireless services,
cellular reseller services and fixed location wireless telemetry services, as transferred to
Borrower under Asset Purchase Agreement, but excluding any businesses that Borrower owned or
operated prior to the date hereof and any businesses of Borrower acquired in the future through
transactions not related to the Asset Purchase Agreement.

     4.5 “Collateral” shall, subject to the last sentence of this Section 4, mean
all of Borrower’s right, title and interest in and to the following, together with all of
Borrower’s books and records relating to the following and any and all claims, rights and interests
in any of the following, each to the extent permitted by applicable law (including, without
limitation, the Communications Act):

     (a) the Copyright Collateral as such term is defined in that certain Copyright Security
Agreement, dated concurrently herewith (the “Copyright Security Agreement”), made by
Borrower in favor of Holder;

- 3 -

 

     (b) the Trademark Collateral as such term is defined in that certain Trademark Security
Agreement, dated of even date herewith (the “Trademark Security Agreement”), made by
Borrower in favor of Holder;

     (c) the Patent Collateral as such term is defined in that certain Patent Security
Agreement, dated of even date herewith (the “Patent Security Agreement”), made by
Borrower in favor of Holder;

     (d) the Contract Rights Proceeds Collateral as such term is defined in that certain
Contracts Security Agreement, dated of even date herewith (the “Contracts Security
Agreement” and together with the Copyright Security Agreement, the Trademark Security
Agreement, the Patent Security Agreement and the Pledge Agreement, the “Collateral
Agreements”), made by Borrower in favor of Holder

     (e) all pager device inventory used primarily in the Business; and

     (f) all equipment acquired under the Asset Purchase Agreement and all replacements
thereof and substitutions therefor.

Notwithstanding anything contained in this Note to the contrary, the Collateral shall not include
any of the following property of Borrower: (i) Borrower’s right, title and interest in and to
Borrower’s Accounts Receivable whether now owned or existing or whether owned or arising at any
time hereafter, (ii) payments with respect to or proceeds or products of the Accounts Receivable,
(iii) Borrower’s books and records relating to its Accounts Receivable, including computer records,
and/or (iv) any and all other claims, rights and interests in or with respect to Borrower’s
Accounts Receivable, including all supporting obligations, letter of credit rights, and instruments
or agreements evidencing the right to payment of the Accounts Receivable.

          5. Holder shall have such rights and remedies with respect to the Collateral as are available
under the applicable provisions of the Uniform Commercial Code in effect in the State of New York
from time to time (the “Uniform Commercial Code”), in addition to all other rights and
remedies existing at law, in equity, or by statute or provided in this Note or the Collateral
Agreements, which may be exercised; provided, however, that, in connection with any exercise by
Holder of its rights hereunder to acquire, dispose of, or operate under certain of the Collateral,
Holder shall secure all required FCC approvals in connection with the exercise of any such rights
or any of its remedies under this Note.

          6. Borrower waives presentment, demand, protest, notice of dishonor, notice of demand or
intent to demand, notice of acceleration or intent to accelerate, and all other notices and agrees
that no extension or indulgence of Borrower or release, substitution or nonenforcement of any
security, or release or substitution of Borrower, whether with or without notice, shall affect the
obligations of Borrower.

          7. Covenants. So long as any of the obligations of Borrower under this Note or any
Collateral Agreement remain unsatisfied, and unless waived or consented to in writing by the
Holder, Borrower agrees that:

- 4 -

 

     (a) Without giving Holder at least thirty (30) days prior written notice thereof,
Borrower will not (i) change its name, federal employer identification number, corporate
structure or identity (ii) change its state of organization or (iii) create or operate under
any fictitious name.

     (b) Borrower shall comply in all material respects with all laws, regulations and
ordinances relating in a material way to the possession, operation, maintenance and control
of the Collateral; provided, however, and anything to the contrary contained
herein or in any of the Collateral Agreements to the contrary notwithstanding, in the event
Borrower reasonably determines that any intellectual property, including any registered
patent, trademark or copyright, conveyed to Borrower pursuant to the Asset Purchase
Agreement has minimal or no value or utility to or in the ordinary course of Borrower’s
business, Borrower shall have no obligation to maintain, defend, renew or otherwise protect
such intellectual property.

     (c) Without the prior written consent of the Holder, Borrower shall not grant any
Person a Lien in any of the Collateral unless such Person shall have entered into an
Acceptable Intercreditor Agreement.

     (d) Borrower shall not sell, assign or transfer a material portion of the Collateral
whether in one transaction or a series of related transactions, other than sales,
assignments or transfers of assets made in the ordinary course of business, including
without limitation the sale or other disposition of worn, damaged or obsolete equipment.

     (e) Upon Borrower’s senior management obtaining knowledge that (i) Borrower has
materially breached any representation, warranty, covenant or undertaking contained in this
Note or any Collateral Agreement or (ii) a Subordinate Lender is in default of an Acceptable
Intercreditor Agreement entered into with Holder, Borrower shall provide written notice to
Holder of the same within five (5) Business Days of obtaining such knowledge.

          8. Representations and Warranties. Borrower represents and warrants to Holder that:

     (a) No transfer of property is being made by Borrower and no obligation is being
incurred by Borrower in connection with the transactions contemplated by the Asset Purchase
Agreement or this Note with the intent to hinder, delay, or defraud either present or future
creditors of Borrower.

     (b) Upon filing of financing statements and the recordation of the Copyright Security
Agreement, the Trademark Security Agreement and the Patent Security Agreement, Holder’s
liens and security interests in the items of Collateral covered thereby will be validly
created and perfected.

     (c) Borrower has not granted any Liens in its property which would attach to the
property acquired pursuant to the Assets Purchase Agreement other than the Liens in favor of
Holder created hereunder and under the Collateral Agreements.

- 5 -

 

     (d) Borrower is duly organized, validly existing and in good standing under the law of
the State of Delaware and has all requisite power and authority to execute, deliver and
perform its obligations under this Note and the Collateral Agreements.

     (e) The execution, delivery and performance by Borrower of this Note and the Collateral
Agreements has been duly authorized by all necessary action of Borrower, and this Note and
the Collateral Agreements constitute the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in equity).

     (f) No consent, approval, permit, authorization of, or filing or declaration with, any
governmental authority or agency, or approval or consent of any other person, is required
for the due execution, delivery or performance by Borrower of this Note and the Collateral
Agreements, except for (i) any filings necessary to perfect any liens on any Collateral, and
(ii) such other consents, approvals, permits, authorizations, filings or declarations, the
failure of which to obtain would not have materially adversely affect Borrower’s ability to
execute, deliver or perform this Note and the Collateral Agreements.

          9. Event of Default. Any of the following events which shall occur and be continuing
shall constitute an “Event of Default”:

     (a) Payments under this Note are not made within five (5) Business Days of the date
such payments are due.

     (b) Borrower shall have breached any representation, warranty, covenant or undertaking
contained in this Note or any Collateral Agreement and such breach is not cured within ten
(10) Business Days after Holder’s written notice to Borrower of the occurrence of such
breach.

     (c) Borrower shall have commenced any bankruptcy, reorganization, arrangement,
adjustment or debt, relief of debtors, dissolution, insolvency, receivership or liquidation
or similar proceeding of any jurisdiction relating to Borrower.

     (d) If this Note or any of the Collateral Agreements shall, for any reason, fail or
cease to create a valid, perfected and first priority Lien on or security interest in the
Collateral covered hereby or thereby, except (i) as a result of a disposition of the
applicable Collateral in a transaction permitted under this Note or such Collateral
Agreement or otherwise consented to by Holder in writing, (ii) any action taken by the
Holder to voluntarily release its Lien in the Collateral, (iii) any failure of the Holder to
file, record or maintain any filings necessary to perfect or maintain any Liens on any
Collateral, or (iv) any failure of the Holder to file, record or otherwise discharge any

- 6 -

 

Liens that existed in the Collateral immediately prior to the Closing of the Asset
Purchase Agreement.

     (e) If Borrower is in default of an agreement with a Subordinate Lender regarding an
obligation of Borrower greater than $1,000,000, and such default is not cured by Borrower or
waived by the Subordinate Lender within thirty (30) Business Days of the initial event of
default and such continuing event of default would allow such Subordinate Lender to demand
an acceleration of payment, commence an insolvency proceeding, assignment for the benefit of
creditors, foreclosure, seizure of assets, or similar action against Borrower, regardless of
whether or not such actions are actually taken by such Subordinate Lender.

     (f) If a Subordinate Lender is in default of an Acceptable Intercreditor Agreement
entered into with Holder and such default is not cured (if curable) or waived within fifteen
(15) Business Days after Holder’s notice of the occurrence of such default to such
Subordinate Lender (with a concurrent copy of such notice to Borrower).

          10. Right of Offset.

          10.1 Right of Offset. With respect to a claim for indemnification under the Asset
Purchase Agreement (a “Claim”), Borrower may offset payments due under this Note in respect
of any unpaid indemnification payments due and owing by Holder only in the event that such Claim is
(1) a Final Claim (as such term is defined below) or (2) a Valid Claim (as such term is defined
below), and in each case subject to the limitations and conditions set forth herein.

          10.2 Final Claims; Valid Claims.

          (a) A Claim shall be deemed to be a “Final Claim” if (i) a final decision, judgment or
award has been rendered by a Governmental Body of competent jurisdiction and the time in which to
appeal therefrom has elapsed, (ii) a binding settlement has been consummated, or (iii) the
Indemnified Party and the Indemnifying Party have arrived at a mutually binding agreement, in each
case with respect to the Claim.

          (b) A Claim shall be deemed to be a “Valid Claim” if (i) the Claim was identified by
Borrower to Holder in a written notice of the Claim (a “Claim Notice”) delivered to Holder
within eight (8) months of the date hereof, which Claim Notice shall include a reasonably detailed
description of the facts and circumstances underlying such Claim and Borrower’s intention to submit
the matter for potential offset hereunder; and (ii) an independent law firm mutually agreed upon by
Borrower and Holder has determined the amount that such independent law firm reasonably believes a
court of competent jurisdiction would more likely than not award to Borrower to satisfy the Claim
(the “Valid Claim Amount”). The fees of such independent law firm shall be shared equally
by the parties. In the event Borrower and Holder cannot mutually agree upon an independent law
firm, an arbitrator, as appointed in accordance with Section 10.4 hereof (the
“Arbitrator”), shall determine the Valid Claim Amount.

- 7 -

 

          10.3 Offset Rights in Respect of Final Claims and Valid Claims.

          (a) If any Claim (including a Valid Claim) becomes a Final Claim prior to the Maturity Date,
Borrower may offset all of the unpaid Losses payable by Holder under such Final Claim from the
amount payable to Holder on the Maturity Date.

          (b) If a Valid Claim has not become a Final Claim by the Maturity Date, Borrower may withhold
payment of 80% of the Valid Claim Amount, but not greater than $2,000,000 in the aggregate for all
Valid Claim Amounts hereunder (the “Escrowed Amount”) from the amount payable on the
Maturity Date to Holder, in which case Borrower shall deposit the Escrowed Amount in an interest
bearing escrow account with a nationally recognized escrow agent, reasonably acceptable to Borrower
and Holder (the “Escrow Agent”) pursuant to a written escrow agreement, reasonably
acceptable to Borrower and Holder to which Borrower and Holder will each be parties. Any and all
interest earned on the Escrowed Amount in the interest bearing escrow account shall be for the sole
benefit of Borrower.

          (c) The Escrow Agent shall hold the Escrowed Amount until the earlier of (A) the date that the
Valid Claim becomes a Final Claim; or (B) the Maturity Date.

          (d) If a Valid Claim becomes a Final Claim prior to the Maturity Date, then:

     (i) Borrower and Holder shall instruct the Escrow Agent to release to Holder an
amount equal to (A) the Escrowed Amount, minus the Losses payable by Holder under
such finally determined Valid Claim (the “Holder’s Amount”); plus
(B) an amount in respect of interest at the Applicable Rate on the Holder’s Amount
from the date the Escrowed Amount was placed in escrow to the release date (provided
that if the entire Escrowed Amount is insufficient to account for the Holder’s
Amount plus accrued interest thereon, Borrower shall promptly pay such shortfall);
and

     (ii) Borrower and Holder shall instruct the Escrow Agent to release to Borrower
any amount remaining in the escrow account after payments of the foregoing.

          (e) If a Valid Claim does not become a Final Claim prior to the Maturity Date, then so long as
there is no order of a Governmental Body of competent jurisdiction prohibiting the release of the
Escrowed Amount from escrow, the Escrowed Amount shall be released to Holder and, to the extent
that the Escrowed Amount is insufficient to account for the interest accrued thereon at the
Applicable Rate, Borrower shall promptly pay such shortfall to Holder.

          10.4 Non-Binding Arbitration Procedures Relating to Claims.

          (a) The Arbitrator will consist of any person who is a member of a nationally recognized
dispute resolution association and mutually acceptable to the parties to the dispute. If no
agreement can be reached within thirty (30) days after the submission of a Claim to arbitration
hereunder, then the Arbitrator shall be chosen by a nationally recognized dispute resolution
service, mutually agreed upon by the parties. The Arbitrator must be independent (not

- 8 -

 

a lawyer or relative to an officer or director of a party to the Asset Purchase Agreement or
an agent, officer, director, employee, shareholder or affiliate of a party to or a relative of any
of those persons) without any economic or financial interest of any kind in the outcome of the
arbitration. The Arbitrator’s conduct will be governed by the rules of the applicable dispute
resolution association. The arbitration will be conducted in New York City, New York, in
accordance with the rules of the applicable dispute resolution association and the discovery rules
of the State of New York. In reaching its advisory opinion, the Arbitrator shall have no authority
to change, extend, modify or suspend any of the terms of the Asset Purchase Agreement or this Note.
The Arbitrator shall issue a written advisory opinion that includes the factual and legal basis
for such. The Arbitrator shall apply the substantive law (and the law of remedies, if applicable)
of New York or federal law, or any of them, as applicable to the claim(s) asserted. The Arbitrator
will use commercially reasonable efforts to cause the arbitration to be concluded as soon as
practicable. The Arbitrator’s fees shall be shared equally by the parties.

          (b) The Arbitrator shall render its advisory opinion within thirty (30) days after the
conclusion of the hearing. The advisory opinion of the Arbitrator shall not be binding or
conclusive as to the parties, except to establish whether a Claim is a Valid Claim. The advisory
opinion of the Arbitrator will be subject to re-examination, upon the presentation of new and
substantial evidence by either party, provided, however, that no party shall be
able to submit a matter for re-examination more than once. The advisory opinion of the Arbitrator
and all records or proceedings in arbitration shall be deemed to be settlement negotiations and
shall not be admissible in any court proceedings as evidence.

          11. Except as otherwise provided herein, Borrower agrees to reimburse the holder or owner of
this Note for any and all reasonable costs and expenses (including, without limitation, reasonable
attorney fees) incurred in collecting on this Note.

          12. Any notices or other communications required or permitted to be given or made pursuant to
this Note shall be made in accordance with the notice provisions set forth in the Asset Purchase
Agreement.

          13. This Note may not be waived, changed, modified or discharged, except by an agreement in
writing signed by the party against whom the enforcement of waiver, change, modification or
discharge is sought.

          14. Each provision of this Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Note shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Note. Whenever in this Note reference is made to Holder or Borrower, such reference shall be
deemed to include, as applicable, a reference to their respective successors and assigns;
provided, however, that no assignment of this Note or of any rights or obligations
hereunder may be made by Borrower, directly or indirectly (by operation of law or otherwise),
without the prior written consent of the Holder and any attempted assignment without the required
consents shall be void. No assignment of any obligations hereunder shall relieve the Borrower of
any such obligations. The Holder may assign this Note and the Collateral Agreements and any of the
rights and obligations hereunder or thereunder, provided that in no

- 9 -

 

event shall the Holder assign any of its obligations under the provisions of Section 10 of
this Note and no attempted assignment thereof shall relieve the Holder of such obligations. The
provisions of this Note shall be binding upon Borrower and its successors and assigns and shall
inure to the benefit of Holder and its successors and assigns. Borrower’s successors and assigns
shall include, without limitation, a receiver, trustee or debtor in possession of or for Borrower.

          15. Neither a failure nor a delay on the part of Holder in exercising any right, power or
privilege under this Note shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege. The rights,
remedies and benefits of Holder herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which Holder may have under this Note at law, in equity, by
statute or otherwise.

          16. This Note shall be interpreted and the rights and liabilities of the parties hereto
determined in accordance with the internal laws and decisions of the State of New York without
regard to conflict of law principles. EACH OF HOLDER AND BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK CITY, NEW YORK
WITH RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
NOTE AND HEREBY WAIVES ANY OBJECTION TO SUCH FORUM BASED ON FORUM NON-CONVENIENS. IN ADDITION, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, HOLDER AND BORROWER HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS NOTE.

          17. Each of Borrower agrees to do such further acts and things, and to execute and deliver
such additional conveyances, assignments, agreements and instruments, as Holder may at any time
reasonably request in connection with the administration and enforcement of this Note or any part
thereof or in order to better assure and confirm unto Holder its rights and remedies hereunder.

- 10 -

 

          18. Upon the indefeasible payment and performance in full of all obligations under this Note,
and the termination of this Note, Holder shall execute and deliver to Borrower at Borrower’s
expense, for filing in each office in which any financing statement relative to the Collateral, or
any part thereof, shall have been filed, termination statements under the Uniform Commercial Code
and a quitclaim and assignment of Holder’s rights under the Collateral Agreements, releasing
Holder’s liens therein, all without recourse upon or warranty by Holder and at the sole cost and
expense of Borrower.

	 	 	 	 	 
	 

	 	“BORROWER”	 	 
	 
	 	 	 	 
	 

	 	VELOCITA WIRELESS LLC,	 	 
	 

	 	a Delaware limited liability company	 	 
	 
	 	 	 	 
	 

	 	By: /s/ Mark Hull	 	 
	 

	 	 

Name: Mark Hull
	 	 
	 

	 	Title: Chief Executive Officer	 	 

- 11 -

 

PROMISSORY NOTE

			
	 	 	 
	$1,500,000.00
	 	June 13, 2008

          FOR VALUE RECEIVED, the undersigned, Velocita Wireless LLC, a Delaware limited liability
company (“Borrower”), HEREBY PROMISES TO PAY to the order of Bell Industries, Inc., a
California corporation (“Holder”), at Holder’s offices at 8888 Keystone Crossing,
Indianapolis, Indiana, or at such other place as may be designated by Holder, the principal amount
of One Million Five Hundred Thousand Dollars ($1,500,000.00) (the “Principal Amount”) with
interest thereon until the Principal Amount is paid in full, whether by acceleration or otherwise,
at the simple interest rate of six percent (6%) per annum (the “Applicable Rate”) in
accordance with the terms hereof. This Promissory Note (this “Note”) is being delivered as
partial consideration for the purchase by Borrower of certain assets of Holder pursuant to the
terms and conditions of that certain Asset Purchase Agreement between Holder and Borrower dated as
of March 30, 2008 (the “Asset Purchase Agreement”), as amended. Capitalized terms not
defined herein shall have the meanings ascribed to them in the Asset Purchase Agreement.

          1. The entire Principal Amount plus all interest accrued and unpaid on the unpaid Principal
Amount shall be due and payable on June 13, 2009, the first anniversary of the Closing Date (the
“Maturity Date”), unless otherwise accelerated in accordance with the terms hereof. All
payments under this Note shall be in immediately available United States funds, without setoff or
counterclaim, except as specifically set forth in Section 10 hereof. If any payment under this
Note shall be payable on a day other than a Business Day such payment shall be extended to the next
succeeding Business Day and interest shall be payable at the rate specified in this Note during
such extension. This Note may be prepaid in full or in part at any time without penalty or
premium.

          2. Upon and after the occurrence of an Event of Default (as such term is defined below) (and
only while such Event of Default continues) Holder may, at its election, and upon written notice to
the Borrower, do any one or more of the following: (1) declare all obligations under this Note
immediately due and payable; and (2) exercise any one or more of the rights and remedies granted to
Holder by the Asset Purchase Agreement or any other agreement between Holder and Borrower or
applicable law.

          3. To secure the prompt payment and performance of this Note and that certain secured
promissory note made by Borrower in favor of Holder in the principal amount of Three Million
Dollars ($3,000,000.00) dated as of the date hereof (the “Secured Promissory Note”),
Borrower hereby grants to Holder a continuing security interest in all of its right, title, and
interest in and to the Collateral (as such term is defined below), provided, however, that such
security interest shall terminate upon the payment in full of Borrower’s obligations under the
Secured Promissory Note. Borrower hereby agrees to execute and deliver such further documentation
and take such further action as Holder may reasonably request in order to enforce and protect the
aforesaid security interest in the Collateral. Borrower hereby authorizes Holder to file one or
more financing statements or continuation statements in respect thereof, and amendments thereto,
relating to all or any part of the Collateral without the signature of Borrower where permitted by
law. It is understood that, in addition to the Collateral, Holder is

 

 

receiving a security interest in the Membership Collateral as such term is defined in that
certain Membership Pledge Agreement, dated of even date herewith (the “Pledge Agreement”),
made by United Spectrum Management Services LLC in favor of Holder, provided, however, that such
security interest in the Membership Collateral shall terminate upon the payment in full of
Borrower’s obligations under the Secured Promissory Note. Upon the payment in full of the entire
principal amount of the Secured Promissory Note, together with all interest which has accrued and
is unpaid with respect thereto to the date of payment of the Secured Promissory Note, Holder’s
security interest in and to the Collateral and the Membership Collateral shall automatically
terminate and be released, whereupon Borrower shall have the right, without further notice to or
consent by Holder, to file terminations of all financing statements, continuation statements and
amendments thereto which have been filed in order to perfect Holder’s security interest in and to
the Collateral and the Membership Collateral.

          4. Definitions.

     4.1 “Accounts Receivable” shall mean all accounts, trade or otherwise, contract
rights, monies, general intangibles, chattel paper, instruments, and all forms of obligations owing
to Borrower arising from goods sold or services rendered by Borrower under any Contract (as such
term is defined in the Contracts Security Agreement), including those under any trade names,
through any divisions and through any selling agent, including (i) all proceeds thereof, (ii)
rights against carriers of said merchandise; (iii) rights of replevin and reclamation and stoppage
in transit and all other rights of an unpaid seller of merchandise or services and (iv) all rights,
title, interest, including security interests, and guarantees with respect to any and all of the
foregoing.

     4.2 “Secured Promissory Note” shall mean that certain Secured Promissory Note between
Holder and Borrower dated as of the date of this Note.

     4.3 “Liens” shall mean any mortgage, deed of trust, pledge, security interest,
assignment, deposit arrangement, charge or encumbrance, lien, or other type of preferential
arrangement, but excluding (i) statutory liens for current Taxes, assessments or other governmental
charges not yet delinquent; (ii) mechanics’, carriers’, workers’, repairers’ and similar Liens
arising or incurred in the ordinary course of business; (iii) zoning, entitlement and other land
use and environmental regulations.

     4.4 “Business” shall mean the business of Borrower consisting of the production, sale,
development and operation of one-way and two-way paging services, air-to-ground wireless services,
cellular reseller services and fixed location wireless telemetry services, as transferred to
Borrower under Asset Purchase Agreement, but excluding any businesses that Borrower owned or
operated prior to the date hereof and any businesses of Borrower acquired in the future through
transactions not related to the Asset Purchase Agreement.

     4.5 “Collateral” shall, subject to the last sentence of this Section 4, mean
all of Borrower’s right, title and interest in and to the following, together with all of
Borrower’s books and records relating to the following and any and all claims, rights and interests
in any of the following, each to the extent permitted by applicable law (including, without
limitation, the Communications Act):

- 2 -

 

     (a) the Copyright Collateral as such term is defined in that certain Copyright Security
Agreement, dated concurrently herewith (the “Copyright Security Agreement”), made by
Borrower in favor of Holder;

     (b) the Trademark Collateral as such term is defined in that certain Trademark Security
Agreement, dated of even date herewith (the “Trademark Security Agreement”), made by
Borrower in favor of Holder;

     (c) the Patent Collateral as such term is defined in that certain Patent Security
Agreement, dated of even date herewith (the “Patent Security Agreement”), made by
Borrower in favor of Holder;

     (d) the Contract Rights Proceeds Collateral as such term is defined in that certain
Contracts Security Agreement, dated of even date herewith (the “Contracts Security
Agreement” and together with the Copyright Security Agreement, the Trademark Security
Agreement, the Patent Security Agreement and the Pledge Agreement, the “Collateral
Agreements”), made by Borrower in favor of Holder

     (e) all pager device inventory used primarily in the Business; and

     (f) all equipment acquired under the Asset Purchase Agreement and all replacements
thereof and substitutions therefor.

Notwithstanding anything contained in this Note to the contrary, the Collateral shall not include
any of the following property of Borrower: (i) Borrower’s right, title and interest in and to
Borrower’s Accounts Receivable whether now owned or existing or whether owned or arising at any
time hereafter, (ii) payments with respect to or proceeds or products of the Accounts Receivable,
(iii) Borrower’s books and records relating to its Accounts Receivable, including computer records,
and/or (iv) any and all other claims, rights and interests in or with respect to Borrower’s
Accounts Receivable, including all supporting obligations, letter of credit rights, and instruments
or agreements evidencing the right to payment of the Accounts Receivable.

          5. While the Collateral Agreements are in effect, Holder shall have such rights and remedies
with respect to the Collateral as are available under the applicable provisions of the Uniform
Commercial Code in effect in the State of New York from time to time (the “Uniform Commercial
Code”), in addition to all other rights and remedies existing at law, in equity, or by statute
or provided in this Note or the Collateral Agreements, which may be exercised; provided, however,
that, in connection with any exercise by Holder of its rights hereunder to acquire, dispose of, or
operate under certain of the Collateral, Holder shall secure all required FCC approvals in
connection with the exercise of any such rights or any of its remedies under this Note.

          6. Borrower waives presentment, demand, protest, notice of dishonor, notice of demand or
intent to demand, notice of acceleration or intent to accelerate, and all other notices and agrees
that no extension or indulgence of Borrower or release, substitution or nonenforcement of any
security, or release or substitution of Borrower, whether with or without notice, shall affect the
obligations of Borrower.

- 3 -

 

          7. Covenants. So long as any of the obligations of Borrower under this Note or any
Collateral Agreement remain unsatisfied, and unless waived or consented to in writing by the
Holder, Borrower agrees that:

     (a) Without giving Holder at least thirty (30) days prior written notice thereof,
Borrower will not (i) change its name, federal employer identification number, corporate
structure or identity (ii) change its state of organization or (iii) create or operate under
any fictitious name.

     (b) Borrower will not incur more than Two Million Dollars ($2,000,000.00) of debt
senior to this Note that is borrowed from entities that own, directly or indirectly through
affiliates, more than ten percent (10%) of the equity of Borrower (collectively,
“Affiliates”). Notwithstanding the foregoing, for purposes of this clause, the issuance by
Borrower of debt senior to this Note to parties that are not Affiliates as of the date of
this Note shall not be deemed a breach of this covenant.

     (c) Borrower will not authorize any dividends, stock repurchases, or other
distributions to equity holders of Borrower in an aggregate amount greater than Three
Million Dollars ($3,000,000.00).

          8. Representations and Warranties. Borrower represents and warrants to Holder that:

     (a) No transfer of property is being made by Borrower and no obligation is being
incurred by Borrower in connection with the transactions contemplated by the Asset Purchase
Agreement or this Note with the intent to hinder, delay, or defraud either present or future
creditors of Borrower.

     (b) Upon filing of financing statements and the recordation of the Copyright Security
Agreement, the Trademark Security Agreement and the Patent Security Agreement, Holder’s
liens and security interests in the items of Collateral covered thereby will be validly
created and perfected.

     (c) Borrower has not granted any Liens in its property which would attach to the
property acquired pursuant to the Assets Purchase Agreement other than the Liens in favor of
Holder created hereunder and under the Collateral Agreements.

     (d) Borrower is duly organized, validly existing and in good standing under the law of
the State of Delaware and has all requisite power and authority to execute, deliver and
perform its obligations under this Note and the Collateral Agreements.

     (e) The execution, delivery and performance by Borrower of this Note and the Collateral
Agreements has been duly authorized by all necessary action of Borrower, and this Note and
the Collateral Agreements constitute the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good

- 4 -

 

faith and fair dealing (regardless of whether enforcement is sought in a proceeding at
law or in equity).

     (f) No consent, approval, permit, authorization of, or filing or declaration with, any
governmental authority or agency, or approval or consent of any other person, is required
for the due execution, delivery or performance by Borrower of this Note and the Collateral
Agreements, except for (i) any filings necessary to perfect any liens on any Collateral, and
(ii) such other consents, approvals, permits, authorizations, filings or declarations, the
failure of which to obtain would not have materially adversely affect Borrower’s ability to
execute, deliver or perform this Note and the Collateral Agreements.

          9. Event of Default. Any of the following events which shall occur and be continuing
shall constitute an “Event of Default”:

     (a) Payments under this Note are not made within five (5) Business Days of the date
such payments are due.

     (b) Borrower shall have breached any representation, warranty, covenant or undertaking
contained in this Note and such breach is not cured within ten (10) Business Days after
Holder’s written notice to Borrower of the occurrence of such breach.

     (c) Borrower shall have commenced any bankruptcy, reorganization, arrangement,
adjustment or debt, relief of debtors, dissolution, insolvency, receivership or liquidation
or similar proceeding of any jurisdiction relating to Borrower.

     (d) An “Event of Default” shall have occurred under the Secured Promissory Note.

     (e) If Borrower is in default of an agreement with a lender regarding an obligation of
Borrower greater than $1,000,000, and such default is not cured by Borrower or waived by
such lender within thirty (30) Business Days of the initial event of default and such
continuing event of default would allow such lender to demand an acceleration of payment,
commence an insolvency proceeding, assignment for the benefit of creditors, foreclosure,
seizure of assets, or similar action against Borrower, regardless of whether or not such
actions are actually taken by such lender.

          10. Right of Offset.

          10.1 Right of Offset. With respect to a claim for indemnification under the Asset
Purchase Agreement (a “Claim”), Borrower may offset payments due under this Note in respect
of any unpaid indemnification payments due and owing by Holder only in the event that such Claim is
(1) a Final Claim (as such term is defined below) or (2) a Valid Claim (as such term is defined
below), and in each case subject to the limitations and conditions set forth herein.

- 5 -

 

          10.2 Final Claims; Valid Claims.

     (a) A Claim shall be deemed to be a “Final Claim” if (i) a final decision,
judgment or award has been rendered by a Governmental Body of competent jurisdiction and the
time in which to appeal therefrom has elapsed, (ii) a binding settlement has been
consummated, or (iii) the Indemnified Party and the Indemnifying Party have arrived at a
mutually binding agreement, in each case with respect to the Claim.

     (b) A Claim shall be deemed to be a “Valid Claim” if (i) the Claim was
identified by Borrower to Holder in a written notice of the Claim (a “Claim Notice”)
delivered to Holder within eight (8) months of the date hereof, which Claim Notice shall
include a reasonably detailed description of the facts and circumstances underlying such
Claim and Borrower’s intention to submit the matter for potential offset hereunder; and (ii)
an independent law firm mutually agreed upon by Borrower and Holder has determined the
amount that such independent law firm reasonably believes a court of competent jurisdiction
would more likely than not award to Borrower to satisfy the Claim (the “Valid Claim
Amount”). The fees of such independent law firm shall be shared equally by the parties.
In the event Borrower and Holder cannot mutually agree upon an independent law firm, an
arbitrator, as appointed in accordance with Section 10.4 hereof (the “Arbitrator”),
shall determine the Valid Claim Amount.

          10.3 Offset Rights in Respect of Final Claims and Valid Claims.

          (a) If any Claim (including a Valid Claim) becomes a Final Claim prior to the Maturity Date,
Borrower may offset all of the unpaid Losses payable by Holder under such Final Claim from the
amount payable to Holder on the Maturity Date.

          (b) If a Valid Claim has not become a Final Claim by the Maturity Date, Borrower may withhold
payment of 100% of the Valid Claim Amount, but not greater than $1,500,000 in the aggregate for all
Valid Claim Amounts hereunder (the “Escrowed Amount”) from the amount payable on the
Maturity Date to Holder, in which case Borrower shall deposit the Escrowed Amount in an interest
bearing escrow account with a nationally recognized escrow agent, reasonably acceptable to Borrower
and Holder (the “Escrow Agent”) pursuant to a written escrow agreement, reasonably
acceptable to Borrower and Holder to which Borrower and Holder will each be parties. Any and all
interest earned on the Escrowed Amount in the interest bearing escrow account shall be for the sole
benefit of Borrower.

          (c) The Escrow Agent shall hold the Escrowed Amount until the earlier of (A) the date that the
Valid Claim becomes a Final Claim; or (B) the Maturity Date.

          (d) If a Valid Claim becomes a Final Claim prior to the Maturity Date, then:

     (i) Borrower and Holder shall instruct the Escrow Agent to release to Holder an
amount equal to (A) the Escrowed Amount, minus the Losses payable by Holder under
such finally determined Valid Claim (the “Holder’s Amount”); plus
(B) an amount in respect of interest at the Applicable Rate on the Holder’s Amount
from the date the Escrowed Amount was placed in escrow to the release date (provided
that if the entire Escrowed Amount is insufficient to account for

- 6 -

 

the Holder’s Amount plus accrued interest thereon, Borrower shall promptly pay
such shortfall); and

     (ii) Borrower and Holder shall instruct the Escrow Agent to release to Borrower
any amount remaining in the escrow account after payments of the foregoing.

          (e) If a Valid Claim does not become a Final Claim prior to the Maturity Date, then so long as
there is no order of a Governmental Body of competent jurisdiction prohibiting the release of the
Escrowed Amount from escrow, the Escrowed Amount shall be released to Holder and, to the extent
that the Escrowed Amount is insufficient to account for the interest accrued thereon at the
Applicable Rate, Borrower shall promptly pay such shortfall to Holder.

          10.4 Non-Binding Arbitration Procedures Relating to Claims.

          (a) The Arbitrator will consist of any person who is a member of a nationally recognized
dispute resolution association and mutually acceptable to the parties to the dispute. If no
agreement can be reached within thirty (30) days after the submission of a Claim to arbitration
hereunder, then the Arbitrator shall be chosen by a nationally recognized dispute resolution
service, mutually agreed upon by the parties. The Arbitrator must be independent (not a lawyer or
relative to an officer or director of a party to the Asset Purchase Agreement or an agent, officer,
director, employee, shareholder or affiliate of a party to or a relative of any of those persons)
without any economic or financial interest of any kind in the outcome of the arbitration. The
Arbitrator’s conduct will be governed by the rules of the applicable dispute resolution
association. The arbitration will be conducted in New York City, New York, in accordance with the
rules of the applicable dispute resolution association and the discovery rules of the State of New
York. In reaching its advisory opinion, the Arbitrator shall have no authority to change, extend,
modify or suspend any of the terms of the Asset Purchase Agreement or this Note. The Arbitrator
shall issue a written advisory opinion that includes the factual and legal basis for such. The
Arbitrator shall apply the substantive law (and the law of remedies, if applicable) of New York or
federal law, or any of them, as applicable to the claim(s) asserted. The Arbitrator will use
commercially reasonable efforts to cause the arbitration to be concluded as soon as practicable.
The Arbitrator’s fees shall be shared equally by the parties.

          (b) The Arbitrator shall render its advisory opinion within thirty (30) days after the
conclusion of the hearing. The advisory opinion of the Arbitrator shall not be binding or
conclusive as to the parties, except to establish whether a Claim is a Valid Claim. The advisory
opinion of the Arbitrator will be subject to re-examination, upon the presentation of new and
substantial evidence by either party, provided, however, that no party shall be
able to submit a matter for re-examination more than once. The advisory opinion of the Arbitrator
and all records or proceedings in arbitration shall be deemed to be settlement negotiations and
shall not be admissible in any court proceedings as evidence.

          11. Except as otherwise provided herein, Borrower agrees to reimburse the holder or owner of
this Note for any and all reasonable costs and expenses (including, without limitation, reasonable
attorney fees) incurred in collecting on this Note.

- 7 -

 

          12. Any notices or other communications required or permitted to be given or made pursuant to
this Note shall be made in accordance with the notice provisions set forth in the Asset Purchase
Agreement.

          13. This Note may not be waived, changed, modified or discharged, except by an agreement in
writing signed by the party against whom the enforcement of waiver, change, modification or
discharge is sought.

          14. Each provision of this Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Note shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Note. Whenever in this Note reference is made to Holder or Borrower, such reference shall be
deemed to include, as applicable, a reference to their respective successors and assigns;
provided, however, that no assignment of this Note or of any rights or obligations
hereunder may be made by Borrower, directly or indirectly (by operation of law or otherwise),
without the prior written consent of the Holder and any attempted assignment without the required
consents shall be void. No assignment of any obligations hereunder shall relieve the Borrower of
any such obligations. The Holder may assign this Note and the Collateral Agreements and any of the
rights and obligations hereunder or thereunder, provided that in no event shall the Holder assign
any of its obligations under the provisions of Section 10 of this Note and no attempted assignment
thereof shall relieve the Holder of such obligations. The provisions of this Note shall be binding
upon Borrower and its successors and assigns and shall inure to the benefit of Holder and its
successors and assigns. Borrower’s successors and assigns shall include, without limitation, a
receiver, trustee or debtor in possession of or for Borrower.

          15. Neither a failure nor a delay on the part of Holder in exercising any right, power or
privilege under this Note shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege. The rights,
remedies and benefits of Holder herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which Holder may have under this Note at law, in equity, by
statute or otherwise.

          16. This Note shall be interpreted and the rights and liabilities of the parties hereto
determined in accordance with the internal laws and decisions of the State of New York without
regard to conflict of law principles. EACH OF HOLDER AND BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK CITY, NEW YORK
WITH RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
NOTE AND HEREBY WAIVES ANY OBJECTION TO SUCH FORUM BASED ON FORUM NON-CONVENIENS. IN ADDITION, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, HOLDER AND BORROWER HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS NOTE.

          17. Each of Borrower agrees to do such further acts and things, and to execute and deliver
such additional conveyances, assignments, agreements and instruments, as Holder may

- 8 -

 

at any time reasonably request in connection with the administration and enforcement of this
Note or any part thereof or in order to better assure and confirm unto Holder its rights and
remedies hereunder.

          18. Upon the indefeasible payment and performance in full of all obligations under this Note,
and the termination of this Note, Holder shall execute and deliver to Borrower at Borrower’s
expense, for filing in each office in which any financing statement relative to the Collateral, or
any part thereof, shall have been filed, termination statements under the Uniform Commercial Code
and a quitclaim and assignment of Holder’s rights under the Collateral Agreements, releasing
Holder’s liens therein, all without recourse upon or warranty by Holder and at the sole cost and
expense of Borrower.

	 	 	 	 	 
	 

	 	“BORROWER”	 	 
	 
	 	 	 	 
	 

	 	VELOCITA WIRELESS LLC,	 	 
	 

	 	a Delaware limited liability company	 	 
	 
	 	 	 	 
	 

	 	By: /s/ Mark Hull	 	 
	 

	 	 

Name: Mark Hull
	 	 
	 

	 	Title: Chief Executive Officer	 	 

- 9 -

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