SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[Mark One]
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________________ to_____________________.
Commission file no.: 0-22848
U.S. WIRELESS DATA, INC.
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(Name of small business issuer in its charter)
Colorado 84-1178691
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Powell Street, Suite 450, Emeryville, California 94608
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 596-2050
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Exchange Act
No Par Value Class A Common Stock
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes _X_ No___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
The issuer's revenues for the fiscal year ended June 30, 1997 were $1,315,362
The aggregate market value of the issuer's voting stock held as of August 31,
1997 by non-affiliates of the Registrant was approximately $18,581,000 based on
an average price of $3.49 as of August 29, 1997.
As of August 31, 1997, the issuer had 9,113,952 shares of its no par value
common stock outstanding.
The Company's Proxy Statement covering the fiscal year ended June 30, 1997 is
incorporated by reference into Part III of this Form 10-KSB.
Transitional Small Business Disclosure Format (check one):
Yes___ No _X_
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development.
U.S. Wireless Data, Inc., a Colorado corporation, (the "Company" or
"USWD"), was organized on July 30, 1991 for the purpose of designing,
manufacturing and marketing a line of wireless and portable credit card and
check authorization terminals. The Company's first product, known as the
POS-50(R), is the world's first integrated wireless credit card and check
authorization terminal using cellular communication technology. The POS-50(R) is
certified to operate on the major credit card transaction processing networks
and is presently being marketed in the U.S. by a variety of Independent Sales
Organizations ("ISOs"), cellular service providers, and directly by the Company.
The POS-50(R) allows a merchant to electronically capture a credit card, debit
card or check transaction at the point of sale virtually anywhere cellular voice
service exists and complete the authorization process in approximately 16-18
seconds. Because of its portable and wireless nature, the POS-50(R) is well
suited for the small to medium sized mobile retailer or service company.
Examples of current POS-50(R) customers include craft show vendors, sporting
event concessionaires, towing services, cart and kiosk vendors and essentially
any business on the go that wants to safely accept credit cards, debit cards or
checks for their products and services. With over 4,000 POS-50(R) terminals in
the marketplace, the Company is recognized as the leader in providing wireless
terminal transaction equipment for the mobile marketplace.
The POS-50(R) product accounted for most of the sales recorded in fiscal year
1997.
Over the past two and a half years, USWD has focused its product
development effort on incorporating Cellular Digital Packet Data (CDPD)
technology into its product line. CDPD is a high speed digital packet data,
internet protocol (IP) based technology that operates in parallel with current
cellular voice networks. It is designed for high speed encrypted data
transmission over the air-link and will not interfere with or degrade cellular
voice traffic. Because of the high speed nature of CDPD technology, and the
ability to bypass the public switched telephone network, the Company's new line
of CDPD-based terminals can have significant performance and communication cost
advantages when compared with the traditional dial-up terminals currently being
sold in the U.S. market today. The result is that the Company now offers two new
CDPD products (POS-500 & TRANZ Enabler) that reduce the current authorization
time from approximately 15 seconds to 3 to 5 seconds.
The most significant new USWD product is the TRANZ Enabler which allows
current Verifone TRANZ(R) 330 or TRANZ(R) 380 users to immediately convert their
terminals and printers from a land-line telephone dial-up mode to a high-speed
wireless mode of operation. By effecting this technological upgrade, the cost of
dedicated telephone lines is eliminated as are the delays created by busy
telephony networks during peak periods of authorization activity. Furthermore,
the efficiencies created by adopting the CDPD technology and USWD's alliance
with a major transaction processor enabled U.S. Wireless Data to develop a
pricing schedule which lowers transaction and/or discounts rates that most
retailers are currently paying to handle credit and debit card transactions. The
TRANZ Enabler was introduced in pilot mode in March of 1996 and is directed at
the existing U.S. installed base of more than 3.5 million TRANZ 330 and TRANZ
380 terminals.
The second CDPD product created by the Company is the POS-500, a
self-contained card terminal and printer that provides the same mobility
features of the POS-50(R) product and also incorporates the processing benefits
of the TRANZ Enabler. The unit is geared for the user who either does not have a
dial-up terminal/printer in place or requires the advantages of the CDPD
technology in a mobile application. This product was introduced in pilot mode in
January of 1996.
In mid fiscal year 1997, the Company made a fundamental decision to
change the manner in which it generates revenue. If successfully implemented,
this significant decision transforms the Company from being a "box maker" in
which it earned one time wholesale margins from the sale of its products to
earning recurring revenue by providing wireless credit card and debit card
processing services to retail merchants. In January, 1997 the Company executed a
Member Service Provider ("MSP") agreement with NOVA Information Systems
("NOVA"), the nations 7th largest credit card transaction processor. As a
registered MSP of NOVA, the Company can enroll merchants to process their credit
and debit card transactions with NOVA. This MSP agreement allows U.S. Wireless
Data to earn revenue on each card swipe and every dollar processed from
merchants enrolled by the Company.
*TRANZ is a registered trademark of Verifone, Inc.
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Another key component of the Company's strategy involves the entry of
service resale agreements with major CDPD service providers. To date, USWD has
signed agreements with GTE Mobile Communications Service Corporation (GTE), AT&T
Wireless Services and Bell Atlantic NYNEX Mobile. The net result of the NOVA MSP
agreement, the Company's new CDPD products, and becoming a national reseller of
CDPD service positions the Company to offer high performance transaction
processing services at very competitive discount rates. These relationships are
significant in USWD's strategy of providing high performance, low cost
transaction processing services to the merchant base.
A key element of USWD's strategic direction is the close alliance with
large communications carriers such as GTE Mobilnet. In addition to the CDPD
service agreement, the Company successfully negotiated and executed a joint
marketing and operating agreement with GTE to market the Company's TRANZ Enabler
and processing services through GTE's commercial and major account sales force
in all of its CDPD markets. Under the terms of the agreement, the Company and
GTE will act as each other's exclusive agents, within markets serviced by GTE,
and GTE will exclusively market USWD's TRANZ Enabler product as its CDPD product
offering in its Wireless Merchant Program. The joint marketing program will
focus on retail merchants who currently utilize a Verifone TRANZ 330 or 380
credit card authorization terminal. Presently there are over 3.5 million
Verifone TRANZ 330/380 terminals located in the US retail marketplace. The
product offering includes a TRANZ Enabler at no cost to the merchant, provided
that they meet established minimum transaction volumes, a very competitive
discount rate and authorization speeds of less than 5 seconds. The Company is
also required to build a sales and support organization to provide local support
for more than 450 GTE sales representatives. By leveraging the sales
organizations of the major CDPD providers, the Company has the potential to
reach a large number of merchants very quickly. The Company plans to execute
similar joint marketing agreements with the other CDPD service providers with
which it currently has cellular service resale agreements.
Direct Data Acquisition and Dissolution
During fiscal 1995, the Company acquired all of the outstanding shares
of Direct Data, a distributor of POS-related products. During fiscal year 1996,
the Direct Data assets were surrendered to Direct Data's secured creditor in
lieu of the creditor's foreclosure on a past due $1.3 million obligation. Direct
Data was left with no assets, ceased operations, and was dissolved on October
19, 1995. As a result of the surrender of Direct Data's assets in settlement of
the $1.3 million obligation and the dissolution of Direct Data in fiscal 1996,
the Company recognized a gain on restructuring of payables and debt of
$2,332,411.
(b) Business of Issuer.
Industry Overview
Credit Card and Debit Card Industry
Americans reached for their plastic credit and debit cards over 32
billion times to purchase over $800 billion in goods and services in 1995,
however, nearly 80% of all retail payments were non-electronic. Credit card and
debit card purchases are growing at a rate of 16% annually with volumes expected
to reach $1 Trillion in 1997. Recent studies have indicated that consumers spend
30% more per transaction when using credit cards than when using cash or checks.
The proliferation in the uses and types of credit, charge, stored-value and
debit cards, rapid technological advances in transaction processing and
financial incentives offered by credit card associations and issuers have
contributed greatly to wider merchant acceptance and increased consumer use of
transaction cards.
Unfortunately, fraud is also on the rise and as a result, merchant
acquirers, transaction processors and card issuers are trying to minimize their
losses by offering incentives and requiring merchants to utilize electronic
draft capture ("EDC") terminals to conduct on-line credit and debit card
transactions. An EDC terminal magnetically reads the encoded account information
from the magnetic strip on the back of a credit or debit card and sends it to a
transaction processor for electronic on-line authorization. The transaction
processor authorizes the card with the issuer, electronically captures the
transaction, generates an approval code and returns the data to the terminal,
which prints a customer receipt. Presently, the majority of EDC terminals
communicate with the transaction processor via a telephone or leased line. This
dial-up type transaction process takes approximately 10 - 30 seconds to
complete. At the end of the business day, the EDC terminal dials the transaction
processor to initiate the settlement, collection and electronic deposit of funds
to the merchant's local bank account. Losses from fraudulent cardholder use
where no authorization was obtained at the retail point of sale are
electronically "charged back" to the merchant.
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Payment acceptance guidelines have been introduced by Visa that require
a merchant to comply with specific procedures in order to receive the lowest
transaction processing fees or discount rates. These requirements include: (1)
the presence of the bank card at the point of sale, (2) transmission of all data
encoded on the card's magnetic strip, and (3) settlement within two days of the
authorization. If any one of these requirements is not met, the merchant is
penalized with a higher discount rate and a surcharge is applied to each
transaction not complying with the new requirements.
The Company manufactures a line of wireless EDC terminals and wireless
enabling products that allow a merchant to safely accept credit and debit cards
virtually anywhere cellular and/or CDPD service is available. The Company's
products comply with the recent payment acceptance guidelines and allow a
merchant to qualify for the lowest discount rates when processing credit and
debit card transactions.
Transaction Processing Industry
The transaction processing industry is characterized by a small number
of large transaction processors that primarily focus on servicing large
merchants and by many smaller transaction processors that provide a limited
range of services to small-to-medium sized merchants. Large merchants (i.e.
those with multiple locations and high volumes of card transactions) typically
demand and receive the full range of transaction processing services as well as
customized information services at low per-transaction costs. By contrast,
small-to-medium sized merchants historically have not been offered the same
level of services as large merchants and have incurred relatively higher
per-transaction costs. The growth in card transactions and the transition from
paper-based to electronic transaction processing have caused small-to-medium
sized merchants increasingly to demand sophisticated transaction processing and
services similar to those provided to large merchants.
Transaction processing services are marketed and sold to the
small-to-medium sized merchant market segment primarily by community and
regional banks and Independent Sales Organizations (ISOs) that outsource all or
a portion of the transaction processing services they offer. The costs to
convert from paper-based to electronic processing, merchant requirements for
improved customer service, and demands for additional customer applications have
made it difficult for community and regional banks and ISO's to remain
competitive. As a result, transaction processing continues to undergo rapid
consolidation in recent years. The industry remains fragmented with respect to
the number of entities providing merchant services and the economic factors are
expected to drive additional consolidation of transaction processors.
Check Payment Industry
Checks are still the American consumers second favorite way to pay for
purchases, behind cash. Americans wrote 60 billion checks last year. Of
approximately $3 trillion worth of retail purchases nationwide, almost $700
billion were paid by check, of which approximately $13 billion were returned
unpaid for insufficient funds or other reasons.
Nationwide, the number of bad checks is increasing. The cost of
insufficient funds checks often leads merchants either to refuse to accept
checks or to utilize check verification and guarantee services. Check
verification or guarantee services require the merchant to magnetically read the
MICR line of a check or hand key certain information into an EDC terminal which
communicates with a database maintained and operated by the verification
service. If the check is approved, an approval code is generated and sent back
to the terminal to complete the check verification or guarantee.
The Company's wireless terminal and enabling products expand check
verification services to mobile and fixed retail merchants where phone lines are
either not available or too slow and expensive, and the risks of accepting
checks are high.
The Company's Products
POS-50(R) - The Company's first product, known as the POS-50(R), is the
first fully-integrated, wireless portable credit/debit card authorization and
check verification terminal. It is packaged in a compact, lightweight design
which includes an ergonomic handle for maximum portability. The battery operated
POS-50(R) uses a proprietary printed circuit board module to integrate a 3-watt
cellular transceiver, credit card terminal, rechargeable battery and a printer.
The POS-50(R) has been in the U.S. market since January 1994, and addresses the
mobile retail sales and service marketplace. A merchant can utilize the
POS-50(R) to safely accept and process a credit or debit card transaction
anywhere cellular voice service is available. With the cellular handset, the
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terminal can also be used as a cellular telephone. The POS-50(R) may be operated
in a vehicle, at a weekend craft show or similar temporary locations, can be
carried from site-to-site or can be used at a fixed location. When a phone line
is available, intelligent circuitry recognizes the connection to a phone line
and automatically transmits data by telephone line without using the cellular
transceiver, thereby reducing cellular charges.
New Products
POS-500 - During the third fiscal quarter of 1996, the company
introduced two new products utilizing CDPD technology. The Company's first CDPD
product, known as the POS-500, is a fully integrated EDC terminal, receipt
printer and CDPD wireless modem that allows a merchant to complete a credit or
debit card transaction in less than 5 seconds. The POS-500 is designed to target
the traditional small-to-medium sized retailer. Because response times are 3-5
times faster than dial-up terminals, and per-transaction communication costs are
competitive with current dial-up costs, the POS-500 can compete favorably and
eventually replace dial-up credit card terminal technology in areas where CDPD
service is available. The POS-500 has been deployed with a number of small to
medium sized retailers as well as some high profile customers such as Villanova
University, The Houston Astrodome and some of the AT&T Wireless retail stores.
TRANZ Enabler - The TRANZ Enabler was also released in test mode during
the third fiscal quarter of 1996, and was designed to enable the existing
installed base of Verifone TRANZ 330 or 380 dial-up terminals to operate over
the CDPD network resulting in high speed, low cost transaction processing
solution for the retail marketplace. The TRANZ Enabler connects to the printer
port of the TRANZ 330 or 380 terminal and utilizes power from the credit card
terminal power supply. The TRANZ Enabler features a printer port for connection
to a receipt printer and can complete a credit or debit card transaction in less
than 5 seconds. In addition to credit and debit card transactions, the TRANZ
Enabler has recently been successfully tested in an Electronic Benefit Transfer
(EBT) application, a College student card application and a vending machine
application.
The Company's new CDPD products and transaction processing services
benefit merchants in the following ways:
Faster Transactions
A CDPD-enabled credit card authorization is 3 to 4 times faster that a
transaction completed via a telephone line. A CDPD-enabled credit card
transaction bypasses the local telephone and interexchange carrier networks
resulting in faster transactions and fewer delays due to busy telephony networks
and inefficiencies. The TRANZ Enabler and POS-500 can complete a credit card
transaction in less than 5 seconds. Faster transactions afford the merchant the
ability to process more business in a given period of time while improving
customer convenience and satisfaction.
Lower Transaction Fees.
Because of the ability to bypass the traditional telephony networks and
the costs associated with them, the Company can offer its customers lower
transaction fees and discount rates. Favorable buy rates under the NOVA MSP
agreement also contribute to the Company's ability to offer very competitive
rates. Lower transaction fees and discount rates are a key component in the
merchant's decision making process when evaluating a transaction processing
relationship that can have a significant effect on a merchant's bottom line.
Increases Sales
Consumers often make purchases when they have no cash on hand if the
merchant accepts credit cards or checks. Research indicates that when customers
have the option to use a credit card, they spend 30% more per transaction.
Merchants that accept alternative methods of payment such as credit/debit cards
or checks believe such alternative methods provide a competitive advantage over
merchants who do not.
Controls Bad Debt
All of the Company's products allow a merchant to obtain an on-line
authorization and electronically capture each credit card transaction. Once the
customer's credit card transaction has been electronically authorized, an
approval code is assigned and funds are electronically "captured" (i.e.,
reserved to pay for the authorized transaction). Since each transaction begins
by swiping the credit card through the terminal's magnetic card reader, there is
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a significant reduction in the risk of fraud loss due to lost, stolen,
overextended, or physically-altered credit cards. Debit or ATM transactions
require that the customer keys in a personal identification number ("PIN") to
complete a transaction. Debit or ATM transactions cannot be reversed or charged
back to a merchant thereby further reducing bad debt. Losses from insufficient
checks are collected or guaranteed by check service Company's under a separate
fee agreement with the merchant.
Improves Cash Flow
Once funds have been authorized and electronically captured and the
settlement procedure initiated, they are transferred electronically to the
merchant's local bank account. When compared to paper submission of credit card
transactions, the Company's products expedite the funding process by
electronically depositing the day's credit card transactions into the merchant's
local bank account usually within 24 to 48 hours.
Circuit Switched Cellular, CDPD, and EDC Terminal Technology
The Company's products integrate circuit-switched cellular, CDPD, and
credit card terminal technology to access credit card, debit card and check
verification services. The POS-50(R) terminal can be used anywhere advanced
mobile phone service (AMPS) cellular service is available. Upon card swipe, and
once the sales amount is entered via the terminal keypad, the cellular
transceiver acquires a cellular channel and transmits the data over the air
waves to a cell site, which is connected to a mobile telephone switching office
(MTSO) and then connected to the public switched telephone network (PSTN). The
call is then routed over one of several inter-exchange carriers (IEC's) to the
transaction processor. Once an authorization is obtained, a corresponding
approval code is returned to the terminal, which prints a duplicate customer
receipt and electronically captures the entire transaction data. A check
authorization utilizes essentially the same technology and communication path,
but authorizes the check data with a negative file maintained by a check
verification or guarantee company.
The CDPD products, including the TRANZ Enabler and POS-500, utilize
dedicated CDPD channels to transmit high speed, encrypted credit card
authorization from the merchant location to the nearest CDPD cell site which
routes the data to the local mobile data intermediate system (MDIS) which then
routes the transaction to NOVA via a leased line or frame relay connection. Once
the transaction is authorized, the response is returned to the terminal in less
than 300 milliseconds. The CDPD protocol is based on internet protocol (IP) and
each terminal and authorization host has its own unique IP address. The CDPD
infrastructure includes a network of routers that direct the data to the
appropriate IP addresses. A CDPD enabled terminal is essentially on-line with
the transaction processor whenever it is powered up.
The credit card application software within the Company's products is
unique to each transaction processor (FDC, NOVA, CES, First USA Paymentech, GPS
etc.) with which it communicates. In addition to proprietary software, each
terminal has a unique merchant identification number embedded in the software to
accurately identify the merchant and bank account information for settlement
purposes. The application software can be updated or remotely downloaded by a
unique procedure of keystrokes by the merchant or by the terminal supplier.
Electronic passwords prevent unauthorized changes in either the terminal
application software or in the identification numbers.
Cellular Communication Networks
Presently there are cellular communication networks providing coverage
in over 700 metropolitan statistical area ("MSA") and rural service area ("RSA")
markets in the U.S. It is estimated that the present cellular service footprint
covers 95% of the U.S. population. The POS-50(R) can be used in any area where
cellular voice-grade coverage is present.
With approximately 20,000 cellular phones being sold each day, cellular
voice technology is rapidly becoming a commodity service. To support this type
of explosive growth, the cellular carriers are spending a substantial part of
their revenues to expand capacity by upgrading their infrastructure with new
digital technology. The Company believes the cellular carriers are now focusing
on incremental revenue streams, including wireless data transmission. Wireless
data can be transmitted over the same cellular infrastructure as voice. It has
been estimated that, by the year 2000, as much as 30% of cellular revenues will
be derived from data transmission.
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Wireless Data Networks
There are several terrestrial-based wireless data networks currently
providing regional and national data services in the U.S. market. Listed below
are several networks the Company perceives as current and potential future
carriers of POS data traffic. USWD continuously monitors and evaluates this
technology to determine feasibility, and applicability for POS data
transmission.
Cellular Digital Packet Data (CDPD)
The Company believes that CDPD is the superior wireless data technology
for transaction processing. Presently over 260 metropolitan statistical areas
have CDPD service provided by AT&T Wireless Services, Bell Atlantic Mobile, GTE
Wireless, Ameritech Cellular and 360 Communications, and an aggressive
deployment schedule is expected to continue throughout the U.S., Canada and
Latin America. CDPD appears to be the standard protocol for transmitting data
over a cellular network and presently covers approximately 70% of the retail
marketplace.
Because of the encrypted packet data and IP (internet protocol) nature
of CDPD technology, CDPD-enabled POS terminals can out-perform traditional
dial-up terminal technology operating over public switched telephone networks. A
CDPD network provides high speed (19.2 bps) wireless access between a
CDPD-enabled POS terminal and a transaction processor, effectively bypassing
local phone line service and the monthly costs associated with it. The result of
utilizing CDPD technology is sub-5 second authorization response times at lower
than dial-up rates. In addition to fast, secure and low transaction costs, the
merchant can also eliminate the monthly recurring cost of a dedicated phone
line, which averages between $30-40 per month. However, the Company recommends
that at least one dial-up line be maintained as a back up in the event that a
CDPD network interruption occurs.
Digital Cellular
Present cellular networks consist of digital and analog technology.
There are two digital voice technologies competing for market acceptance and
dominance: Code Division Multiplexing Access (CDMA) and Time Division
Multiplexing Access (TDMA). Both digital voice technologies have the ability to
transmit data over their respective networks, but a data standard is presently
not established. The Company perceives these networks as suitable for nationwide
POS applications if the pricing structure is competitive with other packet data
networks.
Personal Communication Services (PCS)
With the allocation of additional RF spectrum and the FCC's successful
auctioning of these air wave licenses, a variety of competing Personal
Communication Services ("PCS") networks are beginning to offer local and
regional wireless voice and data services. As these networks are developed and
deployed, PCS could become a viable POS wireless access technology. The future
viability of PCS as a wireless POS access technology will be contingent on a
"standardized" protocol and a competitive data pricing structure. Presently, the
major PCS service providers are deploying GSM, CDMA and TDMA infrastructure and
products. The Company will continue to evaluate the benefits and customer
opportunities regarding PCS based products and services.
RAM Mobile Data
RAM Mobile Data is a wireless packet data network currently available
in over 7,500 U.S. cities and towns, covering 90% of the urban business
population. The network is very similar to, but separate from the cellular voice
network. RAM is designed as a data-only infrastructure. RAM is also connected to
a limited number of transaction processors and currently has credit card data
transversing its network. The Company believes, however, that RAM Mobile Data is
not the most effective technology for wide spread deployment due to its data
pricing structure, building penetration inefficiencies and other factors.
Nextel
Nextel currently has a digital Specialized Mobile Radio (SMR) network,
based on TDMA technology, providing voice and messaging services in the top 50
major metropolitan service areas, covering approximately 65% of the U.S.
population. Presently, Nextel's network is not suitable for POS data traffic,
but it is anticipated that over the next two years it will be upgraded to a
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packet-based data-ready network. When the network is upgraded to packet-based
status, it could become a viable POS data network if the pricing structure is
competitive. The Company will continue to evaluate Nextel as a potential data
highway for its wireless products and services.
Metrocom
Metrocom is currently operating a packet-based data network in major
cities including San Francisco, Seattle, and Washington D.C. Metrocom's Ricochet
network is a low power packet data network designed for wireless mobile
computing applications including E-mail and internet access. The Company
perceives the Ricochet network as a potentially viable POS data network when the
coverage area expands to a nationwide footprint.
Markets
Current market research indicates that there are over 4 million
stand-alone credit card terminals installed in the U.S. market. In 1996,
1,088,000 POS terminals were shipped in the U.S. market, a 36% increase over
1995. One contributing factor to this healthy increase is the growth of debit
card processing and larger memory requirements due to the amount of data a
credit card terminal must capture on each transaction. A debit card transaction
requires a personal identification number (PIN) to be entered into the POS
terminal, and a large percentage of the existing terminal base is not debit
ready. In addition to the increased demand for debit-ready terminals, other
market segments are emerging for POS terminal devices including Electronic
Benefit Transfer (EBT) transactions.
In the U.S., mobile service and retail sales companies have experienced
large growth as Americans have developed a demand for convenience and a need to
save time. To a larger extent than in past years, the retail point of sale is
often wherever the customer is located, and the merchant must be prepared to
complete the sale at that location. Thus, a wide range of business services such
as towing services, locksmiths, concessionaires, special event vendors, in-home
appliance repair services, mobile auto repair, delivery, and similar businesses
depend almost exclusively on completing the sales transactions at the customer's
location. A recent research report estimates that the total North American
wireless POS market size is in excess of 4 million units and will increase over
5% annually.
International Applications
The same research report referenced above estimates that the total
international wireless POS market size is in excess of 4 million units and will
increase over 5% annually. The Company believes that international markets,
particularly Latin America, where land-based telephone lines are not in place or
are unreliable, represent realistic market potential for the Company's POS-500
and TRANZ Enabler products. The Company is presently evaluating its
international strategy and will enter these markets if it can establish a
recurring revenue model that is consistent with its business plan.
Several Latin American countries have operational CDPD networks and POS
transaction processing is being viewed as one of the initial and most immediate
applications to be pursued. The Company expects that it may be able to leverage
its current cellular alliances to assist it in entering international markets.
Product Distribution
POS-50(R) Distribution
The POS-50(R) can be purchased or leased through a variety of ISO's,
cellular companies or the Company directly. The Company has no agreements in
which the reseller or distributor is obligated to purchase product from the
Company.
The Company's most successful distributor is Cardservice International
("CSI") of Agoura Hills, California. CSI currently processes in excess of $4
billion in credit and debit card transactions for approximately 90,000
merchants.
POS-50(R) sales to CSI accounts for approximately 53% of the Company's total
revenues.
In addition to CSI, the Company has entered into distribution
agreements with several other ISO's to sell and provide help desk services for
their POS-50(R) customers. ISO's usually use a commission-only sales force to
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call on merchants to offer their credit card processing services and terminal
equipment. Presently, ISO's sell or lease nearly 80% of all stand-alone credit
card terminals used in the marketplace.
The Company has agreements with two master distributors that supply
other ISO's, small banks and other resellers. The Company also sells directly to
merchants that currently have a bankcard relationship and are looking for
hardware only. Due to the lack of an advertising budget or a public relations
campaign, sales volumes have remained fairly flat, with no new distribution
channels or internal sales people added during the past fiscal year.
TRANZ Enabler and POS-500 Sales and Marketing Plan
As the Company enters fiscal year '98, it is in the process of
implementing a new sales and marketing strategy for its CDPD- based products and
bankcard processing services. The Company will only sell or provide its products
to merchants that sign up for bankcard processing services with the Company.
This approach is the fundamental basis of the Company's sales and marking
strategy. The Company will no longer just sell a "box" without the ability to
earn recurring revenue from each transaction originated by its customers. The
Company will market its products and bankcard processing services through joint
marketing and operating agreements with its cellular alliances and its own
direct sales organization. Presently, the Company is focused on launching the
TRANZ Enabler and its bankcard processing program though a joint marketing
effort with GTE's commercial account and major account sales representatives.
The Company will concentrate on developing distribution of its products with
associated processing services in conjunction with CDPD carrier partners, and
through its own direct sales force to major accounts. The CDPD carrier partners
provide an opportunity to leverage large sales organizations in the distribution
of the Company's products and services to the merchant.
Competition
Currently, the Company believes it has no direct POS-50(R) competitor
that is manufacturing an integrated, battery powered, circuit-switched
cellular-based terminal and printer product. However, the company has identified
several non-integrated cellular based solutions that compete with the POS-50(R),
but are not as elegant or functional. These non-integrated solutions range from
a few hundred dollars to a few thousand dollars depending upon the distribution
channels and the type and number of components.
The Company has identified several potential competitors attempting to
develop CDPD-based terminals and solutions. Hypercom, a Phoenix-based terminal
manufacturer, has publicly announced their CDPD-based terminal product. The
Company perceives this product as direct hardware competition to the POS-500.
With the fundamental decision to enter the recurring revenue business, the
Company believes that it may be able to develop supplier relationships with its
perceived competitors which will essentially minimize potential direct
competition.
Manufacturing
The Company utilizes high quality, third party manufacturers to build
its products. Uniform Industrial Corporation manufactures the Company's POS-50.
Wellex Corporation, a Freemont California based manufacturer, builds the TRANZ
Enabler product line, and Finite Technologies, of Pueblo, Colorado manufacturers
the POS-500 CDPD-based terminal line.
The Company recently entered an agreement with Wellex Corporation which
includes specific build schedules and operating terms for the manufacture of the
TRANZ Enabler. The Company's engineering team develops a detailed manufacturing
manual for each of its product lines and manages the manufacturing process with
each respective manufacturer.
-9-
<PAGE>
Customers
CSI has been the Company's single largest customer, with sales to CSI
representing approximately 25% and 53% of the Company's POS-50(R) revenues for
the twelve months ended June 30, 1996, and June 30, 1997 respectively. CSI is
one of the fastest growing credit card processing companies in the U.S. with
1,800 agents and a customer base of over 90,000 merchants processing an annual
bank card volume in excess of $3 billion. The Company's remaining revenue is
comprised of sales to a variety of ISO's and direct sales. To date, the Company
has shipped approximately 4200 POS-50(R) terminals and is currently shipping
approximately 50 terminals per month. The Company currently relies on CSI for
approximately half of its POS-50 business. The Company has developed a new sales
and marketing plan for the CDPD based products. If successfully implemented, the
joint marketing and distribution agreements with major cellular carriers will
provide USWD with a much broader reach to the merchant end-user. See
"Description of Business - Business Development".
Patents, Trademarks and Licenses
The Company was granted a design patent on certain aspects of the
POS-50(R) product in June, 1994. The Company expects to file additional patents
as it determines appropriate.
POS-50(R), is a registered trademark of the Company. The Company
identifies its mark in all its marketing material and advertising campaigns. The
Company may register future product related trademarks if appropriate.
Proprietary technology involved in the primary components of the
Company's products, including the cellular and CDPD transceiver and printer, is
owned by the respective component supplier. The Company does claim proprietary
rights with respect to the integration and use in the Company's products. The
Company also claims proprietary rights on certain aspects of its application
software as it relates to CDPD point-of-sale functionality and diagnostic
features. The Company is also pursuing potential intellectual property
protection on its hardware and software products.
Government Regulation
The POS-50(R), POS-500 and TRANZ Enabler use cellular RF channels in
the 800-900 megahertz bandwidth and are subject to regulation by the FCC for
both cellular transmission and unintentional interference radiation. The
products incorporate either a circuit-switched cellular or CDPD transceiver
manufactured by suppliers that comply with the appropriate FCC requirements and
have been issued an FCC identification number.
The Company has received confirmation from the FCC that the POS-50(R)
terminal product does not require FCC approval to sell the terminal in the U.S.
marketplace.
The POS-50(R), POS-500 and TRANZ Enabler have passed all known UL and
CSA requirements in testing conducted at an independent certified test site.
Most foreign countries accept United States federal regulatory approval
for purposes of permitting commercial sales of electronic products; however,
specific regulatory approval of the product may be required in some countries
and could become an obstacle to sales of the product in such areas.
Research and Development
A substantial portion of the Company's early activities were involved
in the engineering and development of the initial POS-50(R) terminal product.
The Company completed development in early 1993. During the last two fiscal
years, ending June 30, 1996 and 1997, the Company expended $458,407 and $406,522
respectively, in research and product development activities.
-10-
<PAGE>
The Company employs four people who are engaged in research and
development. Current efforts are focused on CDPD-based products and on POS-50(R)
enhancement, including bringing a new manufacturer on line, cost reduction,
product efficiency and reliability, customization and software development. The
Company expects to add personnel to its R&D staff as the financial condition of
the Company improves and/or additional development contracts are obtained.
Employees
As of August 31, 1996, the Company had reduced its staff to 11
full-time employees including its officers; sales and marketing staff; product
research and development team; technical and customer support staff and
administrative staff. Due to continuing financial pressure, headcount has
remained at approximately this level and was at 8 full-time employees at June
30, 1997 and 11 employees on August 31, 1997. During the first quarter of fiscal
1998, the company added several key management positions and is aggressively
building a national sales and marketing organization. See "Management Discussion
and Analysis: Results of Operations and Subsequent Events".
Documents Filed as Exhibits
References made in this report to material contracts, agreements or
other documents are summaries only and are qualified in their entirety by
reference to the complete copy of the document which is filed as an Exhibit to
this Report. Copies of such documents can be obtained from the United States
Securities and Exchange Commission or from the Company by a written request
addressed to the attention of the Corporate Secretary.
ITEM 2. DESCRIPTION OF PROPERTY
On October 23, 1996, the Company closed its Boulder office and
consolidated operations in Colorado Springs, Colorado, where it leases
approximately 1,200 square feet of office and laboratory space pursuant to a
lease which extends through July of 1998. A small customer service and POS-50
deployment office was opened in Wheat Ridge, Colorado and is leased through
November of 1997. The combined monthly rent is approximately $2,100. With the
creation of a new management team in the first quarter of fiscal 1998 and the
need to establish the required infrastructure to support the marketing and sales
initiatives, the Company will establish its headquarters operations in
Emeryville, California. See "Management Discussion and Analysis: Subsequent
Events".
ITEM 3. LEGAL PROCEEDINGS
In September of 1996, the Company agreed to terms to settle securities
fraud litigation, pending since 1994, which was brought in relation to the
Company's initial public offering of December 1993. The parties' agreement (the
"Settlement Agreement") was filed in the United States District Court for the
District of Colorado on January 15, 1997 in consolidated Case N0. 94-Z-2258,
Appel, et al. v. Caldwell, et al. By its order approving the settlement, the
court certified a plaintiffs' settlement class and provided the mechanism for
payment of claims. The Company contributed $10,000 to the total settlement fund
of $2,150,000. The remaining portion of the settlement was contributed by
certain underwriters of the Company's initial public offering and securities
counsel. No objections to the Settlement Agreement were made. No potential class
member opted-out of the settlement and all are bound by the release granted the
Company. All claims against the Company in those consolidated cases were
dismissed by final federal court order on September 4, 1997. No appeal was
filed. Similar state court claims were dismissed by Colorado district court
order dated October 9, 1997.
To resolve cross-claims asserted by underwriters in the litigation, U.S.
Wireless Data, Inc. agreed to transfer to RAS Securities Corporation, H.J.
Meyers & Co, Inc., Sands & Co. Ltd. and R.J. Steichen & Co. a total of 600,000
U.S. Wireless Data, Inc. common shares upon the effective date of the Settlement
Agreement. The Company has agreed to register such shares upon demand not sooner
than April 26, 1998. Further, on September 17, 1997 the Company agreed to entry
of a consent judgment against it and in favor of Don Walford, the sole
shareholder of underwriter Walford Securities, Inc., in the amount of $60,000,
payable over a three year period.
-11-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's shareholders during
the fourth quarter of the Company's fiscal year ended June 30, 1997.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
The Company's Common Stock was traded on and quoted in the National
Market System of the National Association of Securities Dealers Automated
Quotation System (NASDAQ) under the symbol USWDA since the Company's initial
public offering on December 3, 1993 until July 6, 1995, when the Company's stock
was de-listed from NASDAQ for failure to meet the minimum bid price or the
market value of public float requirements. As a result, the Company's stock is
currently trading on the OTC Bulletin Board under the symbol USWDA. For the
fiscal quarter indicated, the following table shows the high and low reported
closing prices of the Company's Common Stock as reported on the OTC Bulletin
Board.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
First Quarter `96 .469 .125
Second Quarter `96 .469 .094
Third Quarter `96 1.063 .109
Fourth Quarter `96 .844 .281
First Quarter `97 .406 .125
Second Quarter `97 .375 .156
Third Quarter `97 .281 .125
Fourth Quarter `97 .625 .218
</TABLE>
The above quotations were furnished by the OTC Bulletin Board. Such quotations
represent prices between dealers and do not include retail mark-ups, mark-downs
or commissions and may not represent actual transactions.
(b) Holders.
As of June 30, 1997, the Company had approximately 233 shareholders of
record of its Common Stock. This number does not include an undetermined number
of holders who retain their shares in "street name".
(c) Dividends.
The Company has not declared cash dividends on its Class A Common Stock
since its inception and the Company does not anticipate paying any cash
dividends in the foreseeable future.
(d) Recent Sales of Unregistered Securities
Unregistered Common Shares were sold or issued as follows:
o November 15, 1996Arthur Bosworth 102,975 shares Issued in
settlement of Company payables of $15,446 at $.15 per share.
o May 16, 1997 RAS Securities 384,000 shares
H. J. Meyers 138,000
Sands Brothers 54,000
R. J. Steichen 24,000
Issued 600,000 shares in settlement of class action law suit
per Board of Directors resolution dated October 9, 1996.
o June 3, 1997 entrenet Group LLC. $150,000 Convertible Debenture
The Company agreed to issue a convertible debenture in
exchange for consulting services to be rendered during the
balance of fiscal 1997 and 1998. The debenture is
convertible into common stock at a stated price of $.50 per
share. If not converted, the debenture is due and payable
June 3, 1998.
-13-
<PAGE>
o Fourth Quarter FY 1997 Private Investors $185,000
Convertible Demand Notes The Company executed and delivered
demand notes to certain private investors. The Notes bear
interest at 10% annually and are convertible at a price of
$.35 per share ($75,000 of Notes) and $.50 per share
($100,000 of notes) for any and all outstanding principal
and interest. If not converted, the notes are due during the
fourth quarter of fiscal 1998.
o July 1, 1996 Cardservice International 142,544 Shares
Common Stock Cardservice International exercised warrants
and stock issued relating to Solectron inventory
procurement.
The Company relied upon the registration exemption contained
in Section 4(2) of the Securities Act of 1933 for all above-described
transactions. None of the transactions involved a public offering.
Representations were received from the purchasers of the securities to the
effect that the purchasers were taking for investment purposes only and not with
a view to distribution; "restricted securities" legends were imprinted on all
stock certificates; and stop-transfer instructions were lodged with the
Company's transfer agent as to all shares of common stock issued in the
transactions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
U.S. Wireless Data, Inc. was incorporated on July 30, 1991, and is in
the business of designing, manufacturing and marketing a line of wireless and
portable credit card and check authorization terminals. The Company completed an
initial public offering in December of 1993, and in 1994, completed development
of its initial product, negotiated agreements with suppliers of components,
developed a marketing strategy, and initiated sales of the POS-50(R) portable
credit card and check verification terminal. During fiscal 1996, the Company
continued to promote its product through Independent Sales Organization (ISO)
channels and began development on its new CDPD product line. The Company
continued its efforts on the POS-50(R) and in the second half of the year,
introduced two new CDPD-based products. Substantially all the revenue of the
Company for fiscal year 1996 was derived from the sale of inventories for which
the Company had previously paid.
As the Company entered fiscal year 1997, it continued to struggle with
profitability and liquidity. In October 1996, the Company closed its Boulder
office and consolidated operations in Colorado Springs, Colorado. A small
customer service and POS-50 deployment office was opened in Wheat Ridge,
Colorado. As part of the restructuring plan, Michael J. Brisnehan, its
president, principal executive officer and chief financial officer resigned. Rod
L. Stambaugh, chairman and former vice president of marketing and business
development was appointed president and chief executive officer. During fiscal
year 1997, headcount was maintained at approximately 10 employees and ended
June, 1997 at eight.
A strategic decision was made to transition the Company from a "box
maker" to providing a credit/debit card processing solution to the marketplace.
In January, 1997 the Company executed a Member Service Provider agreement with
NOVA Information Systems that establishes U.S. Wireless Data as a transaction
processing service provider to retail merchants. The NOVA arrangement also
allows the Company to generate a recurring revenue stream from each installation
instead of the previous per unit sales approach. Another key piece of the
strategic direction was to significantly broaden distribution of the TRANZ
Enabler CDPD based product by developing distribution agreements with large
communications carriers for direct distribution of products and services to the
merchant. In preparation for this effort, the company signed CDPD air time
agreements with AT&T Wireless Services, Bell Atlantic NYNEX Mobile and initiated
discussions with GTE regarding a joint marketing and operating agreement. USWD
has specific commitments under these agreements including minimum purchase
obligations and staffing requirements.
In the fourth quarter of fiscal 1997, it was clear that the Company had
a very significant market opportunity but had extremely limited financial and
human resources to apply to an aggressive CDPD product roll-out. In June 1997,
the Company engaged entrenet Group, LLC., (entrenet), a management consulting
group, to assist with the development of a detailed marketing and business plan
and introduction of financing sources. The Agreement has a term of one year and
USWD agreed to pay entrenet $150,000 in the form of a convertible debenture,
-14
<PAGE>
bearing interest at 10% per annum. Entrenet is entitled to a finder's fee for
locating direct financing sources for the Company. USWD and entrenet are
discussing certain modifications to the compensation terms of the agreement and
USWD expects to issue the debenture to entrenet in the immediate future. In
August 1997, through an introduction by entrenet, the Company retained Liviakis
Financial Communications Inc. (Liviakis) to advise and assist the company in
matters concerning investor relations, corporate finance and strategic
management planning. Through Liviakis, the Company completed a private placement
of restricted securities. Through this financing, the Company raised $500,000 in
cash for common stock and warrants which, if all warrants were exercised, would
total 5.1 million shares of common stock. See "Subsequent Events", below.
The Company undertook a focused effort to strengthen and broaden its
management team. In early August 1997, the Company retained Evon Kelly as its
chief executive officer. Also in August, the Company hired a vice president of
sales, vice president of major accounts, and in September added a chief
financial officer. The company is actively recruiting and hiring marketing and
sales personnel for deployment on a nationwide basis as joint marketing programs
with the major wireless carriers are implemented. The retention of these people
is expected to bring the necessary expertise to implement the Company's business
plan.
In August 1997, GTE and USWD announced a joint marketing and operating
agreement to distribute the Company's TRANZ Enabler credit card processing
system through GTE's CDPD sales network to merchants . Both companies are
engaged in a nation wide deployment which will extend TRANZ Enabler sales
through over 400 GTE sales representatives. The Company has also executed a
purchase agreement with Wellex Corporation for the manufacture of the TRANZ
Enabler units and is negotiating an agreement with GTE Leasing for the financing
of the inventory procurement.
The development of the Company's infrastructure and expansion of the
sales and marketing organization requires additional financing resources. U.S.
Wireless is working both directly and through its consultants to secure a
capital infusion which will finance the Company's growth. See "Financial
Condition, Capital Resources and Liquidity", below.
Fiscal 1997 Compared to Fiscal 1996
Net sales of $1,315,542 for fiscal 1997 decreased from net sales of
$1,582,553 generated during fiscal 1996. Unit sales during both years were
approximately the same. The decrease in sales dollars is attributable to: a)
reductions in retail prices from one year to the next, and b) slower than
anticipated sales of the CDPD-based POS-500(R) unit.
Gross margins increased from a negative $1,303,879 in fiscal 1996 to a
positive $506,095 for fiscal 1997. This increase is attributable to a $1,525,000
write-down of inventories during fiscal 1996, resulting from declines in market
value of such inventories relative to cost, compared to the 1997 gross margin
which shows a significant increase due mainly to lower costs for the POS-50(R)
from a major supplier.
Selling, general and administrative expenses decreased from $1,365,235
in fiscal 1996 to $976,287 in fiscal 1996. This decrease was due primarily to:
a) headcount reductions in sales, marketing and administration over 1996
staffing levels reduced salary expense by approximately $182,000; b) legal
expense reductions in 1997 from the approximately $226,000 incurred in fiscal
1996 (related to class action lawsuits filed against the Company due to the
Direct Data failure); and c) significant reductions in bad debt expense,
depreciation, royalty expense, relocation expense, and rent expense.
Inventory write-offs decreased from $1,525,000 in fiscal 1996 (due to
declines in the market value of inventories relative to cost) to $15,400 in
fiscal 1997.
Financial Condition, Capital Resources and Liquidity
The Company continues to have significant concerns regarding its
financial condition and liquidity. While the Company is optimistic with its
medium and long term opportunities, it is constrained by its immediate financial
condition and requirement for increased liquidity. The Company has accumulated a
deficit of approximately $17.0 million since inception and currently has a
negative working capital position. The Company's CDPD based products, the GTE
joint marketing and distribution agreement, pending distribution agreements and
transition to a recurring revenue focus present an opportunity for significant
revenue growth, an eventual return to profitability, and the generation of a
positive cash flow from operations. At present, the development of the Company's
infrastructure and expansion of the sales and marketing organization requires
additional financing. Implementation of the Company's business plan is dependent
-15-
<PAGE>
on the infusion of new debt or equity financing. As of the date of this report,
the Company is seeking to raise between $2 to $4 million. The Company is working
both directly and through its consultants to secure additional debt or equity
financing which is expected to fund the Company's growth. While management is
confident it can accomplish this objective, there is no guarantee that this
additional funding will occur in the required time frame.
Forward-Looking Statements
The Company may, in discussions of its future plans, objectives and
expected performance in periodic reports filed by the Company with the
Securities and Exchange Commission (or documents incorporated by reference
therein) and in written and oral presentations made by the Company, include
projections or other forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 or Section 12E of the Securities Act of 1934,
as amended. Such projections and forward-looking statements are based on
assumptions which the Company believes are reasonable, but are by their nature
inherently uncertain. In all cases results could differ materially from those
projected. Some of the important factors that could cause actual results to
differ from any such projections or other forward-looking statements follow.
History of Losses and Potential Fluctuations in Operating Results.
Through the end of the fiscal year ending June 30, 1997, the Company had
experienced significant operating losses. In addition, because the Company
generally ships its products on the basis of purchase orders, operating results
in any quarter are highly dependent on orders shipped in that quarter and,
accordingly, may fluctuate materially from quarter to quarter. The Company's
operating expense levels are based on the Company's internal forecasts for
future demand and not on firm customer orders. Failure by the Company to achieve
these internal forecasts could result in expense levels which are inconsistent
with actual revenues. The Company's results may also be affected by fluctuating
demand for the Company's products and by increases in the costs of components
acquired from the Company's vendors.
Distribution Program. In the past fiscal year CSI accounted for
over 50% of the Company's revenue. The roll-out of the GTE distribution program
is expected to have a material impact on the Company's future revenue stream.
While the Company anticipates it will execute distribution agreements with other
significant partners, the loss of, or substantial diminution of purchases from
the Company through any of these distributors could have a material effect on
the Company.
The Company's dependence on a Single Type of Product. and
Technological Change. All of the Company's revenues are derived from sales of
its credit card transaction or CDPD enabling products. Demand for these products
could be affected by numerous factors outside the Company's control, including,
among others, market acceptance by prospective customers, or the introduction of
new or superior competing technologies. The Company's success will depend in
part on its ability to respond quickly to technological changes through the
development and improvement of its products.
Competition by Existing Competitors and Potential New Entrants Into
the Market.. The Company has identified several potential competitors attempting
to develop CDPD based terminals and solutions. In addition, companies with
substantially greater financial, technical, marketing, manufacturing and human
resources, as well as name recognition, than the Company may also enter the
market.
Requirement for Additional Capital. Implementation of the Company's
business plan is dependent on the infusion of new debt or equity financing. As
of the date of filing this report, the Company is seeking to raise between $2 to
$4 million through such financing. While management is confident it can
accomplish this objective, there is no guarantee that this additional funding
will occur in the required time frame.
Untimely Filing of 1996 Proxy Statement. The Company apparently
inadvertently failed to file its 1996 Proxy Statement with the Securities and
Exchange Commission within 120 days of the end of fiscal year 1996. Copies of
the Proxy Statement were distributed to all shareholders of the Company in
conjunction with the Company's 1996 Annual Shareholder Meeting, which involved
only the election of directors and the retention of accountants. The Company has
since filed the 1996 Proxy Statement with the Commission. It is not certain what
liability, if any, the Company might have as a result of its untimely filing.
-16-
<PAGE>
Subsequent Events
Subsequent to June 30, 1997, the Company has continued to experience
inadequate sales volume on its products through its traditional sales channels.
As a result, the Company is implementing a strategic decision to shift from only
a "box maker" to also a reseller of credit card processing products and services
which generate recurring revenue. The Company is focused on strengthening the
management team, building a sales and support organization, implementing the GTE
distribution roll-out, starting the transition to a recurring revenue
orientation and acquiring additional funding. Key subsequent events are outlined
as follows:
o In August 1997, the Company retained Liviakis Financial
Communications Inc. to advise and assist the Company in matters concerning
investor relations, corporate finance and strategic management planning.
Remuneration for the consulting agreement which has a term of one year includes
$10,000 in cash over a one year period and 300,000 shares of unregistered stock
with 150,000 shares of the stock payable over a 10-month period. The Company
completed a private placement of restricted securities pursuant to Regulation D
of the Securities Act of 1933 with two officers of Liviakis. The Company raised
$500,000 in cash for 3.5 million shares of common stock and 1.6 million warrants
to purchase common stock for $.01 per share, exercisable from January 15, 1998
through August 4, 2002. The securities carry future registration rights,
including a one-time demand registration, with fees to be paid by the Company.
o In early August 1997, the Company announced the appointment of Evon
Kelly to the position of Chief Executive Officer. At this same time, Rod
Stambaugh assumed the position of President. Also in August, the Company hired
Clyde Casciato, Vice President Sales; Tom Cote, Vice President Major Accounts;
and in September hired Robert Robichaud, Chief Financial Officer.
o In August 1997, GTE Wireless and U.S. Wireless Data, Inc. announced a
joint marketing and operating agreement to distribute USWD's proprietary TRANZ
Enabler credit card processing system using GTE's CDPD network. Both companies
are engaged in a nation wide deployment which will extend TRANZ Enabler sales to
merchants through over 400 GTE sales representatives. The agreement contains
certain operational and financial performance criteria, directly related to the
joint marketing program, which must be met by the Company.
o In September 1997, the Company executed a lease for office space in
Emeryville, California. The lease provides for approximately 4,000 square feet
at an initial rate of $9,942 per month commencing October, 1997 and containing
an initial term of 5 years. The monthly rent will progress to a rate of $11,640
in year five.
o In September 1997, the Company signed an agreement with Unicard
Systems Inc. to develop terminal application software that will perform both the
Unicard enrollment process as well as deliver wireless credit card transaction
processing. Unicard Systems will become a registered agent of U.S. Wireless Data
and has placed an initial order for 400 TRANZ Enabler units. Unicard Systems is
a Dallas based service provider to over 500 restaurants and nightclubs in Texas.
o In October 1997, The Company signed an exclusive agreement with
GoldCan Recycling, Inc. for wireless monitoring of its state of the art
automated aluminum redemption centers. This is the first application of USWD's
TRANZ Enabler technology outside the credit card/point-of-sale industry. USWD
will receive a monthly equipment and wireless service fee on every TRANZ Enabler
placed by GoldCan. GoldCan anticipates placing in excess of 3,000 units over the
next three years.
-17-
<PAGE>
ITEM 7: FINANCIAL STATEMENTS
Page
Report of Independent Accountants.............................................18
Balance Sheet - as of June 30, 1997...........................................19
Statement of Operations - for the fiscal years ended
June 30, 1997 and June 30, 1996......................................20
Statement of Cash Flows - for the fiscal years ended
June 30, 1997 and June 30, 1996......................................21
Statement of Changes in Stockholders' Equity (Deficit) -
for the period from July 1, 1995 through June 30, 1997..............22
Notes to Financial Statements..............................................23-32
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(Not Applicable)
-18-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of U.S. Wireless Data, Inc.
In our opinion, the accompanying balance sheet and the related
statement of operations, of changes in stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
U.S. Wireless Data, Inc. (the "Company") at June 30, 1997, and the results of
its operations and its cash flows for each of the two years in the period ended
June 30, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered significant recurring losses from
operations and has an accumulated deficit of $16,960,853 that raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to this matter are described in Note 1. Additionally, due to
matters concerning the Company's ability to continue as a going concern, there
is also significant uncertainty surrounding the net realizable value of the
Company's inventory balances at June 30, 1997 (see Note 2). The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
PRICE WATERHOUSE LLP
Boulder, Colorado
October 13, 1997
<PAGE>
U.S. WIRELESS DATA, INC.
<TABLE>
<CAPTION>
BALANCE SHEET
As of June 30, 1997
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents ....................................................... $ 6,083
Accounts receivable, net of allowance
for doubtful accounts of $15,903
120,531
Inventory, net
208,867
Other current assets
113,859
Total current assets
449,340
Property and equipment, net
40,445
Other assets
11,495
Total assets ....................................................................... $ 501,280
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ................................................................ $ 354,213
Accrued liabilities ............................................................. 125,587
Notes payable ................................................................... 737,866
------------
Total current liabilities .................................................. 1,217,666
Long Term Debt
45,000
Total liabilities .................................................................. 1,262,666
Commitments and contingencies (Notes 9 and 11)
Stockholders' equity (deficit):
Common stock, no par value,
12,000,000 shares authorized,
5,613,952 shares issued and outstanding, stated value $1.00 .................. 5,613,952
Common stock subscribed
0
Additional paid-in capital ...................................................... 10,613,465
Accumulated deficit ............................................................. (16,960,853)
Notes Receivable from Shareholder
(27,950)
Total stockholders' equity (deficit)
(761,386)
Total liabilities and stockholders' equity (deficit) ............................... $ 501,280
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
U.S. WIRELESS DATA, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Year Ended
June 30, June 30,
1997 1996
---- ----
<S> <C> <C>
Revenue ................................................. $ 1,315,542 $ 1,582,553
Cost of goods sold ...................................... 809,447 2,886,432
----------- -----------
Gross margin (deficit) .................................. 506,095 (1,303,879)
----------- -----------
Operating Expenses:
Selling, general and administrative ................. 812,687 1,365,235
Research and development ............................ 406,522 458,407
----------- -----------
1,219,209 1,823,642
----------- -----------
Loss from operations .................................... (713,114) (3,127,521)
Interest income ......................................... 94 685
Interest expense ........................................ (32,637) (33,621)
Other income ............................................ 44,873 (4,506)
Litigation settlement ................................... (163,600)
0
Loss from continuing operations ......................... (864,384) (3,164,963)
----------- -----------
Loss from discontinued operation ........................ 0 (309,206)
----------- -----------
Loss before extraordinary item .......................... (864,384) (3,474,169)
Extraordinary gains on restructuring of payables and debt 0 3,431,823
----------- -----------
Net loss ................................................ $ (864,384) $ (42,346)
=========== ===========
Earnings (loss) per share:
From continuing operations .......................... $ (.17) $ (.72)
From discontinued operation ......................... 0
(.07)
From restructuring of payables and debt ............. 0 .78
----------- -----------
Net loss per share .................................. $ (.17) $ (.01)
=========== ===========
Weighted average common shares outstanding .............. 4,986,767 4,418,618
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-21-
<PAGE>
U.S. WIRELESS DATA, INC.
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
Fiscal Year Ended
June 30, June 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................................... $ (864,384) $ (42,346)
Adjustments to reconcile net income to net cash
used in operatingactivities:
Gain on restructuring of payables and debt .................. -- (3,431,823)
Loss due to market decline of inventory ..................... -- 1,525,026
Depreciation and amortization ............................... 56,958 107,525
Stock issued for services ................................... -- 3,880
Lawsuit settlement .......................................... 163,600 --
Consulting services ......................................... 50,000 --
Loss on disposal of asset ................................... (441) --
Debt relieved by product sales .............................. (32,400) --
Changes in assets and liabilities:
Accounts receivable ......................................... (78,768) 197,293
Inventory ................................................... 412,369 1,702,058
Other current assets ........................................ 21,847 93,048
Accounts payable ............................................ 136,581 (46,764)
Accrued liabilities ......................................... (102,010) (686,707)
----------- -----------
Net cash used in operating activities ............................ (236,648) (578,810)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and furniture ............................. -- (3,000)
Proceeds from sale of equipment .................................. 499 23,296
(Increase) decrease in other assets .............................. 11,261 (565)
----------- -----------
Net cash provided by (used in) investing activities ........... 11,760 19,731
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt ................................... 185,000 292,678
Net proceeds from issuance of stock .............................. 5,621 12,650
----------- -----------
Net cash provided by (used in) financing activities ........... 190,621 305,328
(DECREASE) IN CASH .................................................. (34,267) (253,751)
CASH, Beginning of period ........................................... 40,350 294,101
----------- -----------
CASH, End of period ................................................. $ 6,083 $ 40,350
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ........................... $ 13,833 $ 33,621
=========== ===========
Supplemental schedule of non-cash investing and financing activities:
Debt relieved with sale of inventory ............................. $ 32,400 $ --
=========== ===========
Inventory purchased with stock ................................... $ $ 162,500
=========== ===========
Issuance of debt for services/lawsuit settlement ................. $ 210,000 $ --
=========== ===========
Stock issued for services/lawsuit settlement ..................... $ 109,046 $ 3,880
=========== ===========
Note executed for stock issuance ................................. $ 27,950 $ --
=========== ===========
Non cash extinguishment of debt and payables
Fair value of assets transferred .............................. $ -- $ 1,031,868
Payables and debt extinguished ................................ -- 4,463,691
----------- -----------
Gains on restructuring of payables and debt ................... $ -- $ 3,431,823
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-22-
<PAGE>
U.S. WIRELESS DATA, INC.
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
COMMON COMMON NOTE
STOCK STOCK PAID IN RECEIVABLE ACCUM.
SHARES AMOUNT SUBSCRIBED CAPITAL SHAREHOLDER DEFICIT
<S> <C> <C> <C> <C> <C> <C>
BALANCES, June 30, 1995 ......................... 4,390,910 $ 4,390,910 11,514,859 (16,054,123)
Shares issued for services at $.10 - .46 per .. 18,123 18,123 (14,243)
share
Stock options exercised at $.215 per share .... 9,300 9,300 (7,300)
Warrant exercised at $.10 per share ........... 100,000 100,000 (90,000)
Director stock option exercised at $.13 per ... 5,000 5,000 (4,350)
share
Stock subscription ............................ $ 142,544 19,956
Net loss ...................................... (42,346)
- ------------------------------------------------- ------------ ------------ ---------- ------------ ------------
BALANCES, June 30, 1996 ......................... 4,523,333 $ 4,523,333 $ 142,544 $11,418,922 $(16,096,469)
Shares issued for services at $.15 per share .. 102,975 102,975 (87,529)
Stock issued in connection with class lawsuit . 600,000 600,000 (506,400)
Stock options exercised at $.13-.215 per share 245,100 245,100 (211,530)
Stock subscription issued ..................... 142,544 142,544 (142,544)
Note receivable on stock option plan .......... (27,950)
Net loss ...................................... (864,384)
Rounding ...................................... 2
================================================= ============ ============ ============ =========== =========== =============
BALANCES, June 30, 1997 ......................... 5,613,952 $ 5,613,952 $10,613,465 ($27,950) $(16,960,853)
================================================= ============ ============ ============ =========== ========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-23-
<PAGE>
U.S. WIRELESS DATA, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
U.S. Wireless Data, Inc. (the "Company") was incorporated in the State
of Colorado on July 30, 1991. It designs, develops and manufactures a
wireless credit card authorization and check verification terminal
utilizing both analog and digital cellular network architectures. The
Company began generating its first significant revenue from product
sales in fiscal 1995. Prior to fiscal 1995, the Company was in the
development stage. The Company is now in a transition from only a "box
maker" orientation to also providing products and services which
generate recurring revenue. The recurring revenue component is expected
to become the dominant component of the Company's business.
Financial Condition
The Company has incurred an accumulated deficit of approximately $17.0
million since inception and has incurred additional losses subsequent
to the year ended June 30, 1997. In order to continue as a going
concern, the Company has transitioned to a recurring revenue focus, is
working on programs to increase revenue levels and product margins; is
negotiating new distribution agreements and seeking additional debt or
equity financing.
Subsequent to June 30, 1997, the Company has strengthened the
management team, signed several significant distribution agreements
which are expected to build a recurring revenue base, started the
expansion of the sales force and expanded its contract manufacturing
relationships. The current sales volume is inadequate to fund the
infrastructure growth and business transition. As a result, and as part
of its continuing effort to find working capital funding in order to
continue operations, the Company has entered into certain consulting
agreements designed to facilitate financing relationships with third
parties. While management is confident it can accomplish this
objective, there is no guarantee that this additional funding will
occur in the required time frame.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of
recorded assets and liabilities that might be necessary should the
Company be unable to continue as a going concern.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from the
estimates used.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents are carried at cost which approximates fair value.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined by the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. The Company uses the
straight-line method of depreciation based on the estimated useful
lives of the assets (generally three to seven years). Maintenance and
repairs are charged to operations as incurred.
-24-
<PAGE>
Revenue Recognition and Major Customers
Direct sales are recognized upon shipment of products to customers. The
Company also leases products to customers with an option to buy. The
leasing arrangements are accounted for as sales-type leases. During
fiscal 1997, Cardservice International, Inc. ("CSI") accounted for 53%
of revenue. During fiscal 1996, two customers, CSI and Superior
Bankcard Services, accounted for 25% and 11% of revenue, respectively.
Research and Development Costs
Research and development costs are expensed as incurred.
Net Loss Per Share
Net loss per share is based on the weighted average number of shares of
common stock outstanding during each respective period. Shares issuable
upon the conversion of stock options and warrants were not included in
the calculation since their effect was anti-dilutive.
Fair Value of Financial Instruments
The carrying value of assets and liabilities reported on the balance
sheet is a reasonable estimate of their fair value.
Recent Pronouncements
In February, 1997 the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 128,
"Earnings per Share". SFAS No. 128, which is effective for periods
ending after December 15, 1997, requires changes in the computation,
presentation, and disclosure of earnings per share. All prior period
earnings per share data must be restated to conform with the provisions
of SFAS No. 128. The Company will adopt SFAS No. 128 during the fourth
quarter of fiscal 1998, but does not expect the new accounting standard
to have a material impact on the Company's reported loss per share.
In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130, which is effective for all periods beginning
after December 15, 1997, establishes standards for reporting and
displaying comprehensive income and its components with the same
prominence as other financial statements. All prior periods must be
restated to conform with the provisions of SFAS No. 130. The Company
will adopt SFAS No. 130 during the first quarter of fiscal 1999, but
does not expect the new accounting standard to have a material impact
on the Company's reported financial results.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131, which is
effective for fiscal years beginning after December 15, 1997,
establishes new disclosure requirements for operating segments,
including products, services, geographic areas, and major customers.
The Company will adopt SFAS No. 131 for the 1999 fiscal year. The
Company does not expect the new accounting standard to have a material
impact on the Company's reported financial results.
Reclassifications
Certain reclassifications have been made in prior year to conform to
current year presentation.
-25-
<PAGE>
<TABLE>
<CAPTION>
NOTE 2. INVENTORY
June 30,
1997
----
<S> <C>
Inventory consists of:
Raw material ................................................... $ 111,299
Finished goods ................................................. 208,095
Spare parts and accessories .................................... 1,895
Lower of cost or market reserve ................................ (112,422)
- ------------------------------------------------------------------- ---------
$ 208,867
=========
</TABLE>
The Company has established a reserve against finished goods and raw
materials to reflect the estimated net realizable value of the
inventory as of June 30, 1997, based on current selling prices.
NOTE 3. PROPERTY AND EQUIPMENT
<TABLE>
June 30,
1997
----
<S> <C>
Property and equipment consists of:
Equipment and furniture ........................................ $ 295,020
Tooling ........................................................ 124,267
Less: accumulated depreciation and amortization ............... (378,842)
---------
$ 40,445
=========
</TABLE>
-26-
<PAGE>
NOTE 4. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
June 30,
1997
----
<S> <C>
Accrued liabilities consists of:
Accrued wages/commissions ............................... $ 38,115
Relocation expense ...................................... 30,300
Accrued revenue and royalty ............................. 44,888
Litigation Settlement ................................... 10,000
Other
2,284
--------
$125,587
========
</TABLE>
NOTE 5. NOTES PAYABLE
<TABLE>
<CAPTION>
Notes payable consist of the following:
June 30, 1997
-------------
<S>
Current Portion <C>
Note payable - supplier .................................. $387,866
Notes payable - investors ................................ 185,000
Note payable - entrenet .................................. 150,000
Note payable - lawsuit settlement ........................ 15,000
--------
$737,866
Long-term portion of Note payable - lawsuit settlement ........... $ 45,000
========
</TABLE>
Note Payable - Supplier
The note payable to a supplier is currently in default. The Company
continues to accrue monthly interest payments. As of October 13, 1997,
the supplier had not called the note. The note bears interest at 8% and
is fully collateralized with certain inventory. The Company is
currently in discussion with the vendor regarding payment of the note
and the accrued interest.
Notes Payable - Investors
During the fourth quarter of fiscal 1997, the Company executed demand
notes with certain investors. The notes bear interest at 10% annually
and are convertible to common stock on or after November 1, 1997 at a
conversion price of $.35 per share ($75,000 of Notes) and $.50 per
share ($100,000 of notes) for any or all outstanding principal and
accrued interest. If not converted, the notes are due in the fourth
quarter of fiscal 1998.
Note Payable - entrenet
During June 1997, the Company executed a convertible debenture in
exchange for consulting services to be rendered during fiscal 1997 and
1998 by entrenet Group LLC. The debenture bears interest at 10%
annually and is convertible to common stock at a conversion price of
$0.50 per share. If not converted, the debenture is due June 3, 1998.
Note Payable - Lawsuit Settlement
As part of the class actin lawsuit settlement, the Company executed a
note payable in September 1997 which is due in installments as follows:
$5,000 due March 17, 1998; $10,000 due September 17, 1998; $20,000 due
September 17, 1999; and $25,000 due September 17, 2000. See additional
discussion of the lawsuit settlement in Note 11. - Litigation.
-27-
<PAGE>
NOTE 6. STOCKHOLDERS' EQUITY
Stock Options
In September 1992, the Company adopted an incentive stock option plan
and a non-qualified stock option plan covering 600,000 shares of the
Common Stock. In October 1994, the Shareholders approved an amendment
to the stock option plan increasing the number of available shares to
880,000. In December 1995, the Shareholders approved an amendment to
the stock option plan making certain clarifications to the plan and
providing for the annual grant of an option for 20,000 shares to
non-employee directors.
Stock options have been granted under the option plan at the fair
market value of the common stock on the date of grant and generally
vest over a period of between two and four years. Options granted under
the option plan generally must be exercised no later than 10 years from
the date of grant.
The following table summarizes information about stock options
outstanding at June 30, 1997:
<TABLE>
<CAPTION>
Outstanding Options Outstanding Vested Options
------------------------------------------------ --------------------------
Average Weighted Weighted
Remaining Average Average
Range of Contractual Exercise Number Exercise Number
Exercise Price Life Price Outstanding Price Outstanding
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 - $0.13 8.4 $0.13 262,849 $0.13 233,449
$0.14 - $0.22 8.4 $0.21 166,800 $0.21 128,400
------- -------
429,649 361,849
========= =======
</TABLE>
Stock option transactions for the years ended June 30, 1997 and 1996
were are follows:
<TABLE>
<CAPTION>
Options Outstanding
Weighted Average
Number of Exercise Price
Shares Per Share
<S> <C> <C>
Balance at June 30, 1995 462,500 $3.67
Granted 827,849 $0.16
Exercised ( 14,300) $0.19
Terminated (482,500) $3.65
-------
Balance at June 30, 1996 793,549 $0.16
Granted 20,000 $0.16
Exercised (245,100) $0.14
Terminated (138,800) $0.22
-------
Balance at June 30, 1997 429,649 $0.16
=======
Exercisable at June 30, 1997 361,849 $0.18
=======
</TABLE>
Notes Receivable from Stockholder
In connection with the resignation of the Company's former CEO, the
Company received a promissory note during October 1996 to fund the
exercise of the former CEO's stock options pursuant to the Company's
Stock Option Plan. The note evidences a three-year non-recourse loan
which accrues interest at 6% per annum.
-28-
<PAGE>
SFAS No. 123
The Company applies APB No. 25 in accounting for its Stock Option Plan,
and no compensation expense has been recognized in the financial
statements as all options had been granted at the fair market value of
the underlying common stock. Had compensation expense for the Company's
Plan been determined based on the fair value of the options at the
grant dates for awards under the Plan consistent with the method of
accounting prescribed by SFAS No. 123, the Company's net loss and loss
per share would have been increased to the proforma amounts indicated
below:
<TABLE>
<CAPTION>
June 30,
1997 1996
-------------------
<S> <C> <C>
Net loss .............. As reported ($864,382) ($ 42,346)
Pro forma ( 876,142) ( 58,562)
Net loss per common share As reported $ (0.17) $ (0.01)
Pro forma $ (0.18) $ (0.01)
</TABLE>
In accordance with the guidance under SFAS No. 123, fair values are
based on minimum values. The weighted average fair value of option is
estimated as $0.03 and $0.05 for options granted during fiscal year
1997 and 1996, respectively, using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for grants
during the years ended June 30, 1997 and 1996: dividend yield of zero;
expected volatility of 162% and 101%, respectively; risk-free interest
rate of 6.4% and 5.5%, respectively; and an expected term of 3.5 years.
The risk-free rates used in the calculation represent the average U.S.
Government Security interest rates on the stock option grant date with
maturities equal to the expected term of the options granted. The
effect of actual forfeitures is included in the computation of
compensation cost for options granted during each of the respective
years.
Stock Warrants
In fiscal 1993, the Company issued warrants to one officer and one
director of the Company to purchase an aggregate of 250,000 shares of
common stock at $4.00 per share. As of June 30, 1997, all of these
warrants were fully vested and had the following terms: 100,000 expire
April 12, 1998; 150,000 expire May 1, 2003. In connection with the
Company's December 1993 initial public offering, the Company issued
warrants to the underwriters to purchase 165,000 shares of the
Company's common stock at $12.33 per share, which were fully vested at
the date of issuance. Such warrants expire on December 2, 1998.
In fiscal 1994, in conjunction with the acquisition of Direct Data, the
Company issued warrants to four former shareholders of Direct Data to
purchase 29,548 shares of common stock at $2.625 per share which were
fully vested at the date of issuance. In October 1994, warrants for the
purchase of 5,000 shares of common stock were exercised and 5,752
warrants expired. The remaining 18,796 warrants expire May 31, 1998.
In October 1995, as partial consideration for entering into a
development contract, the Company issued warrants to a customer to
purchase 100,000 shares of common stock at $0.10 per share. This
warrant was subsequently exercised during fiscal year 1996.
NOTE 7. INCOME TAXES
At June 30, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $11,700,000. Annual
utilization of the loss carryforwards is subject to significant
limitations due to changes in the Company's ownership which could
result in little or no benefit being derived from these carryforwards.
Future changes in ownership could further reduce the annual
availability of these benefits. If unused, the carryforwards will
expire beginning in 2008.
-29-
<PAGE>
Deferred income taxes reflect the net tax effects of: (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss and tax credit carryforwards. The tax
effects of significant items comprising the Company's deferred taxes
are as follows:
<TABLE>
<CAPTION>
June 30,
1997 1996
---- ----
Deferred tax assets
<S> <C> <C>
Net operating loss carry-forwards $ 4,388,000 $ 3,880,000
Depreciation .................... ( 3,000) ( 12,000)
Inventory reserves .............. 31,000 195,000
Allowance for bad debts ......... 6,000 35,000
Other
28,000 28,000
----------- -----------
$ 4,450,000 4,126,000
Valuation allowance ............. (4,450,000) (4,126,000)
----------- -----------
Net deferred tax asset .............. $ -- $ --
=========== ==========
</TABLE>
Deferred tax assets have been reduced to zero by a valuation allowance
based on current evidence which indicates that it is not considered
more likely than not that these benefits will be realized. During
fiscal 1997, the valuation allowance increased by $324,000 primarily
due to additional losses for which no tax benefit was recorded. During
fiscal 1996, the valuation allowance decreased by $1,090,000 primarily
due to the dissolution of Direct Data.
The difference between the zero provision for income taxes and the
expected amount determined by applying the federal statutory rate to
the loss before income taxes results primarily from a reduction of net
operating loss carryforwards due to an increase in the valuation
allowance for the year ended June 30, 1997 and due to the dissolution
of Direct Data for the year ended June 30, 1996.
NOTE 8. EMPLOYEE BENEFIT PLAN
In April 1994, the Company established a qualified Section 401(K)
Savings Plan. The Plan allows eligible employees to contribute up to
15% of their salaries on a pre-tax basis. The Company did not make any
contributions to the Plan during fiscal year 1997.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases its office facilities under various operating lease
arrangements. Most of the leases contain certain provisions for rental
adjustments. In addition, the leases require the Company to pay
property taxes, insurance and normal maintenance costs. Future minimum
rentals under these arrangements are $18,105 in 1998. Rent expense was
$73,550 during fiscal 1997 and sublease income of $16,680 was received
during fiscal 1997.
In September 1997, the Company executed a lease for office space in
Emeryville, California. Rental payments commence October 1, 1997 at an
initial rental rate of $9,942 per month for a term of 5 years. In year
five, the rental rate increases to $11,640 per month.
-30-
<PAGE>
NOTE 10. EXTRAORDINARY GAINS AND DISCONTINUED OPERATION
During the year ended June 30, 1996, the Company recognized $3.4
million in gains related to the restructuring of debt and payables as follows:
<TABLE>
<CAPTION>
<S> <C>
Release of guarantee of bank debt by former officer of Direct Data $ 593,132
Release of liability for inventory by supplier 1,099,412
Liabilities of dissolved Direct Data subsidiary 1,739,279
---------
$ 3,431,823
===============
</TABLE>
The release of guarantee of bank debt by a former officer of Direct
Data ("the Officer") occurred as a result of the September 1995 demand
for payment by a financial institution creditor of a $1.3 million loan
made to Direct Data. The loan was guaranteed by the Officer who paid
the loan and became a security holder of Direct Data's assets in early
October 1995. The Company was obligated to remove the Officer from his
guarantee of the bank loan, and in consideration for release of such
liability, surrendered the assets of Direct Data to the Officer on
October 5, 1995. The excess carrying value of the debt over the book
value (which approximated fair value) of the assets surrendered in
satisfaction of the obligation was $593,132. In connection with this
transaction, the Officer granted the Company an option to repurchase
397,684 shares of Company stock from the Officer at a price of $.25 per
share, as well as the right to vote such shares.
During its fiscal year 1995, the Company entered an agreement with a
supplier, whereby the Company became liable for the purchase of certain
raw materials the supplier procured for manufacturing of Company
products. During 1996, the Company and the supplier agreed that the
Company would settle the liability of $1.4 million for consideration of
approximately $325,000, and that the Company or its designee would take
possession of the raw materials. Accordingly, the Company has
recognized a gain of $1.1 million as a result of restructuring the
liability during fiscal year 1996.
During October 1995, the Company dissolved Direct Data. Upon the
dissolution of Direct Data, approximately $1.7 million of unsecured
trade debt remained unpaid and the creditors were notified that Direct
Data would be unable to pay its remaining obligations. The Company
believes it has no liability for future claims arising from the unpaid
obligations of Direct Data; therefore, such unpaid obligations have
been recognized by the Company as a gain from restructuring of
liabilities of the dissolved Direct Data subsidiary during fiscal 1996.
Management believes Direct Data represented a separate and material
line of business from the Company. The pretax loss on disposal has been
accounted for as a loss from discontinued operations and prior years
financial statements have been reclassified to reflect the disposition.
Revenue of Direct Data for the year ended June 30, 1996 was $657,667.
NOTE 11. LITIGATION
In September of 1996, the Company agreed to terms to settle securities
fraud litigation, pending since 1994, which was brought in relation to
the Company's initial public offering of December 1993. The parties'
agreement (the "Settlement Agreement") was filed in the United States
District Court for the District of Colorado on January 15, 1997 in
consolidated Case N0. 94-Z-2258, Appel, et al. v. Caldwell, et al. By
its order approving the settlement, the court certified a plaintiffs'
settlement class and provided the mechanism for payment of claims. The
Company contributed directly or by indemnification a total of $10,000
to the total settlement fund of $2,150,000. The remaining portion of
the settlement was contributed by certain underwriters of the Company's
initial public offering and securities counsel. No objections to the
Settlement Agreement were made. No potential class member opted-out of
the settlement and all are bound by the release granted the Company.
All claims against the Company in those consolidated cases were
dismissed by final federal court order on September 4, 1997. No appeal
was filed. Similar state court claims were dismissed by Colorado
district court order dated October 9, 1997.
-31-
<PAGE>
To resolve cross-claims asserted by underwriters in the litigation,
U.S. Wireless Data, Inc. agreed to transfer to RAS Securities
Corporation, H.J. Meyers & Co, Inc., Sands & Co. Ltd. and R.J.
Steichen & Co. a total of 600,000 U.S. Wireless Data, Inc. common
shares upon the effective date of the Settlement Agreement. The
Company has agreed to register such shares upon demand not sooner than
April 26, 1998. Further, on September 17, 1997 the Company agreed to
entry of a consent judgment against it and in favor of Don Walford,
the sole shareholder of underwriter Walford Securities, Inc., in the
amount of $60,000, payable over a three year period.
The total charge recognized during fiscal 1997 consists of the
following: $93,600 for the value of the common shares issued based upon
the fair market value of the Company's common stock on the date the
commitment of such shares was made; $10,000 for actual cash to be paid
by the Company pursuant to the settlement with stockholders; and
$60,000 for the note payable executed with Don Walford as discussed
above.
NOTE 12. RELATED PARTIES
A director of the Company is also an officer of the Company's largest
customer, Cardservice International, Inc. ("CSI"). Additionally, CSI
owns approximately 5% of the Company's outstanding common stock as of
June 30, 1997. Sales to CSI approximated $698,000 and $398,000 in
fiscal years 1997 and 1996, respectively.
During fiscal 1996, CSI advanced the Company $162,500 for the purchase
of raw materials in exchange for 142,544 shares of common stock issued
subsequent to June 30, 1996 at 150% of then current fair market value
plus registration rights after one year on all stock owned by CSI. This
transaction increased CSI's ownership to from 2% to 5%. Additionally,
the Company will make royalty payments to CSI on future sales of
POS-50(R) product built with the raw materials purchased using the
amounts advanced from CSI. As of June 30, 1997, no units were built
using the raw materials referred to above.
NOTE 13. SUBSEQUENT EVENTS
In August 1997, the Company received $500,000 for the issuance of 3.5
million unregistered shares of common stock and 1.6 million warrants to
purchase common stock at an exercise price of $0.01 per share to two
officers of Liviakis Financial Communications, Inc. ("Liviakis"). The
warrants are exercisable from January 15, 1998 through August 4, 2002.
Additionally, in August 1997, the Company executed a one year
consulting agreement with Liviakis for consulting services to be
rendered during fiscal 1998 and 1999. Fees related to the agreement are
payable in cash of $10,000 and stock, the issuance of 300,000 shares of
common stock to occur at various times during the consulting agreement,
commencing November 15, 1997.
The Liviakis securities carry future registration rights, including a
one-time demand registration, with fees to be paid by the Company.
On August 4, 1997, the Company retained Evon A. Kelly as chief
executive officer. As part of Mr. Kelly's compensation package, the
Board of Directors issued 600,000 shares of non-qualified stock options
exercisable at $1.00 per share.
On September 4, 1997 and October 9, 1997, respectively, the Company
received notice that the federal and state courts dismissed all claims
against the Company related to the class action shareholder lawsuits
filed in 1994. See additional discussion in Note 11. - Litigation.
In September 1997, the Company entered into a lease agreement for
office space in California. See additional discussion in
Note 9. - Commitments and Contingencies.
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<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required by this item is incorporated by reference from the
U.S. Wireless Data, Inc. 1997 Proxy Statement sections entitled "Election of
Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of
1934."
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
U.S. Wireless Data, Inc. 1997 Proxy Statement section entitled "Executive
Compensation."
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
U.S. Wireless Data, Inc. 1997 Proxy Statement section entitled "Beneficial
Ownership of Common Stock."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
U.S. Wireless Data, Inc. 1997 Proxy Statement section entitled "Certain
Transactions."
-33-
<PAGE>
EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits Required by Item 601 of Regulation S-B
-------------------------------------------------------
Exhibit Description
3.1 Copy of Amended Articles of Incorporation (2)
3.2 Copy of Amended Bylaws (2)
10.1 License and Volume Purchase Agreement with OMRON
Systems of America with
Solectron Addendum (1)
10.2 Promissory Note with OMRON Systems, Inc. (2)
10.3 Supply Agreement with Novatel Communications LTD. (2)
10.4 Release Agreement with Richard P. Draper (2)
10.5 Copy of Amended 1992 Stock Option Plan
10.6 Agreement for Manufacture and Purchase between USWD,
Uniform Industrial Corp
and Cardservice International, Inc.
10.7 AT&T CDPD Value Added Reseller Agreement dated
April 30. 1997
10.8
Bell Atlantic AIRBRIDGE Packet Service Agreement dated
August 12, 1997 10.9 Engagement Agreement between USWD and
entrenet Group, LLC dated June 3, 1997 10.10 GTE Leasing
Corporation Promissory Note dated August 6, 1997
10.11
GTE Mobilnet Communications Service and Equipment Agreement
dated August 1, 1997 10.12 Form of Demand Note issued to
private investors during the fourth quarter of 1997
10.13
Liviakis Financial Communications, Inc. Consulting
Agreement, and Subscription Agreement for the purchase of
U.S. Wireless Data, Inc. Common Stock and Warrants dated
July 25, 1997
10.14
Member Service Provider Sales and Service Credit Card
Processing Agreement between U.S. Wireless Data, Inc. and
NOVA Information Systems, Inc. dated January 1, 1997
10.15
Purchase Agreement with Unicard Systems, Inc. dated
September 18, 1997
10.16
Purchase Agreement with Wellex Systems Manufacturing &
Distribution Group dated August 7, 1997
21.1 List of Subsidiaries (2)
23.1 Consent of Independent Accountants
27 Financial Data Schedule
(1) Incorporated by reference to the reference Exhibit and Exhibit number
in Registration Statement No. 33-69776-D.
(2) Incorporated by reference to the Company's report on Form 10-KSB filed
on October 13, 1996. (Control No. 95201388)
(b) Reports on Form 8-K
There were no reports on Form 8-K that were filed during the last quarter
of the fiscal year ended June 30, 1997.
-34-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: October 14, 1997
U.S. WIRELESS DATA, INC.
\s\ Evon A. Kelly Chief Executive Officer October 14. 1997
- ---------------------- ----------------
Evon A. Kelly
In accordance with the Exchange Act, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated:
\s\ Evon A. Kelly Chief Executive Officer October 14, 1997
- ------------------ ----------------
Michael J. Brisnehan
\s\ Rod L. Stambaugh President October 14, 1997
- ---------------------- ----------------
Rod L. Stambaugh
\s\ Alan B. Roberts Director October 14, 1997
- -------------------------- ----------------
Alan B. Roberts
\s\ Chester N. Winter Director October 14, 1997
- ------------------------- ----------------
Chester N. Winter
\s\ Caesar Berger Director October 14, 1997
- ------------------------- ----------------
Caesar Berger
CDPD VALUE ADDED RESELLER AGREEMENT
This CDPD Value Added Reseller Agreement (this "Agreement"), dated as of
April 30, 1997, is made between AT&T Wireless Data, Inc., a Delaware coloration
doing business as AT&T Wireless Services, for cellular digital packet data
("CDPD") communications service (defined below) provided by AT&T Wireless Data,
Inc., d/b/a AT&T Wireless Services and its Affiliates, collectively, ("AT&T"),
and U.S. Wireless Data, Inc., a corporation organized under the laws of the
State of Colorado, for itself ("Customer").
RECITALS
A. Customer would like to receive Service from AT&T, in connection with
Customer's provision of certain value-added communications services to its End
Users.
B. AT&T wishes to provide Service to Customer based upon the
value-added communications services provided by Customer to its End Users, in
accordance with the terms and conditions of this Agreement.
AGREEMENTS
In consideration of the mutual promises contained in this Agreement,
the Parties hereby agree as follows:
Section 1. Definitions
1.1 Affiliate means, with respect to any entity, any other entity that directly
Controls, is Controlled by or is under common Control with the first entity.
1.2 Application means the combination of the Service and Customer's value-added
communications services provided to its End Users. The Application is more
specifically described in Exhibit A hereto.
1.3 Control (and all conjugations thereof) means, with respect to any
entity, the direct or indirect possession of the power to direct the management
and policies of such entity.
1.4 End User means the individuals or entities obtaining access to
Service from Customer.
1.5 Number means, for each End User, the AT&T network and service
identifier numbers and various other network, equipment and service numbers
assigned to Customer for that End User to obtain access to Service.
1.6 Service means the CDPD communication service and associated support
services provided to Customer by AT&T.
1.7 Service Area means those portions of AT&T's CDPD operating areas
as identified by AT&T from time to time (the "Service Area") and as set forth in
Exhibit B hereto, as amended from time to time.
<PAGE>
Section 2. The Service
2.1 Provision
2.1.1 Service is available to each of Customer's users or units
within AT&T's Service Area as long as Customer's CDPD transmitting and
receiving equipment (the "Equipment") is turned on, programmed with
AT&T network and service identifier numbers (collectively, the
"Numbers").
2.1.2 Service provided pursuant to this Agreement will be
provided only upon the request of Customer's authorized
representatives, and not by End Users, and only in connection with the
Application.
2.1.3 Customer is not authorized under this Agreement to use the
Service independent of the Application or in conjunction with any
other Application unless such Application is described and attached in
Exhibit A hereto.
2.2 Support Services. AT&T will provide to Customer, and not directly
to End Users, network monitoring, technical assistance and trouble-shooting
support of the Service through AT&T's technical assistance center (the "ATAC"),
The ATAC will be staffed and available to Customer's authorized representatives
twenty-four (24) hours per day, seven (7) days per week to perform these
functions and to address Customer's inquiries. Customer will provide AT&T with
access to contacts and dispatch information to facilitate appropriate response
to Service interruptions.
2.3 Numbers. Customer shall be issued an initial amount of Numbers as
set forth in the Service Plan attached as Exhibit C hereto. Customer may order
additional numbers by completing a Service Request Form, Additional Numbers will
be issued to Customer provided Customer is not in default hereof-, and subject
to any requirements for a security deposit. AT&T may change any of Customer's
Numbers -from time to time, by giving Customer written notice thereof. AT&T will
use its best efforts to minimize such changes. Customer will inform its End
Users of the provisions of this Section and agrees that neither it nor its End
Users will acquire any proprietary right in any specific Number provided by
AT&T.
2.4.1 Customer will use' the Service only for lawful business
purposes and only in connection with the Application, and may resell the Service
only in connection with the Application and as provided by this Agreement.
2.4.2 AT&T authorizes Customer to provide any or all of the
Service to End Users in connection with End Users' use of the Application,
2.4.3 AT&T is obligated only to Customer, with which it is in
privity of contract., and not to End Users, with whom AT&T is not in privity,
End Users are not to be deemed third-party beneficiaries of this Agreement.
2.4.4 Customer is solely responsible for all risks and
expenses incurred with its actions or omissions in the provision of the Service
or the provision of the Application to End Users, including but not limited to
payment to AT&T for all charges for Service used by Customer or its End Users or
third Patties using a Number assigned to Customer. In connection with such
activities, Customer will act in all respects for its own account and will be
responsible for such things as credit verification, deposits, billing,
collection, bad debts and any unauthorized use of the Service by End Users or
any third Patty using a Number assigned to Customer.
<PAGE>
2.4.5 Customer will disclose to End Users the provisions set
forth in Exhibit D.
2.4.6 Customer is responsible for all End User support
regarding all aspects of End Users' use of the Service (whether arising in
connection with hardware, software or Service), including but not limited to
issues relating to modems, protocol stacks, software configuration and setup,
usability issues, Service activation, Service coverage, billing, and any and all
other aspects of technical services and customer care. This includes, but is not
limited to, Customer taking the End Users' calls and using reasonable commercial
efforts to remedy any Customer or End User-identified problem without AT&T's
participation, Customer will report a problem to AT&T only upon reasonable
verification that the problem is due to reasons other than misuse, malfunction
or the failure of the Customer Equipment to meet the technical standards for
compatibility with the Service, or failure of the End User to understand how to
use the Service.
2.4.7 The Service will not be used to transmit any
communication where the message, or its transmission or distribution would
involve any local court order or regulation or would likely be offensive to the
recipient or recipients thereof.
2.5 Continuing Right. AT&T will have the continuing right to market and
sell, the service and any other communications services to any third Parties,
including but not limited to current, future and potential End Users of
Customer.
2.6 Procedures. Customer will comply with AT&T's procedures for
obtaining Numbers and for activating Service with respect to any End User. AT&T
may from time to time modify these procedures by giving Customer written notice
of such modification.
2.7 Service Area. The Service is available only within the Service
Area and is subject to (a) transmission limitations caused by atmospheric,
topographical or other conditions affecting transmission, (b) equipment
modifications, repairs and other similar activities necessary for the proper
or improved operation of the Service, and (c) equipment failures beyond AT&T's
reasonable Control. AT&T will not be responsible ,for any interruption or
inability to use the Service that results from equipment or systems used in
connection with the Service or the Application. AT&T may amend Exhibit B to
add or delete any portion of the Service Area from time to time by giving
written notice to Customer.
2.8 Interruptions and Field Trials. The Service may be temporarily
refused, limited, interrupted or curtailed due to governmental regulations or
orders, system capacity limitations or equipment maintenance, repair,
modifications, upgrades or relocation. AT&T will attempt to notify Customer of
scheduled and unscheduled network outages that are expected to last more than
four (4) hours and that may affect the Service. Customer will cooperate, at
AT&T's expense, in conducting any field tests and trials that AT&T or any
Service provider reasonably determines are necessary or desirable to ensure
the performance and reliability of the Service.
<PAGE>
Section 3. Interconnection
Customer will be required to obtain and pay for any interconnection
services required to connect Customer to AT&T's CDPD network to be used by End
Users. In the event that individual connectivity to End Users is required,
Customer will follow AT&T policies and procedures for such connections.
Section 4. Customer Equipment
Customer will be responsible for the acquisition, programming,
installation, maintenance and repair of all equipment (other than equipment
comprising portions of AT&T's CDPD network) necessary to enable Customer and
its End Users to receive the Service ("Customer Equipment"). Customer will
ensure that all Customer Equipment is technically and operationally compatible
with the Service and meets all applicable federal and state laws, rules and
regulations.
Section 5. Rates
5.1 Customer will pay AT&T for Service provided to Customer and its End
Users in accordance with the Service Plan. Unless @ Service Plan provides
otherwise, AT&T shall not increase the rates contained in the Service Plan
within six months from the effective date of this Agreement, Thereafter,
however, AT&T may increase the rates contained in the Service Plan from time to
time on thirty days (30) written notice to Customer; provided, however, if such
increase is unacceptable to Customer, Customer may terminate this Agreement by
providing AT&T with written notice at least fifteen (I 5) days in advance of
such termination. Notwithstanding the foregoing, if AT&T rescinds its notice of
rate increase within such fifteen days, this Agreement will not terminate, but
will remain in full force and effect. AT&T may decrease the rates contained in
the Service Plan from time to time upon written notice to Customer, effective,
on the date specified on such notice, To the extent AT&T arranges for Customer
to receive Service from non-AT&T Service providers. Customer will pay AT&T for
Service at Company's regular retail rate for such Service,
5.2 Customer may obtain any rate that is available to a similarly
situated reseller of Company. Customer may at any time notify Company that it
chooses to Obtain Service under a different Rate Sheet, provided that Company
may, upon receipt of notice of Customer's election, either revise Exhibit C to
reflect such election or terminate this Agreement and offer Customer a new
agreement.
Section 6. Invoices, Payments, Taxes and Security Deposits
6.1 1 Invoices. AT&T will provide Customer written invoices on a monthly
6.2 Payment. Customer will pay each invoice within thirty (30) days
following its receipt thereof Any payment not received by the due date will
accrue interest at the rate of one and one-half percent (1.5%) per month or the
maximum lawful rate. Additional fees will be assessed for any check returned for
insufficient funds,
6.3. Disputed Charges. If the amount of any invoice is disputed, Customer
will pay the entire amount of the invoice by the due date and will include with
such payment a detailed statement sufficient to allow AT&T to ascertain the
disputed amount and the reasons for the dispute. Any amount not disputed within
ninety (90) days of an invoice due date may not thereafter be disputed. Customer
and AT&T will use good faith efforts to resolve any dispute within sixty (60)
days of receipt of such statement.
6.4 Taxes. Customer will pay all applicable federal, state and local
sales, use, public utilities, gross receipts or other taxes or fees imposed on
AT&T as a result of this Agreement (other than taxes imposed on the not income
of AT&T). Customer will provide certificates of resale required for the states
in which it will resell service, as indicated on Exhibit C. Customer will
reimburse AT&T for any such taxes or fees paid by AT&T on Customer's behalf.
6.5. Security Deposits. AT&T may from time to time require Customer to
provide it with a cash deposit, irrevocable letter of credit, or other security
acceptable to AT&T based upon AT&T's assessment of Customer's creditworthiness.
Section 7. Term and Termination
7.1 Term. The initial ten of this Agreement will begin on the date hereof
and, unless earlier terminated in accordance with this Section 7, will continue
for a three (3) year term. This Agreement will automatically renew for
successive one-year renewal terms unless either Party, at least ninety (90) days
prior to the end of the then-current term, notifies the other Party in writing
Of its intent to terminate this Agreement.
7.2 Termination
7.2.1 If either Party breaches a material term of this Agreement, and
such Party fails to cure the breach within thirty (30) days following its
receipt of written notice from the non-breaching Party (or ten days in the
event of non-payment of any amounts due hereunder), then the non-breaching
Party, in addition to any other remedies it may have at law or in equity,
may terminate this Agreement upon written notice to the breaching Party.
7.2.2 This Agreement will automatically terminate in the event of
either Party's dissolution, insolvency, assignment for the benefit of
creditors or filing for relief under the provisions of the bankruptcy laws
or similar creditor protection laws.
7.2.3 AT&T may terminate this Agreement immediately and without
penalty upon written notice to Customer if the Federal Communications
Commission or any other regulatory agency or court promulgates any rule,
regulation, judgment or order that (a) prohibits or substantially impedes
(in effect or Application) AT&T from fulfilling its obligations hereunder,
(b) prohibits or substantially impedes non-AT&T Service providers from
providing Service, or (c) adversely affects AT&T's ability to conduct
business upon terms and conditions acceptable to it. AT&T will notify
Customer promptly following AT&T's determination that an event permitting
termination under this Section has occurred.
7.2.4 If Customer shall at any time fail to meet the Service Plan
requirements set forth in Exhibit C, Company may provide Customer with
ninety (90) days written notice either 1) that Customer is no longer
eligible to receive Service under this Agreement, or 2) that Company will
modify the Service Plan in accordance with Customer's actual usage. If
Customer is unable, during the sixty (60) day period after Company's notice
is sent, to satisfy the eligibility criteria, Company and Customer will
renegotiate the Service Plan Requirements. If the parties fail to reach a
mutually acceptable agreement regarding the Service Plan within the
following thirty (30) day period, Company may either, immediately or upon
notice to Customer, 1) modify the Service Plan, or 2) terminate this
Agreement without further notice, in its sole discretion.
7.3 Survival. Sections 8, 9,10,1,1, 12, 16 and 17 (together with all
other provisions of this Agreement that may reasonably be interpreted or
construed as surviving termination) will survive the termination of this
Agreement.
7.4 Payment upon Termination. Upon termination of this Agreement for
any reason, all amounts owing to AT&T hereunder will become due and payable.
Section 8. Force Majeure
Neither Party will be liable for any loss, damage, cost, delay or
failure to perform resulting from causes beyond its reasonable Control
including, but not limited to, acts of God,, fires, floods, earthquakes,
strikes, insurrections, riots, lightening or storms, or delays of suppliers or
subcontractors for the same causes.
Section 9. Indemnification
9.1 MUTUAL INDEMNITY. EACH PARTY WILL DEFEND, INDEMNIFY AND HOLD THE OTHER,
THE OTHER'S SUBSIDIARIES AND AFFILIATES (AND THEIR RESPECTIVE OWNERS, DIRECTORS,
OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS) AND ANY UNDERLYING CARRIER
ENABLING THE PROVISION OF SERVICE HARMLESS AGAINST ANY DAMAGES, LOSSES AND
EXPENSES (INCLUDING REASONABLE ATTORNEYS' AND EXPERT WITNESS' FEES AND
DISBURSEMENTS, WHETHER AT TRIAL OR ON ANY APPEAL) ARISING OUT OF OR RELATING TO
ANY CLAIMS, ACTIONS OR OTHER PROCEEDINGS THAT (A) ARE BROUGHT BY OR ON BEHALF OF
ANY THIRD PARTY, AND (B) RESULT FROM THE INDEMNIFYING PARTY'S BREACH, FAILURE TO
PERFORM OR OTHER MISCONDUCT IN CONNECTION WITH ITS DUTIES, OR THE EXERCISE OF
ITS RIGHTS UNDER THIS AGREEMENT.
9.2 ADDITIONAL INDEMNITY. CUSTOMER FURTHER AGREES TO DEFEND, INDEMNIFY AND
HOLD AT&T, ITS SUBSIDIARIES AND AFFILIATES, THEIR RESPECTIVE OWNERS, DIRECTORS,
OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS AND ANY UNDERLYING CARRIER
ENABLING THE PROVISION OF SERVICE (COLLECTIVELY, AS USED IN THIS SUBPARAGRAPH,
"AT&T") HARMLESS AGAINST ANY DAMAGES, LOSSES AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' AND EXPERT WITNESS' FEES AND DISBURSEMENTS, WHETHER AT TRIAL OR ON
ANY APPEAL) ARISING OUT OF OR RELATING TO ANY CLAIMS, ACTIONS OR OTHER
PROCEEDINGS THAT ARE BROUGHT BY OR ON BEHALF OF END USERS; PROVIDED THAT
CUSTOMER'S OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD AT&T HARMLESS WILL NOT
APPLY TO THE EXTENT THE CLAIM, ACTION OR PROCEEDING RESULTS FROM AT&T's GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
Section 10. No Warranties
AT&T SUPPLIES A SERVICE, AND NOT GOODS. AT&T MAKES NO WARRANTIES, EXPRESS OR
IMPLIED, WITH RESPECT TO THE SERVICE OR TIE-IN PERFORMANCE OF ANY OBLIGATIONS
HEREUNDER INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. ALL SUCH WARRANTIES ARE EXPRESSLY EXCLUDED.
AT&T IS NOT THE MANUFACTURER OF ANY CUSTOMER EQUIPMENT AND MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT THERETO. AT&T PROVIDES ACCESS TO INFORMATION
PROVIDED BY OTHER SOURCES, HOWEVER AT&T ACCEPTS NO LIABILITY FOR AND MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE CONTENT THEREOF.
<PAGE>
Section 11. Limitation of Liability
11.1 NO CONSEQUENTIAL DAMAGES. NEITHER PARTY WILL BE LIABLE TO THE OTHER
(OR ITS END USERS, CUSTOMERS OR ANY THIRD PARTY) FOR ANY INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF SUCH PARTY'S FAILURE TO PERFORM UNDER THIS
AGREEMENT. NOTHING IN THIS SECTION 11.1 WILL LIMIT A PARTY'S OBLIGATION TO FULLY
INDEMNIFY THE OTHER UNDER SECTION 9 FOR ACTIONS BROUGHT BY THE INDEMNIFYING
PARTY'S CUSTOMERS, END USERS OR BY ANY THIRD-PARTY, EVEN IF SUCH ACTIONS INCLUDE
CLAIMS FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
11.2 LIMITATION OF ACTIONS. EXCEPT FOR ACTIONS ARISING IN CONNECTION WITH
SECTION 9, NEITHER PARTY MAY BRING AN A LEGAL ACTION WITH RESPECT TO THIS
AGREEMENT MORE THAN TWENTY-FOUR (24) MONTHS AFTER THE CAUSE OF ACTION ACCRUES.
11.3 LIABILITY CAP. EXCEPT FOR LIABILITIES ARISING UNDER SECTION 9, THE
AGGREGATE LIABILITY OF AT&T TO CUSTOMER FOR CLAIMS RELATING TO THIS AGREEMENT,
WHETHER FOR BREACH OR IN TORT, WILL NOT EXCEED THE AMOUNT PAID BY CUSTOMER TO
AT&T IN THE TWO MONTH PERIOD PROCEEDING THE DATE THE CLAIM AROSE.
11.4 PARTY. FOR THE PURPOSES OF THIS SECTION I 1, "PARTY" MEANS THE PARTY,
ITS SUBSIDIARIES AND AFFILIATES AND THEIR RESPECTIVE OWNERS DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, REPRESENTATIVES, SUBCONTRACTORS AND SUPPLIERS.
11.5 SECURITY. ALTHOUGH THE SERVICE USES AN ENCRYPTED TECHNOLOGY, AND THE
LAW GENERALLY PROHIBITS THIRD PARTIES FROM MONITORING CELLULAR TRANSMISSIONS,
AT&T CANNOT GUARANTY THE SECURITY OF DATA TRANSMISSIONS. AT&T SHALL NOT BE
LIABLE FOR ANY LACK OF SECURITY RELATING IN ANY WAY TO USE OF THE SERVICE OR
CUSTOMER'S OR ITS END USERS DATA TRANSMISSIONS.
Section 12. Confidentiality
12.1 Confidential Information. As used in this Agreement, "Confidential
Information" means any information of either AT&T or Customer that is not
generally known to the public, whether of a technical, business or other nature
(including, but not necessarily limited to, trade secrets, know-how and
information relating to the technology, customers, business plans, promotional
and marketing activities, finances and other business affairs of such Party).
AT&T's Confidential Information includes, among other things, the rates, terms
and conditions relating to AT&T's provision of Service to Customer.
<PAGE>
12.2 Use and Disclosure. In the performance of or otherwise in connection
with this Agreement, any Party (the "Receiving Party") may receive certain
Confidential Information of the other Party (the "Disclosing Party"). The
Receiving Party, except as expressly provided in this Agreement, will not
disclose such Confidential Information to anyone without the Disclosing Party's
prior written consent. The Receiving Party will not use, or permit others to
use, Confidential Information for any purpose other than the purpose for which
it was disclosed. The Receiving Party will take all reasonable measures to avoid
disclosure, dissemination or unauthorized use of Confidential information,
including, at a minimum, those measures it takes to protect its own confidential
information of a similar nature.
12.3 Exceptions. The provisions of Section 12.2 will not 'apply to any
information that (a) is or becomes publicly available without breach of this
Agreement, (b) can be shown by documentation to have been known to the Receiving
Party at the time of its receipt from the Disclosing Party, (c) is rightfully
received from a third Party who did not acquire or disclose such information by
a wrongful or tortuous act, or (d) can be shown by documentation to have been
independently developed by the Receiving Party without reference to any
Confidential Information.
12.4 Disclosure to Governmental Entities. If the Receiving Party
becomes legally obligated to disclose Confidential Information to any
governmental entity with jurisdiction over it, the Receiving Party will give the
Disclosing Party prompt written notice sufficient to allow the Disclosing Party
to seek a protective order or other appropriate remedy. The Receiving Party will
disclose only such information as is required by the governmental entity and
will use its reasonable best efforts to obtain confidential treatment for any
Confidential Information that is so disclosed.
12.5 Ownership; Return. All Confidential Information will remain the
exclusive property of the Disclosing Party, and the Receiving Party will have no
rights, by license or otherwise, to use the Confidential Information except as
expressly provided herein. The Receiving Party promptly will return or destroy
all tangible material embodying Confidential Information (in any form and
including, without limitation, all summaries, copies and excerpts of
Confidential Information) upon the earlier of (a) the completion or termination
of the dealings between the Disclosing Party and the Receiving Party, and (b)
the Disclosing Party's written request,
Section 13. Notices
All notices and other communications relating to this Agreement Will be
made in writing and will be deemed to have been duly delivered, effective upon
receipt, if sent to the address set forth below each Party's signature.
Section 14. Assignment
Except as provided in this Section 14, neither Party may assign or
transfer this Agreement, or its rights or obligations hereunder, without the
prior written consent of the other Party. Either Party may assign this
Agreement, without the other's consent, to (a) any Affiliate of the assignor, or
(b) any person or entity that acquires the assignor or substantially all of the
assignor's business through any merger, consolidation or stock or asset
purchase; provided that the assignee agrees in writing to be bound by the
provisions of this Agreement. In addition, AT&T may assign certain of its rights
and obligations under this Agreement without Customer's consent.
Section 15. No Agency
AT&T and Customer are independent contracting Parties. This Agreement
does not create any partnership, joint venture or agency relationship between
the Parties.
<PAGE>
Section 16. Marks
Customer recognizes the right, title and interest of AT&T, the CDPD
Systems and their respective Affiliates in and to all service marks, trademarks
and trade names used by any of them in connection with the Service (the
"Marks"). Customer will not gain any rights to the Marks by virtue of this
Agreement and will not use any Marks without Company's prior written consent.
Section 17. General
17.1 State law/venue. This Agreement will be governed by the laws of
the State of Washington, without reference to its choice of law rules. Any
proceeding to enforce any rights or obligations hereunder shall be brought in
King County, Washington.
17.2 Attorneys' fees. In the event an action is commenced by either
Party to enforce the terms of this Agreement, the substantially prevailing Party
in such action shall be entitled to its reasonable costs and attorneys' and
expert witness' fees incurred therein and on any appeal thereof.
17.3 Entire agreement. This Agreement, together with its attached Exhibits, sets
forth the entire agreement between the Parties concerning the subject matter
hereof Any amendment or modification to this Agreement will be effective only if
made in writing and signed by both Parties. Provided, however, this Agreement
shall be deemed automatically amended to the extent inconsistent with any
federal, state or local law, regulation, court order or tariff required to be
filed by AT&T.
17.4 Waiver. The waiver of any provision or default of this Agreement
will not constitute a waiver of any other provision or default. If any provision
of this Agreement is deemed to be unenforceable, the remaining provisions will
remain in full force and effect.
17.5 Compliance with laws. AT&T and Customer shall at all times comply
in all material respects with all laws, rules and regulations applicable to the
performance of this Agreement.
The Parties have executed this Agreement on the date first above written.
U.S. Wireless Data, Inc. AT&T Wireless Data, Inc.
<PAGE>
EXHIBIT A
Application
CONFIDENTIAL & PROPRIETARY
<PAGE>
EXHIBIT B
Service Area
Customer is authorized to provide the Service in the following MSAS.,
Arizona Phoenix*, Tucson*
California Fresno, Sacramento, San Diego*, San Francisco*,
San Jose*, Bakersfield
Colorado: Denver
Connecticut: Bridgeport*, Hartford*, New Haven*, New London/Norwich*
Delaware Wilmington', Dover*
Florida Orlando, Tampa/St. Petersburg, West Palm Beach,
Boca Raton Miami, Ft.Lauderdale, Lakeland/Winter Havcn*
Illinois* Chicago*
(Gary*, Indianapolis*
Kentucky: Louisville*
Maryland Baltimore, Frederick
Massachusetts: Boston*, Worcester*
Michigan Detroit*
Minnesota Minneapolis/St. Paul
Missouri St-Louis'
Nevada Las Vegas, Reno
New Hampshire! Manchester*
New Jersey* Atlantic City', Trenton*. Long Branch*. New Brunswick"
Ocean City*, Vineland
New Mexico Albuquerque', Las Cruces'
New York New York
North Carolina: Charlotte*, Raleigh*
Ohio: Cincinnati*. Columbus*. Dayton*, Clcveland. Akron',
Canton
Oklahoma Oklahoma City, Tulsa
<PAGE>
Oregon, Portland
Pennsylvania, Pittsburgh, Allentown*, Philadelphia*
South Carolina: Columbia", Greenville,
Tennessee, Memphis, Nashville
Texas Austin, Dallas/Ft. Worth, San Antonio, El Paso*,
Houston*, Galveston*
Utah Salt Lake City
Virginia Newport News*, Richmond*, Norfolk*
Washington Seattle/Everett, Tacoma
Washington D.C.*
* These markets are available for Service through an intercarrier arrangement.
<PAGE>
EXHIBIT C
(Confidentially for this page of this document has been requested pursuant to
Commission rule 24b-2. The omitted material has been filed separately with the
Commission.)
<PAGE>
Billing Guidelines for Calls.
1. General. AT&T will bill Customer on a monthly basis for Service
furnished under this Agreement, including regular monthly Service charges and
usage charges for all data transmissions processed through the Number. Usage
charges include charges on a per kilobyte basis for transmissions that are sent
or received by Equipment programmed with a Number assigned to Customer. Usage
charges may also include charges for additional services offered by AT&T which
Customer may subscribe to at rates determined by AT&T from time to time.
2. Access Charges. Access charges are billed monthly in arrears. Usage
charges are billed monthly in arrears. If AT&T agrees to provide Service
features to Customer, Company reserves the right to charge a reasonable fee for
adding or deleting Service features.
3. measurement, The measurement of a transmission is in kilobytes.
4. Loss of Registration- Registration may be "lose'(i.e., involuntarily
disconnected) for a variety of reasons, including atmospheric conditions,
topography, weak batteries, system overcapacity, movement outside a service
area, and gaps in coverage within a service area. Loss of registration may
result in retransmissions and additional usage charges.
Minimum Number Requirements:
1. Customer shall maintain, within one year of the date of this Agreement,
a minimum of 1000 active Numbers,
2. Customer shall maintain, within eighteen months of the date of this
Agreement, a minimum of 3000 active Numbers.
3 Customer shall maintain, within three years of the date of this
Agreement, a minimum number of 4,500 active Numbers.
Failure to Meet Minimum Number Requirement. In the event Customer fails to
achieve the minimum Number requirements set forth in this Exhibit C for any
given month, Customer shall pay to AT&T in addition to all other amounts due the
difference between Customer's actual Numbers and the required minimum Numbers
times the minimum monthly usage set forth in Exhibit C for each month in which
Customer fails to achieve such minimum. Continued failure to meet Minimum Number
Requirements shall give rise to AT&T's right to terminate under section 7.2.4
Promotional Tools, AT&T will provide Customer with up to two Numbers, at no
charge, with unlimited usage in AT&T markets, and up to 10 Numbers at a rate of
$30 per month, with unlimited usage in AT&T markets. Usage outside of AT&T
markets and all taxes on usage relating to such Numbers will remain the
responsibility of Customer.
<PAGE>
EXHIBIT D
End User Disclosures
I END USER HAS NO PROPERTY RIGHT IN ANY NUMBER ASSIGNED TO IT.
2. [END USER] UNDERSTANDS THAT [CUSTOMER] IS AN AUTHORIZED RE- SELLER OF AT&T
WIRE- LESS PACKET DATA SERVICE.
3. [END USER] UNDERSTANDS AND AGREES THAT IT HAS NO CONTRACTUAL RELATIONSHIP
WHATSOEVER WITH AT&T WIRELESS SERVICES AND THAT [END USER] IS NOT A THIRD PARTY
BENEFICIARY OF ANY AGREEMENT BETWEEN [CUSTOMER] AND AT&T WIRELESS SERVICES.
4. []END USER] UNDERSTANDS AND AGREES THAT AT&T WIRELESS SERVICES WILL HAVE NO
LEGAL, EQUITABLE OR OTHER LIABILITY OF ANY KIND TO (END USER]. IN ANY EVENT,
AT&T WIRELESS SERVICES' ,TOTAL LIABILITY ARISING IN CONNECTION WITH THIS
AGREEMENT WHATSOEVER (INCLUDING BUT NOT LIMITED TO ANY FAILURE OR DISRUPTION OF
THE CDPD SERVICE PROVIDED HEREUNDER) IS LIMITED TO PAYMENT OF DAMAGES IN AN
AMOUNT EQUAL TO THE PROPORTIONATE FIXED MONTHLY CHARGE PAYABLE FOR SERVICES
PROVIDED TO [END USER] UNDER THIS AGREEMENT FOR THE PERIOD OF SERVICE DURING
WHICH SUCH DAMAGES OCCUR.
5. UNLESS CAUSED BY THE NEGLIGENCE OF [CUSTOMER] OR AT&T WIRE, LESS SERVICES,
[END USER] WILL INDEMNIFY AND HOLD AT&T WIRE-LESS SERVICES (AND ITS AFFILIATED
COMPANIES AND ANY OF THEIR OFFICERS, EMPLOYEES AND AGENTS) HARMLESS AGAINST ALL
CLAIMS (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR LIBEL, SLANDER, COPYRIGHT OR
PATENT INFRINGEMENT OR ANY PERSONAL INJURY OR DEATH) ARISING DIRECTLY OR
INDIRECTLY FROM (END USER) USE, FAILURE TO USE, OR INABILITY TO USE THE NUMBERS
ASSIGNED TO IT OR THE CDPD SERVICE,, THIS INDEMNITY WILL SURVIVE THE TERMINATION
OF THIS AGREEMENT.
6. ALTHOUGH CDPD SERVICE USES AN ENCRYPTED TECHNOLOGY, AND THE LAWS GENERALLY
PROHIBITING PARTIES FROM MONITORING CELLULAR TRANSMISSIONS, AT&T WIRELESS
SERVICES (-AN No' I ' GUARANTY THE SECURITY OF DATA TRANSMISSIONS. NEITHER AT&T
WIRELESS SERVICES NOR ANY UNDERLYING CARRIER SHALL BE LIABLE FOR ANY LACK OF
SECURITY RELATING IN ANY WAY TO USE OF THE SERVICE OR (END USER'S DATA
TRANSMISSIONS.
7. [END USER] WILL NOT USE THE SERVICE TO TRANSMIT ANY COMMUNICATION WHERE THE
MESSAGE, OMITS TRANSMISSION OR DISTRIBUTION WOULD VIOLATE ANY LAW, COURT ORDER
OR REGULATION, OR WOULD LIKELY BE OFFENSIVE TO THE RECIPIENT OR RECIPIENTS
THEREOF.
8. [END USER] USES THE INFORMATION ACCESSED BY THE CDPD SERVICE AT ITS OWN RISK.
AIRBRIDGE PACKET SERVICE AGREEMENT
BETWEEN
BELL ATLANTIC NYNEX MOBILE
AND
U.S. WIRELESS DATA INC.
Contract No. ###-##-####
AIRBRIDGE PACKET SERVICE AGREEMENT
This Service Agreement is entered into by and between U.S. Wireless Data
Inc., a Colorado corporation, with a principal place of business located at 4851
Independence Street, #189, Wheat Ridge, Colorado 80033 ("Customer") and Cellco
Partnership, a Delaware general partnership, by its managing general partner,
Bell Atlantic NYNEX Mobile, Inc. (hereinafter known as "BANM") with offices at
180 Washington Valley Road, Bedminster, New Jersey 07921 (the "Agreement").
WHEREAS, BANM is either licensed and authorized by the Federal
Communications Commission ("FCC") to provide cellular telecommunications
service, or manages on behalf of the FCC licensee pursuant to a management
agreement, in the Area (defined below); and
WHEREAS, the Customer wishes to establish a mobile data communications
system through a public packet switched network in order to utilize the system
for data communication by Customer and/or its Authorized Users (defined below);
and
WHEREAS, BANM has the capability to provide Cellular Digital Packet Data
("CDPD") Service, known as AirBridges Packet Service; and
WHEREAS, Customer wishes to obtain such AirBridge & Packet Service from BANM
in the Area; and WHEREAS, BANM wishes to make available AirBridges Packet
Service to Customer on the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and intending to be legally bound, the parties agree as
follows:
TERMS
1. DEFINITIONS,
As used herein the following terms shall have the following respective meaning:
Area, The markets listed in Exhibit A within which BANM either is licensed and
authorized by the FCC to provide commercial mobile service, or manages on behalf
of the FCC licensee pursuant to a management agreement, and in which BANM
currently provides or may provide AirBridge Packet Service.
Authorized User. Individuals or companies authorized by Customer to use the
System established by Customer.
Cellular Digital Packet Data Service ("CDPD") Cellular radio service utilizing
packet switching technology to transmit data over radio frequency channels. The
raw data rate of CDPD is 19.2 Kilobits per second. It is a connectionless
multi-protocol network service providing peer network wireless extension to
existing data networks.
Customer, Customer is U.S. Wireless Data Inc.
Equipment Identifier (EID). An electronic serial number "burned" into a CDPD
radio modem at the time of manufacture.
Fixed End System (FES). A host computer(s) operated by or on behalf of Customer.
<PAGE>
Kilobyte, A kilobyte is 1000 octets of data, measures at the IP packet layer. IP
header and data octets are included in the kilobyte count.
Mobile Data Base Station ("MDBS"), The unit located at BANM cell sites which
serves as the data link relay point. The MDIS communicates with each MES through
the MDBS.
Mobile Service Area, Market areas or combinations of Market areas which Company
establishes to provide Commercial Mobile service.
Mobile Data Intermediate Systems ("MDIS") The component of the AirBridge Packet
Service network which performs routing and which contains the network control
functions, including the mobility manager, registration and authentication
functions.
Mobile End System ("MES"), A data terminal, CDPD radio modem, and antenna.
Network Entity Identifier ("NM. A network address assigned to the MES. Each MES
has an NEI and a unique corresponding EID for authentication purposes.
Packet. The continuous sequence of binary digits of information, which is routed
through the AirBridge Packet Service network as an integral unit. Packet sizes
can be flexible within a range of "O" user bytes to a maximum of "2048" bytes.
Service. The Airbridge Packet Service provided pursuant to this Agreement,
2. PROVISION OF SERVICE.
BANM hereby undertakes to provide the Service to Customer in order for the
Customer and/or its Authorized Users to transmit and receive data over the
Service network in the Area, pursuant to the terms and conditions specified
in this Agreement. Customer shall purchase CDPD service exclusively from
BANM or its affiliates which provide such Service in the Area. BANM will
issue NEIs to Customer. All such NEI assignments shall be made in accordance
with the CDPD Network Information Center policies in effect from time to
time.
3. PRICING.
The rate for the Service provided by BANM is set forth in Exhibit B. In the
event Customer has selected and is purchasing equipment through BANM, the terms
of payment and price of such equipment are set forth in Exhibit B.
4. INSTALLATION.
At Customer's request, BANM will provide and/or arrange for installation
services of MES equipment in Area. The rate for such installation services will
be negotiated on a case by case basis and will be included in a separate
attachment to this Agreement.
5. COMMITMENT OF CUSTOMER.
Customer shall, unless otherwise agreed upon in writing and in
advance, at its sole expense:
(i) purchase and maintain any equipment that Customer and/or its
Authorized Users may require to communicate with the Service network;
and
(ii) establish and maintain facilities or services for connecting
Customer's and/or its Authorized Users' networks or host processors to
the Service network (such as private line connections and/or frame relay
service); and (iii) maintain at its sole expense and option, all MES's
and ensure that each is technically and operationally compatible with
the Service network and is in compliance with applicable state and
federal laws, rules, and regulations; and
(iv) procure any other items or services, including, but not limited
to, any applications software or professional services that may be
required by Customer and/or its Authorized Users in connection with the
Service and/or this Agreement; and (v) submit a completed copy of the
form entitled, "AirBridge Packet Service Request Form", attached hereto
as Exhibit C, for modification, addition or deletion of NEIs/ElDs during
the term of this Agreement; and
2
<PAGE>
pay and hereby guarantees the payment of all invoices presented by BANM under
the terms of this Agreement.
6. AVAILABILITY OF THE SERVICE,
The Service is available for Customer and/or its Authorized Users who are
equipped for the Service when they are within the range of cell sites providing
the Service.
6.1 The Service is subject to transmission limitations caused by
atmospheric and like conditions. The Service may be temporarily
interrupted or curtailed due to government regulations, suspected
fraudulent activities, equipment modifications, upgrades, relocations,
repairs and similar activities necessary or appropriate for the proper
or improved operation of the Service. 6.2 The Service, although
encrypted, is capable of being intercepted without knowledge of or
permission from Customer by unauthorized third parties possessing
certain types of devices or equipment.
7. TARIFF FILINGS.
This Agreement and performance hereunder are subject to any required State and
Federal regulatory filings. Where required, BANM shall commence the process for
submission of any such filings upon execution of this Agreement.
8. BILLING.
BANM will provide Customer with a monthly invoice for the Service
provided under this Agreement. 8.1 The invoice will identify charges in
accordance with Exhibit B. Terms of payment shall be net thirty (30)
days from the date of the invoice. 8.2 Undisputed payments received more
than thirty (30) days after the date of the invoice will incur a late
payment charge in the amount of the greater of one and one-half percent
(11/2%) of the unpaid balance or the applicable limit (if any) set by
law for each month or fraction thereof that such balance shall remain
unpaid. 8.3 Customer will reimburse BANM for court costs, attorney's
fees, costs of investigation or collection and similar expenses incurred
by BANM in the enforcement of any right or privilege hereunder. 8.4 BANM
may verify and/or reverify Customer's credit rating at any time and BANM
may require Customer at any time to make a suitable deposit that BANM
shall hold as guarantee of the payment of charges. Upon termination of
Service, BANM may apply Customer's deposit against Customer's bill for
all charges.
9. LIMITATION OF LIABILITY,
9.1 IN NO EVENT SHALL BANM BE LIABLE TO CUSTOMER, ITS AUTHORIZED USERS, OR
EMPLOYEES AND/OR AGENTS OF EITHER OF THEM, OR ANY THIRD PARTY, FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, PUNITIVE DAMAGES, OR
LOST PROFITS OR ANY CLAIM OR DEMAND OF ANY NATURE OR KIND, INCLUDING,
BUT NOT LIMITED TO, USE OR INABILITY TO USE/ACCESS THE SERVICE,
INCLUDING, BUT NOT LIMITED TO, RELIANCE BY CUSTOMER AND/OR AN
AUTHORIZED USER ON ANY DATA OBTAINED THROUGH USE OF THE SERVICE, ANY
INTERRUPTION, DEFECT, ERROR, VIRUS OR DELAY IN OPERATION OR
TRANSMISSION, ANY FAILURE TO TRANSMIT OR ANY LOSS OF DATA, ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR THE PERFORMANCE OR BREACH
THEREOF.
10. DISCLAIMER OR WARRANTY
10.1 DUE TO THE POSSIBILITY OF ERRORS INCIDENT IN THE USE OF CDPD, THE
SERVICE FURNISHED BY BANM IS SUBJECT TO THE TERMS, CONDITIONS AND
LIMITATIONS SPECIFIED HEREIN. BANM MAKES NO WARRANTY, EITHER EXPRESS
OR IMPLIED, CONCERNING THE SERVICE, INCLUDING WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE OR
USE.
<PAGE>
10.2 CUSTOMER ACKNOWLEDGES IT HAS SELECTED CUSTOMER'S SOFTWARE AND/OR
EQUIPMENT (INCLUDING EQUIPMENT THAT MAY BE PURCHASED BY CUSTOMER
THROUGH BANM). BANM HAS MADE AND MAKES NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER, DIRECTLY OR INDIRECTLY, EXPRESS OR IMPLIED, AS
TO THE SUITABILITY, DURABILITY, FITNESS FOR PARTICULAR PURPOSE OR USE,
MERCHANTABILITY, CONDITION OR QUALITY OF THE CUSTOMER SELECTED
EQUIPMENT AND/OR SOFTWARE. BANM SHALL NOT BE LIABLE TO CUSTOMER AND/OR
ANY AUTHORIZED USER FOR ANY LOSS, DAMAGE OR EXPENSE OF ANY KIND OR
NATURE CAUSED DIRECTLY OR INDIRECTLY BY THE CUSTOMER SELECTED
EQUIPMENT AND/OR SOFTWARE, OR BY THE USE OR MANUFACTURE THEREOF, OR BY
ANY REPAIR, SERVICE OR ADJUSTMENT THERETO OR BY ANY INTERRUPTION OF
SERVICE OR LOSS OF USE THEREOF, OR FOR ANY LOSS OF BUSINESS OR DAMAGE
WHATSOEVER AND HOWSOEVER CAUSED. TO THE EXTENT PERMITTED, BANM AGREES
TO ASSIGN TO CUSTOMER ANY OF THE EQUIPMENT MANUFACTURER'S WARRANTIES
RECEIVED BY BANM WITH RESPECT TO THE CUSTOMER SELECTED EQUIPMENT.
11. CREDIT FOR OUTAGES
No credit or adjustment will be made for interruptions of the Service unless
the interruption continues for a period of twenty-four (24) hours or more,
measured from the time the interruption is reported to BANM by Customer. In
the event of an interruption of the Service that continues for a period of
twenty-four (24) hours or more, credit allowance will be made, at Customer's
request, for a pro-rata amount not to exceed the minimum charge per NEI for
that month for each NEI rendered inoperative by the interruption. The credit
shall be available only where the interruption is in no part due to the acts
or omissions of Customer or an Authorized User whether negligent or
otherwise or by interruptions caused by failure of equipment or service not
provided by BANM. The foregoing credit shall be the sole and exclusive
remedy to Customer and/or Authorized User for any interruption of the
Service. In order to be eligible for any such credit, Customer must request
the credit within sixty (60) days of the commencement of the interruption.
12. USE OF THE SERVICE,
12.1 The Service furnished hereunder is for use only by Customer or its
Authorized Users. 12.2 Customer will be liable for all usage and
administrative charges and any other losses, damages, charges or expenses
arising from or out of the fraudulent use of Service, including unauthorized
use resulting from or attributable to Customer and/or its Authorized Users.
The parties will actively cooperate in order to minimize the fraudulent or
other unauthorized use and subsequent abuse of the Service provided by BANM.
13. USE OF MARKS,
13.1 Customer shall not, directly or indirectly, hold itself out as or
otherwise create the impression that it is sponsored, authorized, endorsed
by, affiliated with, or an agent of BANM or an affiliate thereof.
Additionally, Customer shall not use the name "Bell Atlantic NYNEX Mobile",
"Bell Atlantic", "NYNEX" or any mark used by BANM, Bell Atlantic or NYNEX or
any of their affiliates, or any colorable imitation thereof, in or as part
of any company name or trade name or in any other confusing or misleading
manner, without the prior written consent of BANM. Nothing contained in this
Agreement is intended to convey a license to use any such trademarks,
service marks or trade names.
14.INDEMNIFICATION.
(a) Customer shall defend, indemnify, and save harmless BANM and its
successors and assigns and its employees and agents and their heirs, legal
representatives and assigns from any and all claims or demands whatsoever,
including the costs, expenses and reasonable attorney's fees
4
<PAGE>
incurred on account thereof, that may be made by any person, specifically
including, but not limited to, employees of the Customer, including, but not
limited to, claims for bodily injury (including death to persons) or damage
to property (including theft) occasioned by or alleged to have been
occasioned by the acts or omissions of Customer, its employees or persons
furnished by the Customer whether negligent or otherwise. (b) Customer shall
defend BANM at BANM's request, against any such liability, claim or demand.
The foregoing indemnification shall apply whether Customer or BANM defends
such suit or claims. BANM agrees to notify Customer promptly of any written
claim or demands against BANM for which Customer is responsible hereunder.
15. TERM OF AGREEMENT,
15.1 This Agreement shall be effective when executed by an authorized
representative of BANM ("Effective Date"). The term of this Agreement shall
be three (3) years from the Effective Date. This Agreement shall
automatically renew for additional one (1) year terms unless either party
provides at least sixty (60) days written notice prior to the expiration
thereof of its intention not to renew this Agreement.
16. TERMINATION OF THE SERVICE.
16.1 Upon nonpayment of any sum due BANM, or upon a violation by Customer of
any of the provisions of this Agreement, BANM may give Customer written
notice of such nonpayment and/or violation. If Customer fails to rectify the
nonpayment or the violation within thirty (30) days of being given such
written notice, then BANM may immediately, without incurring any liability,
temporarily discontinue or interrupt the furnishing of the Service to
Customer. 16.2 Should Customer or its Authorized User's MES's be used with
the Service provided by BANM in violation of any of the provisions of this
Agreement, BANM may, immediately upon written notice to Customer, without
incurring any liability, take such action as it may reasonably determine is
necessary or appropriate for the provision of the Service to its customers.
Customer shall effect the discontinuance of any use of MES that is in
violation of this Agreement immediately upon notice to it of the violation,
and shall confirm in writing to BANM within five (5) business days that such
use has been discontinued. BANM may, in sole discretion, choose to restore
service to the MES in question when Customer has complied with the
provisions of this Section 17.2.
17. TERMINATION OF AGREEMENT,
17.1 Upon Default by Customer under this Agreement, of which Customer has
been given written notice, and which Customer has not cured within thirty
(30) days of such written notice BANM may, without incurring any liability,
immediately terminate this Agreement.
17.2 For purposes of this Section 19, "Default" shall be defined as:
17.2.1 Failure by Customer to pay any charge when due (i.e. within thirty
(30) days of date of invoice) or to perform or observe any term or condition
of this Agreement; or 17.2.2 Institution by the Customer of any proceeding
in bankruptcy, reorganization, or insolvency; institution against Customer
of any proceeding in bankruptcy, reorganization, or insolvency that is
acquiesced to or not dismissed within ninety (90) days; appointment of a
receiver for any substantial part of Customer assets; the making of an
assignment for the benefit of creditors or an admission in writing of
Customer of its inability to pay its debts as they mature.
18. PROPRIETARY AND CONFIDENTIAL INFORMATION.
In connection with BANM's provision of the Service, certain confidential and
proprietary, technical, financial or business information may be disclosed by
BANM. 'Me term "Information," as used in this Agreement, includes all
specifications, drawings, sketches, models, samples, reports, plans, forecasts,
current or historical data, computer programs or documentation and all other
technical, financial or business data. "Proprietary and/or Confidential
Information" is defined as Information which is in the possession of BANM, is
not generally available to the public, and which BANM desires to protect against
unrestricted disclosure or competitive use. All Information which is disclosed
by BANM to Customer and which is to be protected hereunder as Proprietary and/or
Confidential Information of BANM shall:
a. if in writing or other tangible form, be conspicuously labeled as
proprietary, confidential or the like at the time of delivery; and
b. if oral, be identified as Proprietary and/or Confidential Information
prior to disclosure and be reduced to a writing labeled as indicated
in (a) above within fifteen (I 5) business days after its disclosure.
BANM shall have the right to correct any inadvertent failure to designate
Information as Proprietary and/or Confidential Information as set forth above
by written notification as soon as practical (but in no event later than five
(5) business days) after such error is determined. After receiving said
notification, Customer shall from that time forward treat such Information as
Proprietary and/or Confidential Information.
c. With respect to Proprietary and/or Confidential Information provided
under this Agreement, Customer shall during the ten-n of this
Agreement and for two (2) years after termination or expiration of
this Agreement:
(1) hold the Proprietary and/or Confidential Information in strictest
confidence; and
(2) restrict disclosure and/or use to solely those
employees of Customer with a need to know and not disclose it to any
other parties; and
(3) advise those employees of their obligations with respect to the
Proprietary and/or Confidential Information and use the Proprietary
and/or Confidential Information only for the purposes hereunder except
as may otherwise be mutually agreed upon in writing.
d. Any Information disclosed by BANM to Customer which BANM holds subject
to an obligation of confidence to a third party, shall be subject to
the same level of protection as Proprietary and/or Confidential
Information of BANM'S, provided BANM advises Customer of the
confidential nature of such third party Information.
e. Customer shall have no obligation to preserve the proprietary nature
of any Information which:
(1) is made public by BANM; or
(2) was previously known to Customer free of any obligation to keep
confidential and is so documented; or
(3) is received by a third party without restriction and without
breach of this Agreement; or (4) is independently developed by
Customer and is so documented; or (5) which Customer is required to
disclose pursuant to a valid order of a court or other
governmental body or any political subdivision thereof-,
provided, however, that Customer shall first have given notice to BANM.
f. All Information shall be deemed the property of BANM. Upon request
Customer shall return all Information in tangible form to BANM or
destroy all such Information.
g. Upon discovery of any disclosure by Customer, its agents, employees,
consultants or contractors, of any Proprietary and/or Confidential
Information, Customer shall notify BANM and, at its own expense, take
all steps necessary to prevent any further disclosure of Proprietary
and/or Confidential Information in violation of this Agreement.
h. Nothing contained in this Agreement shall be construed as granting or
conferring any rights by license or otherwise in any Information
disclosed to Customer.
6
<PAGE>
19. MISCELLANEOUS,
19.1 Entire Agreement: Amendment. This Agreement and the attached Exhibits
constitute the entire agreement between the parties with respect to the
provision of the Service and associated services and supersede all prior
agreements, proposals, and understandings, whether written or oral. Any
modification or waiver of any provision of this Agreement must be in writing and
signed by authorized representatives of the parties.
19.2 Severability. If any provision, or portion thereof, of this Agreement is
invalid or unenforceable under applicable statute or rule of law, it is only to
that extent to be deemed omitted, and such unenforceability shall not affect any
other provision of this Agreement, but this Agreement shall then be construed as
if such unenforceable provision or provisions had never been contained herein.
19.3 Independent Contractor. No party nor its employees or agents shall be
deemed to be employees or agents of the other party, it being understood that
each party is an independent contractor for all purposes and at all times, and
each party shall be wholly responsible for withholding and payment of all
federal, state, and local income and other payroll taxes with respect to its
employees, including contribution from them as required by law.
19.4 Waiver. The failure by Customer or BANM at any time to enforce any of the
provisions of this Agreement or any right with respect thereto, will in no way
be construed to be a waiver of such provisions or rights or in any way to affect
the validity of this Agreement. The exercise by a party of any rights under the
terms or provisions of this Agreement shall not preclude or prejudice the
exercising thereafter of the same or any other right.
19.5 Governing Law. Subject to any tariffs on file with any state or federal
regulatory body, this Agreement shall be governed by the law of the State of New
Jersey regardless of any conflicts of laws or rules which would require the
application of the laws of another jurisdiction.
19.6 Notices. Any notice to be given hereunder by either party to the other
shall be in writing and shall be valid and sufficient if dispatched by: a)
registered or certified mail, postage prepaid in any post office in the United
States; b) hand delivery; or c) overnight courier prepaid.
Notices to BANM shall be addressed to:
Bell Atlantic NYNEX Mobile
180 WashingtonValley Road
Bedminster, New Jersey 07921
Attention: GM Product Management
with a copy to Legal Dept. - same address
Notices to Customer shall be addressed to:
U.S. Wireless Data Inc.
4851 Independence Street, #189
Wheat Ridge, Colorado 80033
Attention:
If either party changes its address during the term hereof, it shall so advise
the other party in writing and any notice thereafter required to be given shall
be sent by certified mail to such new address. 19.7 Captions. The captions in
this Agreement are for convenience only and shall not be construed to define or
limit any of the terms herein. 19.8 Publicity and Advertising. Without the prior
written consent of the other party, no party hereto will disclose to any person
the terms and conditions of this Agreement, except as may be required by law and
then only in compliance with Section 18.3(e). Customer shall submit to BANM all
advertising, sales promotion, press releases and other publicity matters
relating to the Service furnished by BANM under this Agreement wherein BANM's
name or marks is mentioned or language from which the connection of said names
or marks therewith may be inferred or implied. Customer shall not publish or use
such advertising, sales promotion, press releases, or publicity matters without
BANM's prior written approval.
7
<PAGE>
19.9 Assignment. Any assignment of this Agreement, in whole or in part, or any
other interest hereunder without BANM's prior written consent shall be void. It
is further agreed that BANM, upon written notice to Customer, may assign this
Agreement, in whole or in part, or any of its rights, duties and obligations
under this Agreement to its parent, an affiliate or affiliates of BANM, or to a
partnership or partnerships in which BANM, its parent or an affiliate has an
BANM interest. This Agreement shall benefit and be binding upon the parties
hereto and their respective successors and permitted assigns.
19.10 Authorized Signatures. BANM and Customer each represent that the
individual signing this Agreement on its behalf has the power and authority to
enter into this Agreement and that this Agreement constitutes a valid and
binding obligation of each party.
19.11 Compliance with Laws Both parties shall comply with all applicable local,
state, and federal regulations, laws, ordinances, rules, and decisions.
19.12 Acts of God. In no event shall BANM have any liability for any failure to
comply with this Agreement, if such failure results from the occurrence of any
contingency beyond the reasonable control of BANM, including without limitation,
the cellular provider serving a particular area, strike or other labor
disturbance, riot, theft, flood, fire, lightning, storm, any act of God, power
failure, war, national emergency, interference by any government or governmental
agency, embargo, seizure, or enactment of any law, statute, ordinance, rule or
regulation.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
CELLCO PARTNERSHIP
By Bell Atlantic NYNEX Mobile, Inc.,
8
<PAGE>
EXHIBIT A
This Exhibit A sets forth the Area(s), as that term is used in this Agreement,
in which BANM is authorized to provide CRS as described in this Agreement. In
this Exhibit there is described the individual counties of the MSA's and/or
RSA's in which BANM is authorized to conduct its CRS operations
1 . (a) COUNTIES OF THE MSA(S) IN WHICH BANM IS LICENSED:
Bronx NY, Kings NY, New York NY, Queens NY, Richmond NY, Putnam NY, Rockland NY,
Westchester NY, Bergen NJ, Nassau NY, Suffolk NY, Essex NJ, Morris NJ, Somerset
NJ, Union NJ, Hudson NJ and Passaic NJ of the New York MSA; Bucks PA, Chester
PA, Delaware PA, Montgomery PA, Philadelphia PA, Burlington NJ, Camden NJ and
Gloucester NJ of the Philadelphia MSA; Essex MA, Middlesex MA, Plymouth MA,
Suffolk MA and Rockingham NH of the Boston MSA; District of Columbia, Charles
MD, Montgomery MD, Prince Georges MD, Alexandria City VA, Fairfax City VA, Falls
Church City VA, Manassas City VA, Manassas Park City VA, Arlington VA, Fairfax
VA, Loudoun VA and Prince William VA of the Washington DC MSA; Allegheny PA,
Beaver PA, Washington PA and Westmoreland PA of the Pittsburgh MSA; Baltimore
City MD, Anne Arundel MD, Baltimore MD, Carroll MD, Harford MD and Howard MD of
the Baltimore MSA; Hartford CT, Middlesex CT and Tolland CT of the Hartford MSA;
New Haven CT of the New Haven MSA; Madison NY, Worcester MA of the Worcester
MSA; Lackawanna PA, Carbon PA, Lehigh PA, Northampton PA and Warren NJ of the
Allentown MSA; Charles City VA, Chesterfield VA, Goochiand VA, Hanover VA,
Henrico VA, Gaston NC, Meklenburg NC and Union NC of the Charlotte MSA;
Middlesex NJ of the New Brunswick MSA; Hampden MA and Hampshire MA of the
Springfield MSA; Greenville SC, Pickens SC and Spartanburg SC of the Greenville
MSA; New Castle DE, Salem NJ and Cecil MD of the Wilmington MSA; Monmouth NJ of
the Long Branch MSA; Bristol MA of the New Bedford MSA; Lexington SC and
Richland SC of the Columbia MSA; Gloucester VA, Hampden City VA, James City VA,
Poquoson City VA, Barks PA of the Reading MSA; Mercer NJ of the Trenton MSA;
Hillsborough NH of the Manchester MSA; Atlantic NJ and Cape May NJ of the
Atlantic City MSA; Orange NY of the Orange County MSA; Dutchess NY of the
Poughkeepsie MSA; New London CT of the New London MSA; Alexander NC, Burke NC
and Catawba NC of the Hickory MSA; Berkshire MA of the Pittsfield MSA; Anderson
SC of the Anderson MSA; Cumberland NJ of the Vineland MSA; Warren NY and
Washington NY of the Glen Falls MSA; Chittenden VT and Grand Isle VT of the
Burlington MSA.
lb) COUNTIES OF THE RSA(S) IN WHICH BANM IS LICENSED:
Hunterdon in NJ 1-HUNTERDON; Ocean in NJ 2-OCEAN; Sussex in NJ 3-SUSSEX; Kent
and Sussex in DE 1-KENT; Kent, Queen Annes, Talbot, Caroline, Dorchester,
Wicomico, Somerset, Calvert, St. Marys, and Worcester in MD 2-KENT; Frederick in
MD 3-FREDERICK; Lee, Wise, Dickenson, Buchanan, Russell and Norton City in VA
1-LEE; Frederick, Clark, Shenandoah, Page, Rappahannock, Fauquier, Warren and
Winchester City in VA 10-FREDERICK (Bl); Mason, Jackson, Roane, and Calhoun in
WV 1-MASON; Wetzel, Tyler, Doddridge, Ritchie, Gilmer, Lewis, Pleasants in WV
2-WETZEL; McKean, Camerom, and Elk in PA 2-MCKEAN; Butler, Clarion, Lawrence and
Armstrong in PA 6-LAWRENCE (B2); Indiana, Jefferson and Clearfield in PA 7-
JEFFERSON; Greene and Fayette in PA 9-GREENE; Huntingdon, Juniata and Mifflin in
PA 11- HUNTINGDON; Windham in CT 2-WINDHAM; Newport in RL-NEWPORT; Cherokee,
Clay, Graham, Macon, Swain, Haywood, Jackson and Transylvania in NC 1-CHEROKEE;
Anson, Montgomery, Richmond, Scotland in NC 5-ANSON; Cabarrus, Stanly, Rowan,
Iredell, and Davie in NC 15-CABARRUS; Laurens, Greenwood, McCormick, Edgefield,
Saluda, Newberry and Abbeville in SC 2-LAURENS; Calhoun, Orangeburg, Barnwell,
Bamberg and Allendale in SC 7- CALHOUN; Oconee in SC 1-OCONEE; Cherokee,
Chester, Union and Fairfield in SC 3-CHEROKEE; Lancaster and York in SC
9-LANCASTER; Barnstable, Dukes and Nantucket in MA 2- BARNSTABLE; Carroll,
Belknap and Merrimack in NH 2-CARROLL; Franklin, Orleans, Essex, Lamoille,
Washington, Caledonia and Orange in VT 1-FRANKLIN; Addison, Rutland, Windsor,
Bennigton and Windham in VT 2-ADDISON; Dawson, Lumpkin, White, Habersham, Hall,
Banks, Franklin, Stephens, Rabun, Barrow in GA 2-DAWSON.
9
<PAGE>
EXHIBIT B
(Confidentially for this page of this document has been requested pursuant to
Commission rule 24b-2. The omitted material has been filed separately with the
Commission.)
10
<PAGE>
EXHIBIT C
AirBridge's Packet Service Request Form
Please fax requests to Jeffrey Pazkiewicz or Patrick Aanstoots at 908-658-4889
Contract Number Date
Customer Number Quantity
MDIS ..... EID's NEI's Activation/Deactivation Date
2 .... 2. 2.
3 .... 3. 3.
4 .... 4. 4.
5 .... 5. 5.
MDIS EID's NEI's Activation/Deactivation Date
2 2. 2.
3 3. 3.
4 4. 4.
5 5. 5,
MDIS EID's NEI's Activation/Deactivation Date
1 1. 1.
2 2. 2.
3 3. 3.
4 4. 4.
5 5. 5.
MDIS EID's NEI's Activation/Deactivation Date
2 2. 2.
3 3. 3.
4 4. 4.
5 5. 5.
Authorized Signer:
Print Name and Title
Signature:
<PAGE>
EXHIBIT C
AirBridgee Packet Service Request Form
Please fax requests to Charlene Berg or Dave Ribeiro at 973-898-6041
Contract Number Date
Customer Number Quantity
MDIS EID's NEI's Activation/Deactivation Date
2 2. 2.
3 3. 3.
4 4. 4.
5 5. 5.
MDIS EID's NEI's Activation/Deactivation Date
2 2. 2.
3 3. 3.
4 4. 4.
5 5. 5,
MDIS EID's NEI's Activation/Deactivation Date
2 2. 2.
3 3. 3.
4 4. 4.
5 5. 5.
MDIS EID's NEI's Activation/Deactivation Date
2 2. 2.
3 3. 3.
4 4. 4.
5 5. 5.
Authorized Signer:
Print Name and Title
Signature:
DEMAND NOTE
$45,000 April 11, 1997
On demand, U.S. Wireless Data, Inc. ("Borrower), for value received, jointly and
severally promises to pay to the order of ________________________ ("Holders")
the sum of Forty-flve thousand ($45,000) together with interest thereon from the
date hereof until paid at the rate of 10% per annum.
The holders, In lieu of cash payment, may exercise on or after November 1, 1997,
the right to purchase -shares of the common stock of U.S. Wireless Date, Inc. at
a price of $.35 per share for any or all of the outstanding principal and
accrued interest.
If, by April 11, 1998, the Holders have not exercisw their aforementioned rights
to purchase shares of common stock In U.S. Wireless Data, Inc. and has not
previously been paid in full, the outstanding principal and interest due the
issuer will be paid in full no later than April 11, 1998.
This note shall be construed and enforced in accordance with the laws of the
State of Colorado.
Borrower:
- -------------------------------
U.S. Wireless Data, Inc.
ENGAGEMENT AGREEMENT
This Agreement is effective (the "Effective Date") as of the date of execution,
by and between U.S. Wireless Data Inc.. 1123 Western Avenue, Mill Valley,
California 94941 (referred to as "Company"), and entrenet Group, LLC, 5213 El
Mercado Parkway. Suite D, Santa Rosa, California 95403 (referred to as
"entrenet').
In this Agreement, the party who is contracting to receive services shall be
referred to as "Company," and the party who will be providing the services shall
be referred to as "entrenet".
Company desires to have services provided by entrenet.
Therefore, the parties agree as follows:
1 . DESCRIPTION OF SERVICES. Beginning on the Effective Date, entrenet will
provide the services, (collectively, the "Services") as described in
Exhibit A attached hereto and incorporated herein by reference.
2. PERFORMANCE OF SERVICES. The manner in which the Services are to be
performed and the specific hours to be worked by entrenet shall be
determined by entrenet. entrenet shall, and the Company will rely on
entrenet's promise to work as many hours as may be reasonably necessary to
fulfill entrenet's obligations under this Agreement.
3. PAYMENT. Company will pay a fee to entrenet for the Services in an amount
and under terms and conditions as described in Exhibit A.
4. TRANSACTION. For purposes of this agreement, the term "Transaction' shall
mean, whether in one or a series of transactions: Any capital financing,
including without limitation, any financing for debt, equity, capital
stock (common or preferred), convertible instruments, lines of credit and
secured and/or unsecured debt; Any merger/acquisition activity including
without limitation, (i) the acquisition, directly or indirectly, through
purchases, sales, or otherwise, of any or all portions of the securities
of the Company by an investor or
(ii) any merger, consolidation, reorganization, recapitalization,
restructuring or other business combination involving the Company and an
investor.
5 . CONSIDERATION. For purposes of this agreement, the term
"Consideration' means the total proceeds and other consideration paid
and to be paid or contributed directly or indirectly, in connection
with a Transaction (which consideration shall be deemed to include
amounts paid or to be paid into escrow) to the Company and its
shareholders, including, without limitation: (i) cash; (ii) notes,
securities, and other property (including all options, warrants or
other instruments or arrangements convertible into or exercisable for
any of the
<PAGE>
foregoing) at the fair market value thereof, (iii) liabilities assumed;
(iv) payments to be made in installments-. (v) amounts paid or payable
under management, consulting, supply, service, distribution, technology
transfer or licensing agreements, and real property or eqipment lease
agreements, and agreements not to compete, and other similar arrangements
(including such payments to management), entered into other than in the
ordinary course of business; and (vi) contingent payments (whether or not
related to future earnings or operations). The fair market value of
non-cash consideration consisting of securities shall be determined based
upon (A) the closing sale price for such securities on the registered
national securities exchange providing the primary market therein on the
last trading day prior to the date of receipt thereof by the Company or
its shareholders. (B) if such securities are not so traded, the average of
the closing bid and asked prices, as reported by the National Association
of Securities Dealers Automated Quotation System on the last trading day
prior to the date of receipt thereof by the Company or its shareholders,
or (C) if such securities are not so traded or reported, agreement between
the Company and entrenet. The fair market value of any non-cash
Consideration other than securities shall be determined by agreement of
the Company and entrenet. If all or any portion of the Consideration is to
be paid over time, then that portion of the Transaction Fee attributable
thereto shall be payable, in the sole discretion of entrenet, either (i)
as and when such payments are made or (ii) upon consummation of a
Transaction, calculated based on the present value of such Consideration
utilizing a discount rate of 71/o per annum.
6. ACCOUNTING AND INSPECTION RIGHTS. For all compensation referred to in
Exhibit A, it is further agreed that Company shall maintain written records
in sufficient detail for purposes of determining the amount of Fees due
entrenet. Company shall provide to entrenet a written accounting that sets
forth the manner in which Fee payments were calculated. Upon 15 days
notice, entrenet or entrenet's agent shall have the right to inspect
Company's records for the limited purpose of verifying the calculation of
Fee payments, subject to such restrictions as Company may reasonably impose
to protect the confidentiality of the records. Such inspections shall be
made at the company's principal place of business during regular business
hours as may be set by the Company.
7. EXPENSE REIMBURSEMENT. entrenet shall be entitled to reimbursement from
Company for the following "out-of-pocket" expenses: travel expenses,
airfare, hotel, meals, postage and delivery, copying, long-distance
telephone calls, or other expenses as shall be mutually agreed upon.
8. TERM/TERMINATION. This Agreement shall be effective upon signing and shall
have an initial term and such renewal terms as shall be described in
Exhibit A- The termination of this engagement is also defined in Exhibit
A.
9. RELATIONSHIP OF PARTIES. It is understood by the parties that entrenet is
an independent contractor with respect to Company, and not an employee of
Company. Company will not provide fringe benefits, such as health
insurance benefits, paid vacation, or any other employee benefit, for the
benefit of entrenet.
10. INDEMNIFICATION AND CONTRIBUTION.
(a) If, in connection with the services or matters that are the subject of this
agreement, entrenet becomes involved in any capacity in any action or legal
proceeding, the Company agrees to reimburse entrenet, its affiliates and
their respective directors, officers, employees, representatives and
controlling persons (each an "Indemnified Person') promptly upon request
for all expenses (including without limitation, fees and disbursements of
legal counsel and the cost of investigation and preparation) as they are
incurred. In the event a determination is made to the effect set forth
below holding that entrenet is not entitled to indemnification hereunder,
entrenet shall promptly refund to the Company all amounts advanced under
this Section in respect of reimbursement of expenses. The Company also
agrees to indemnify and hold each Indemnified Person harmless against all
losses, claims damages or liabilities, joint or several (collectively,
"Damages"), to which such Indemnified Person may become subject
(i) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any offering
materials or any other written or oral communication provided to any
investor of securities of the Company or arising out of or based upon
the omission or alleged omission to state in any such document or
communication a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; or
(ii) in connection with the services or matters which arc the subject
of this agreement, provided that the Company shall not be liable under
the foregoing indemnity in respect of any Damages to the extent that a
court having jurisdiction shall have determined by a final judgment
(not subject to further appeal) that such damages resulted directly
and primarily from the gross negligence or willful misconduct of
entrenet or any other Indemnified Person. The Company also agrees that
no Indemnified Person shall have any liability to the Company for or
in connection with this engagement, except for any liability which
results directly and primarily from the gross negligence or willful
misconduct of the Indemnified Person.
(b) The Company and entrenet agree that if, for any reason, any
indemnification sought pursuant to this Section is unavailable or is
insufficient to hold any Indemnified Person harmless, then, whether or not
entrenet is the person entitled to indemnification, the Company and
entrenet shall each contribute to amounts paid or payable in respect of the
Damages for which such indemnification is unavailable or insufficient in
such proportion as if appropriate to reflect
(i) the relative benefits to the Company, on the one hand. and
entrenet, on the other and
(ii) their relative fault, in connection with the matters as to which
such Damages relate, as well as any relevant equitable considerations;
provided that in no event shall the amount to be contributed by
entrenet exceed the amount of fees actually received by entrenet
hereunder (excluding any amounts received by entrenet as a
reimbursement of expenses). The Company and entrenet agree to consult
in advance with one another with respect to the terms of any proposed
waiver, release or
<PAGE>
Engagement
Agreement
action or proceeding to which entrenet or an indemnified Person may be
subject as a result of the matters contemplated by this agreement and
further agree not to enter into any such waiver, release or settlement
without the prior written consent of one another (which consent shall
not be unreasonably withheld), unless such waiver, release or
settlement includes an unconditional release of entrenet or such
indemnified Person, as the case may be, from all liability arising out
of such claim, action or proceeding.
(c) The agreements of the Company under this Section shall be in addition to
any liabilities the Company may otherwise have and shall apply whether or
not entrenet or any other Indemnified Person is a formal party to any claim
action or legal proceedings. ANY RIGHT TO A TRIAL BY JURY WITH RESPECT TO
ANY CLAIM FOR INDEMNIFICATION OR CONTRIBUTION ]HEREUNDER OR IN RESPECT OF
ANY CLAIM ACTION OR LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THE
SERVICES OF entrenet HEREUNDER OR IN ANY OTHER MANNER IS ]HEREBY WAIVED BY
EACH INDEMNIFIED AND BY THE COMPANY.
D PARTY
11.
COOPERATION, CONFIDENTIALITY, ETC.
(a) The Company shall furnish entrenet with all information and data which
entrenet shall reasonably deem appropriate in connection with its
activities on the Company, s behalf, and shall provide entrenet full access
to the Company's officers, directors, employees and professional advisors.
The Company recognizes and confirms that entrenet in acting t to this
engagement will be using information m public reports and other information
provided by others, including information provided by the Company, and that
entrenet does not assume responsibility for, and may rely without
independent verification upon, the accuracy or completeness of any such
information.
(b) the Company agrees that entrenet's advice is for the use
and information of the Company's management and Board of Directors only and
the Company will not disclose such advice to others (except the Company's
professional advisors and except as required by law) or summarize or refer
to such advice without, in each case, entrenet's prior written consent.
Notwithstanding anything to the contrary contained in the foregoing, in the
event the Company is required by law to make any filings with any
governmental authority (including without limitation the Securities and
Exchange Commission) which mention entrenet or any disclosure to the holder
of its securities concerning entrenet, the Company shall afford entrenet
the opportunity to review such disclosure in advance and to approve the
form thereof, such approval not to be unreasonably withheld or delayed.
entrenet agrees that it will not. without the prior written consent of the
Company, disclose, to any third party any confidential information provided
by the Company to entrenet in connection with this engagement, except to
the extent
(i) such disclosure is required by applicable law, regulation or legal
process,
(ii) such information becomes publicly known other than as a remit of
the breach by entrenet of its obligations set forth in this sentence,
and
(iii) such disclosure is requested or required by any bank regulatory
authority having jurisdiction over entrenet.
12, OTHER TRANSACTIONS. The Company acknowledges that entrenet and its
affiliates may have and may in the future have investment and commercial
banking, trust and other relationships with parties other than the Company,
which parties may have interests with respect to a Transaction. Although
entrenet in the course of such other relationships may acquire information
about the Transaction, potential investors or such other parties, entrenet
shall have no obligation to disclose such information to the Company or to use
<PAGE>
such information on the Company's behalf. Furthemore, the Company acknowledges
that entrenet may have fiduciary or other relationships whereby entrenet may
exercise voting power over royalties of various persons, which securities may
from time to time include securities of the Company, potential investors or to
others with interests with respect to a Transaction. The Company acknowledges
that entrenet may exercise such powers and otherwise perform its functions in
connection with such fiduciary or other relationships without regard to its
relationship to the Company hereunder.
13. ACKNOWLEDGMENT OF SERVICES PROVIDED. entrenet may include descriptions
of services provided by entrenet to the Company in entrenet's
promotional materials. The Company may not otherwise be publicly
referred to by entrenet without Company's prior consent.
14. NOTICES. All notices required or permitted under this Agreement shall be
in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, fire class postage prepaid,
addressed as follows:
<PAGE>
IF for- Company:
U.S. Wireless Data Inc.
Rod Stambaugh
President & CEO
1123 Western Avenue
mill Valley, California 94941
IF for entrenet:
entrenet Group, LLC
Timothy F. Jaeger
Chief Financial Officer
5213 El Mercado parkway, Suite D Santa Rosa, CA 95403
Such addresses may be changed from time to time by either party by
providing written notice to the other m the manner set forth above.
15. ARBITRATION AND CONSENT TO JURISDICTION. Any dispute and/or
controversy relating to or arising from the interpretation and/or
application of this Agreement shall be submitted at the request of the
Company or entrenet to a neutral arbitrator selected by the parties
from the J.A.M.S/Endispute panel Of arbitrators for a determination
which shall be @ and binding as to the parties thereto. Arbitration
shall take place in Santa Rosa, located in the county of Sonoma, state
of California for a determination which shall be final and binding as
to the parties thereto. The decision and award of the arbitrator may
include the cost of the arbitration proceedings and may include
reasonable attorney fees for the successful party. The arbitration
shall be conducted in accordance with California Arbitration Act (CCP
Section 1280 et seq.) and not by court action except as provided by
California law for the judicial review of arbitration proceedings.
Nothing herein contained shall be deemed to affect the rights of any @
to serve process in any manner other than as permitted by law.
16. ENTIRE AGREEMENT. This Agreement, along with any Exhibits attached
hereto, contains the entire agreement of the parties with respect to
the subject matter and supersedes any other agreement whether oral or
written which are not fully expressed herein, except for carryover
provisions of any previous executed agreements between entrenet and
Company.
17. AMENDMENT. This Agreement may be modified or amended if the amendment
is made in writing and is signed by both parties.
18. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason. the remaining provisions shall
continue to be valid and enforceable. If a court finds that any
provision of this Agreement is invalid or unenforceable, but that by
limiting such provision it would become valid and enforceable, then
such provision shall be deemed to be written, construed, and enforced
as so limited.
19. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver or
limitation of that party's right to subsequently enforce and compel
strict compliance with every provision of this Agreement.
20. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of California, excluding that body of law known as conflict of
laws.
<PAGE>
Engagement Agreement
Exhibit A
SERVICES PROVIDED BY entrenet
ADVISORY SERVICES. entrenet will act as corporate advisor in providing
services to the management of the Company. Services shall include advice
and counsel in the following areas:
1. Business Plan and Corporate presentation
2. Administrative Systems and Controls
3. Sales and Marketing Strategy and Structure
DIRECT INTRODUCTION OF FINANCING SOURCES. entrenet will use its best
efforts to provide introduction to financing sources for the Company.
OTHER SERVICES. entrenet may provide additional direct consulting services
to the Company beyond its role as corporate advisor (egs. financing
strategies, strategic partnerships, acquisition and merger strategies,
securing placement agents, corporate positioning, option for and
participation in financial meetings ("road show")) at the Company's
request. Such additional direct consulting services would be charged at
entrenet, s prevailing consulting rates at the time of the assignment(s) or
as agreed to separately in the future.
entrenet COMPENSATION.
Advisory Service & At signing of this engagement agreement, entrenet shall
earn compensation of $150,000 for a one-year term. Form of payment shall
be one hundred percent (1000/o) payable in a 10% Convertible Debenture.
The form of which is attached as Exhibit B except that the conversion
price shall be fixed at $0.50 per share for a total of 300,000 shares for
the engagement and the Debenture shall not be transferable. Payments due
entrenet upon completion of each the following milestones:
1. Business Plan and Corporate presentation:
* Summary Business Plan - Due 6/15/97 $15,000
* Complete Business Plan - Due 6/19/97 $20,000
* Corporate Presentation - Due 6/24/97 $15,000
2. Administrative Systems and Controls $70,000
* Needs analysis - Due 8/l/97
+ Staffing Requirement-Due 8/l/97
M 15 + RFP Preparation - Due 8/l/97
+ Corporate vs. Regional staffing requirements - Due 8/l/97
* Interim staffing requirements - Due 8/l/97
Systems installation, training and vendor oversight -
On going on an agreed upon mutually agreed upon
schedule
3. Sales and marketing strategy Consultation - All due
S/l/97 $30,000 + Strategy review, analysis, and
recommendations + Reporting command & control,
structure, review, analysis, and recommendations +
Sales/Management recruiting
<PAGE>
Engagement
Agreement
Direct introduction of Financing sources In addition to fees for successful
Transactions and advisory services, entrenet's fees for direct introduction
of a financing source or referral of principal parties, shall be eight
percent (80/o) of the gross consideration provided by such source.
Warrants. For all successful Direct Introduction of Financing Sources,
the Company shall grant to entrenet a five-year warrant to purchase
shares of Company's stock equal to the value of all fees paid to
entrenet in conjunction with all such transactions. These warrants
shall contain all standard provisions, as well as stock split
adjustments and piggy-back registration provisions, and shall have an
exercise price equal to the lower of market or the purchase price of
the stock issued in conjunction with any such transaction.
Reimbursement of Expenses. Entrenet shall be entitled to expense
reimbursement for all pre-approved travel and business expenses as described
in paragraph 7 of this agreement. Additionally, to offset local auto travel.
long-distance telephone calls, postage, delivery, copying, faxing and other
office costs, entrenet shall be advanced a non-accountable $3000 for the
one-year term. Form of payment shall be $750 payable in cash upon signing of
this agreement. The balance of shall be paid quarterly in the amount of $750
on September 1, 1997, December 1, 1997, and March 1, 1998.
TERM
- ----
The term of the Agreement shall be one (1) year from date of signing.
Upon termination of this Agreement, payments under this paragraph shall
cease; provided, however, that entrenet shall be entitled to payments for
periods or partial periods that occurred prior to the date of termination
and for which entrenet has not yet been paid.
GTE LEASING CORPORATION
PROMISSORY NOTE NO. 002
1123 Western Ave
----------------
(Street Address of Maker)
Mill Valley Marin CA 94941
(Town) (County) (State) (zip)
FOR VALUE RECEIVED, U.S. Wireless Data, Inc. (hereafter called "Maker") promises
to pay to the order of GTE Leasing Corporation (hereafter called "Payee") at the
address set forth below or at such other place as Payee or the holder hereof may
designate, the sum of Eighty Thousand and no/100 Dollars ($80,000.00) which sum
comprises both principal and interest at the rate of 11.81% per annum, in 36
consecutive monthly installments of $2,650.00 each. The first installment shall
be due and payable on 15th day of the month following receipt of the certificate
of acceptance with the balance of installments payable on even date of each
succeeding month thereafter until this note is fully paid.
If any installment is not paid within 10 days after due date, Maker agrees to
pay a late charge at the annual rate of 18% on, and in addition to, the amount
of said installment, but not exceeding the maximum lawful charges.
If Maker fails to make payment of any amount due hereunder within 10 days after
same becomes due and payable, then Maker agrees that the entire unpaid balance
of this note shall become due and payable at the option of the holder hereof
together with interest thereon at an annual rate of 18% from such accelerated
maturity until paid, but not exceeding the lawful maximum, if any.
The undersigned and all endorsers or any others who may at any time become
liable for the payment hereof hereby consent to any and all extensions of time,
renewals, waivers, modifications, substitutions or releases of security that may
be granted or consented to by the Payee or holder hereof with regard to time of
payment of this note or any other provision hereof. The undersigned and all
endorsers hereby severally waive presentment, demand for payment, protest and
notice of protest, notice of dishonor and all other notices in connection with
this note and agree to pay, if permitted by law, all expenses incurred in
collection, including reasonable attorneys' fees, if placed with an attorney for
collection, and hereby waive all benefits of valuation and appraisement. The
undersigned and all endorsers authorize, irrevocably, any attorney of any court
of record to appear for the undersigned and all endorsers in said court, and
confess judgment without process in favor of the holder of this note for such
amount as may appear to be unpaid thereon. The undersigned and all endorsers
also expressly waive all benefit under the exemption laws of the state in which
such judgment is sought and waive all errors in any such proceedings and consent
to immediate execution upon such judgment, hereby ratifying and confirming all
that said attorney may do by virtue hereof.
The undersigned authorizes Payee to receive monthly installments on this note
and all other outstanding notes directly from Nova Information Systems,
Inc.("Nova ), as identified on a Member Service Provider Sales and Service
Credit Card Processing Agreement between Nova and Maker signed on February 7,
1997, via ACH to a Bank Account designated by GTE Leasing on the 15 of each
month. Furthermore, under any circumstances should the Agreement be terminated,
Maker, without being relieved of any obligations under this note and any
supplemental documents, authorizes Nova to continue to remit monthly
installments to the Payee and authorizes Payee the right to receive monthly
installments until such time that all obligations are satisfied and paid in
full.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the 6th day of August
1997.
U.S. Wireless Data, Inc.
------------------------
(Type or print name of Maker)
By: Rod Stambaugh
-----------------
(Signature of Authorized Representative
Its:President and CEO
---------------------
(Title)
<PAGE>
GTE LEASING CORPORATION
SECURITY AGREEMENT
Undersigned, U.S. Wireless Data. Inc.
-------------------------------------------
(Print Name of Customer)
1123 Western Avenue, Mill Valley. CA 94941
-------------------------------------------
(Address, City, State)
herein called "Customer", hereby agrees with GTE Leasing Corporation herein
called GTELC, of 19845 U.S. Hwy. 31 N., Westfield, IN 46024-as follows:
1. Concurrently herewith, GTELC lent Customer and Customer hereby
acknowledges receipt of $ Eighty Thousand and no/100 Dollars
($80,000.00) evidenced by Promissory Note of even date herewith,
executes by Customer payable to the order of GTELC, with interest as
provided therein (principal and accrued interest are herein referred to
as "Indebtedness").
2. As security for the payment by Customer of the Indebtedness and all
other indebtedness now or hereafter owing by Customer to GTELC, and the
performance by Customer of the covenants, warranties and agreements
contained herein, and any other agreements between GTELC and Customer,
Customer hereby grants, sells, assigns, conveys, warrants, mortgages
and confirms to GTELC and gives and agrees that GTELC does and shall
have a security interest under the Uniform Commercial Code, in all of
the following described personal property (herein called "Collateral"):
DESCRIPTION OF COLLATERAL
200 ea. Tranz Enabler - Wireless CDPD Transmission Devices per attached Schedule
- --------------------------------------------------------------------------------
The right to receive proceeds from the contract by and between Nova
Information Systems and Maker dated February 7,1997
3. Customer warrants that it is or will be the owner of Collateral free
and clear of any liens or encumbrances, except for the security
interest provided for herein; and will keep and maintain the same
free and clear of all encumbrances, charges and liens except as
herein provided.
4. Collateral will not be moved from the state where it is currently
located, nor will it be sold or otherwise disposed of without prior
written consent of GTELC.
5. Customer will keep and maintain Collateral in good order and repair
and working condition at all times.
6. At Customer's own cost and expense, it will have and maintain
insurance at all times against hazards, with companies in amounts and
in form acceptable to GTELC with insurance policies endorsed to make
the same payable first to GTELC, as its interest may appear. In the
event of any loss thereunder, the carriers owned therein hereby are
directed by Customer to make such payment for loss to GTELC and not to
Customer and GTELC jointly. If any insurance losses be paid by check,
draft or other instrument payable to Customer and GTELC jointly, GTELC
may endorse the name of Customer thereon and do such other things as
it may deem desirable in order to reduce the same to cash. All loss
recoveries received by GTELC upon any such insurance may be applied
and credited by GTELC at its discretion, to the indebtedness or to any
other amounts owing from Customer to GTELC.
7. If Customer fails to keep Collateral free and clear of all
encumbrances, liens and charges, except as herein provided, or to pay
tax or public charges thereon, or to keep the same in good order or
repair, or fully insured as herein required, then GTELC, at its
discretion, may discharge such encumbrances, liens or other charges,
or pay such taxes or other public charges, or procure and maintain
such insurance or make such repairs as may deem advisable. All sums of
money thus expended, and all other monies paid by GTELC at its
discretion, to protect its interest in the Collateral shall be
repayable by Customer to GTELC on demand, and if not so repaid, shall
be added to the Indebtedness, bear interest, and be secured in like
manner as the Indebtedness.
8. Customer confirms that the security interest of GTELC in other
equipment, chattels and personal property of Customer under any other
agreements between GTELC and Customer is also security of Customer's
obligations hereunder.
9. None of the terms or conditions herein or any agreements or contracts
between Customer and GTELC are in violation of any provision of the
Certificate of Incorporation or by-laws of Customer or any agreements
Customer may have with any third party; and the execution and delivery
hereof, and of other agreements or writings with or to GTELC have been
duly authorized by appropriate corporate action. Customer will at all
times comply with all acts, laws, rules and regulations of any federal,
state or public authorities to which Customer is subject.
10. Upon Customer's default in the payment of any principal or interest
under the Note, when due, or default or branch of any of the
provisions hereof, or in the payment performance of any obligations of
Customer to GTELC, or it Customer becomes insolvent, ceases doing
balances as a going concern, or commits an act of bankruptcy, or if a
petition under the Bankruptcy Code or any amendment thereof or any
state insolvency law be filled by Customer or against Customer and be
not dismissed within thirty (30) days, or an attachment or tax lien be
filed against to the satisfaction of GTELC, then as the election of
GTELC, the entire unpaid indebtedness shall immediately become due and
payable without notice, and if not paid, GTELC at any time then or
thereafter, in its discretion, may lawfully enter any of Customer's
premises or other premises on which the Collateral is located and
lawfully remove the Collateral to such place as GTELC may deem
advisable, or require Customer to make any or all such Collateral
available at such place as GTELC may direct, and, upon five (5) days
written notice to Customer, sell the Collateral, or any part thereof,
at public auction, in one or more sales, at such price or prices and
upon such terms either for cash, credit or future delivery as GTELC
may elect, and at any such public sale or sales GTELC may bid for and
become the purchaser of any or all such Collateral, and/or upon five
(5) days written notice to Customer of the date and details of such
sale or sales, sell the Collateral or any part thereof, at private
sale or sales, at any time or place, in one or more sales, at such
price for prices, and upon such terms, either for cash, credit or
future delivery, as GTELC may elect, and/or foreclose its security
interest in the Collateral in any way permitted by law. The proceeds
of such sales may be applied by GTELC, at its discretion, to the
payment of Customer's obligations to GTELC, including interest,
attorneys' reasonable fees and all reasonable cost and expenses
incurred by GTELC in connection therewith. In connection with the
notices given of such sales, it is agreed that in all instances five
(5) days written notice is reasonable notice. GTELC may enforce its
security interest hereunder either alternately or concurrently with
its rights under other agreements between it and Customer and shall
have the full right to realize upon all available collateral,
collecting on the same or instituting procedures in connection
therewith, until GTELC has received payment in full of all amounts
owing to it under any of its agreements with Customer, including
principal, interest, costs and expenses. Any surplus remaining after
payment in full of all Indebtedness of Customer to GTELC shall be paid
by GTELC to Customer along with the reassignment of any remaining
Collateral.
11. Any delay on the part of GTELC in exercising any power, privilege or
right hereunder or under any instrument executed by Customer to GTELC
in connection herewith shall not operate as a waiver thereof and no
single or partial exercise of any power, privilege or right shall
preclude other or further exercise thereof, or the exercise of any
other power, privilege or right. The waiver by GTELC of any default by
Customer shall not constitute a waiver of any subsequent defaults, but
shall be restricted to the default so waived. If any part of this
Agreement shall be contrary to any law which GTELC might seek to apply
or enforce or should otherwise be defective, the other provisions of
this Agreement shall not be affected thereby, but shall continue in
full force and effect. All rights, remedies and powers of GTELC
hereunder are irrevocable and cumulative, and not alternative or
exclusive, and shall be in addition to all rights, remedies and powers
given hereunder or in or by any other instruments or any laws now
existing or hereafter enacted.
12. Customer shall pay all out-of-pocket expenses and all costs of any
nature whatsoever incurred by GTELC in connection with the making
of this loan, including, but not limited to, all filing fees and
recording costs, stamp taxes and attorneys' fees actually incurred.
13. Customer including any guarantor hereunder, hereby waives
presentment, demand, protest, notice of protest, and non-payment or
dishonor, notice of the sale of any collateral security and all
benefits of valuation, appraisement, and all exemption laws now in
force or hereafter passed, including stay of execution and
condemnation.
14. This Agreement shall apply and inure to the benefit of and bind the
successors and assigns of Customer and GTELC, and the terms
"Customer" and "GTELC" include and mean, respectively, the
successors and assigns of Customer and GTELC.
IN WITNESS WHEREOF, Customer has caused this Agreement to be duly executed on
the day and year first above written.
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement"), dated and effective as of July 25,
1997 is entered into by and between U.S. WIRELESS DATA, INC., a Colorado
corporation (herein referred to as the "Company") and LIVIAKIS FINANCIAL-L
COMMUNICATIONS, INC., a California corporation (herein referred to as the
"Consultant").
RECITALS
WHEREAS, Company is a publicly held corporation with its common stock
traded through the OTC Bulletin Board; and
WHEREAS, Consultant has experience in the area of corporate finance,
investor communications and financial and investor public relations; and
WHEREAS, Company desires to engage the services of Consultant to assist
and consult with the Company in matters concerning corporate finance and to
represent the company in investors' communications and public relations with
existing shareholders, brokers, dealers and other investment professionals as to
the Company's current and proposed activities;
NOW THEREFORE, in consideration of the promises and the mutual
covenants and agreements hereinafter set forth, the parties hereto covenant and
agree as follows
1. Term of Consultancy . Company hereby agrees to retain the Consultant to act
in a consulting capacity to the Company, and the Consultant hereby agrees to
provide services to the Company commencing July 31, 1997 and ending on July 31,
1998.
2. Duties of Consultant. The Consultant agrees that it will generally provide
the following specified consulting services through its officers and employees
during the term specified in Section I.:
(a)Advise and assist the Company in developing and implementing
appropriate plans and materials for presenting the Company and its business
plans, strategy and personnel to the financial community, establishing an image
for the Company in the financial community, and creating the foundation for
subsequent financial public relations efforts;
(b) Introduce the Company to the financial community-,
(c) With the cooperation of the Company, maintain an awareness during the
term of this Agreement of the Company's plans, strategy and personnel, as they
may evolve during such period, and advise and assist the Company in
communicating appropriate information regarding such plans, strategy and
personnel to the financial community;
(d) Assist and advise the Company with respect to its (1) stockholder and
investor relations, (ii) relations with brokers, dealers, analysts and other
investment professionals, and (iii) financial public relations generally-,
(e)Perform the functions generally assigned to investor/stockholder
relations and public relations departments in major corporations, including
responding to telephone and written
<PAGE>
inquiries (which may be referred to the Consultant by the Company); preparing
press releases for the Company with the Company's involvement and approval or
reviewing press releases, reports and other communications with or to
shareholders, the investment community and the general public; advising with
respect to the timing, form, distribution and other matters related to such
releases, reports and communications; and consulting with respect to corporate
symbols, logos, names, the presentation of such symbols, logos and names, and
other matters relating to corporate image;
(t)Upon the Company's approval, disseminate information regarding the
Company to shareholders, brokers, dealers, other investment community
professionals and the general investing public;
(g) Upon the Company's approval, conduct meetings, in person or by
telephone, with brokers, dealers, analysts and other investment professionals to
advise them of the Company's plans, goals and activities, and assist the Company
in preparing for press conferences and other forums involving(, the media,
investment professionals and the general investment public;
(h) At the Company's request, review business plans, strategies,
mission statements budgets, proposed transactions and other plans for the
purpose of advising the Company of the investment community implications
thereof, and,
(i) Otherwise perform as the Company's financial relations and public
relations consultant.
3. Allocation of Time and Energies. The Consultant hereby promises to
perform and discharge well and faithfully the responsibilities which may be
assigned to the Consultant from time to time by the officers and duty authorized
representatives of the Company in connection with the conduct of its financial
and investor public relations and communications activities, so long as such
activities are in compliance with applicable securities laws and regulations.
Consultant shall diligently and thoroughly provide the consulting services
required hereunder. Although no specific hours-per-day requirement will be
required, Consultant and the Company agree that Consultant will perform the
duties set forth herein above in a diligent and professional manner. The parties
acknowledge and agree that a disproportionately large amount of the effort to be
expended and the costs to be incurred by the Consultant and the benefits to be
received by the Company are expected to occur upon and shortly after, and in any
event, within two months of the effectiveness of this Agreement. It is
explicitly understood that Consultant's performance of its duties hereunder will
in no way be measured by the price of the Company's common stock, nor the
trading volume of the Company's common stock. It is also understood that the
Company is entering into this Agreement with Liviakis Financial Communications,
Inc. ("LFC"), a corporation and not any individual member of LFC, and with such,
Consultant will not be deemed to have breached this Agreement if any member,
officer or director of LFC leaves the firm or dies or becomes physically unable
to perform any meaningful activities during the term of the Agreement, provided
the Consultant otherwise performs its obligations under this Agreement.
4. Remuneration. As full and complete compensation for services described in
this Agreement, the Company shall compensate Consultant as follows:
4.1 For undertaking this engagement and for other good and valuable
consideration , the Company agrees to issue and deliver to the
Consultant and Robert B. Prag, its Senior Vice President, herein after
referred to as "Prag", an aggregate of Ten Thousand Dollars ($ 1
0,000,00) cash and 300,000 unregistered, restricted shares of the
Company's common
2.
<PAGE>
stock (the "Common Stock"). Said shares will be delivered to
Consultant on the following basis'.
150,000 shares on November 15, 1997 for specific services to be
rendered in the first 60 days of the Consulting Agreement which
include assisting the company in the recruitment of officers and
directors, assisting the company in formulating its business plan and
introducing the company to investment bankers, such shares being fully
paid and nonassessable when delivered to Consultant and Prag. The
remaining 150,000 shares of Company common stock and the Ten Thousand
Dollars ($10,000.00) in cash will be delivered in 10 equal consecutive
monthly installments of 15,000 shares and One Thousand Dollars
($1,000.00) each, such shares being fully paid and nonassessable when
delivered to Consultant and Prag, with the installments due on the
following dates:
15,000 shares and $1,000. 00 on November 15, 1997;
15,000 shares and $1,000. 00 on December 1, 1997;
15,000 shares and $1,000. 00 on January 1, 1998-1
15,000 shares and $ 1,000. 00 on February 1, 1998;
15,000 shares and $1,000. 00 on March 1, 1998;
15,000 shares and $1,000. 00 on April 1, 1998;
15,000 shares and $1,000. 00 on May, 1, 1998;
15,000 shares and $1,000. 00 on June 1, 1998;
15,000 shares and $1,000. 00 on July 1, 1998; and,
15,000 shares and $1,000. 00 on August 1, 1998.
This Compensation shall be delivered to the Consultant and Prag
promptly on the dates outlined above and shall, when issued and
delivered to Consultant and Prag, be fully paid and non-assessable.
The Company understands and agrees that Consultant has foregone
significant opportunities to accept this engagement and that the
Company derives substantial benefit from the execution of this
Agreement and the ability to announce its relationship with
Consultant. If the Company decides to terminate this Agreement prior
to July 3 1, 1998 for any reason whatsoever, it is agreed and
understood that Consultant or Prag will not be requested or demanded
by the Company to return any of the shares or cash paid and delivered
to it hereunder, and the Company agrees to accelerate and pay the
Consultant and Prag in full the entire balance of the 300,000 shares
of Common Stock and Ten Thousand Dollars ($10,000.00) due hereunder.
One hundred (100%) percent of the cash payable to Consultant hereunder
shall be paid to Liviakis Financial Communications, Inc. Seventy-five
percent (75%) of each increment of the Common Stock issued pursuant to
this Agreement shall be evidenced by a stock certificate(s) issued in
the name of Liviakis Financial Communications, Inc. and twenty-five
percent (25%) of the Common Shares issued pursuant to this Agreement
shall be evidenced by a stock certificate(s) issued in the name of
Robert B. Prag. The Common Stock issued to the Consultant and Prag
hereunder shall have "piggyback" registration rights and will be
included in the next appropriate registration done by the Company. All
registration costs shall be borne solely by the Company. In the event
the Company for any reason, including without limitation the
unavailability of authorized but unissued shares, does not deliver
certificates
3.
<PAGE>
representing shares of the Company's Common Stock as and when required
hereunder, the Company shall, unless the time for performance is
extended in writing by the Consultant, pay to Consultant and Prag in
lieu of delivery of the shares of Common Stock with respect to which the
Company is in default, an amount per undelivered share equal to the
average closing asked price per share of Common Stock during the five
trading days ending with the day on which the Company was required
hereunder to deliver but failed to deliver such shares of Common Stock.
4.2 Consultant and Prag (hereinafter referred to as "Consultants")
acknowledge that the shares of Common Stock to be issued pursuant to
this Agreement (collectively, the "Shares") have not been registered
under the Securities Act of 1933, and accordingly are "restricted
securities" within the meaning of Rule 144 of the Act. As such, the
Shares may not be resold or transferred unless the Company has received
an opinion of counsel reasonably satisfactory to the Company that such
resale or transfer is exempt from the registration requirements of that
Act.
4.3 In connection with the acquisition of Shares hereunder, the Consultants
represent and warrant to the Company as follows:
(a) Consultants acknowledge that the Consultants have been afforded the
opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the Company concerning
an investment in the Shares, and any additional information which the
Consultants have requested.
(b) Consultants' investment in restricted securities is reasonable in
relation to the Consultants' net worth, which is in excess of ten (10)
times the Consultants' cost basis in the Shares. Consultants have had
experience in investments in restricted and publicly traded
securities, and Consultants have had experience in investments in
speculative securities and other investments which involve the risk of
loss of investment. Consultants acknowledges that an investment in the
Shares is speculative and involves the risk of loss. Consultants have
the requisite knowledge to assess the relative merits and risks of
this investment without the necessity of relying upon other advisors,
and Consultants can afford the risk of loss of his entire investment
in the Shares. Consultants are (1) accredited investors, as that term
is defined in Regulation D promulgated under the Securities Act of
1933, and (ii) a purchaser described in Section 25102 (f) (2) of the
California Corporate Securities Law of 1968, as amended.
(c) Consultants are acquiring the Shares for the Consultants' own
account for long-term investment and not with a view toward resale or
distribution thereof except in accordance with applicable securities
laws.
5. Financing "Finder's Fee". It is understood that in the event Consultant
introduces Company, or its nominees, to a lender or equity purchaser, not
already having a preexisting relationship with the Company, with whom Company,
or its nominees, ultimately finances or causes the completion of such financing,
Company agrees to compensate Consultant for such services with a "finder's fee"
in the amount of 2.5% of total gross funding provided by such
4.
<PAGE>
tender or equity purchaser, such fee to be payable in cash. This will be in
addition to any fees payable by Company to any other intermediary, if any, which
shall be per separate agreements negotiated between Company and such other
intermediary.
5,1 It is further understood that Company, and not Consultant, is
responsible to perform any and all due diligence on such lender or
equity purchaser introduced to it by Consultant under this Agreement,
prior to Company receiving funds. However, Consultant will not
introduce any parties to Company about which Consultant has any prior
knowledge of questionable, unethical or illicit activities.
5.2 Company agrees that said compensation to Consultant shall be paid in
full at the time said financing is closed. Moreover, said
compensation, will be a condition precedent to the closing,, of such
funding or financing and Company shall execute any and all documents
necessary to effect said compensation.
5.3 As further consideration to Consultant, Company, or its nominees,
agrees to pay with respect to any financing provided directly or
indirectly to the Company by any lender or equity purchaser covered
by this Section 5. during the period of five years from the date of
this Agreement, a fee to Consultant equal to that outlined in Section
"5" herein.
5.4 Consultant will notify Company of introductions it makes for
potential sources of financing in a timely manner (within
approximately 3 days of introduction) via facsimile memo. If Company
has a preexisting relationship with such nominee and believes such
party should be excluded from this Agreement, then Company will
notify Consultant immediately of such circumstance via facsimile
memo.
6. Expenses. Consultant agrees to pay for all its expenses (phone, mailing,
labor, etc.), other than extraordinary items (travel required by/or specifically
requested by the Company, luncheons or dinners to large groups of investment
professionals, mass faxing to a sizable percentage of the Company's
constituents, investor conference calls, print advertisements in publications,
etc.) approved by the Company prior to its incurring an obligation for
reimbursement.
7. Indemnification. The Company warrants and represents that all oral
communications, written documents or materials furnished to Consultant by the
Company with respect to financial affairs, operations, profitability and
strategic planning of the Company are accurate and Consultant may rely upon the
accuracy thereof without independent investigation. The Company will protect,
indemnify and hold harmless Consultant against any claims or litigation
including any damages, liability, cost and reasonable attorney's fees as
incurred with respect thereto resulting from Consultant's communication or
dissemination of any said information, documents or materials not designated by
the Company to the Consultant as "confidential" or "Company private", excluding
any such claims or litigation resulting from Consultant's communication or
dissemination of information not provided or authorized by the Company. To the
extent feasible, the Company agrees to make Consultant an additional insured on
any and all commercial liability and directors and officers liability insurance
policies and to provide Consultant with current Certificates of Insurance
reflecting the same.
5.
<PAGE>
8. Representations. Consultant represents that it is not required to maintain
any licenses and registrations under federal or any state regulations necessary
to perform the services set forth herein. Consultant acknowledges that, to the
best of its knowledge, the performance of the services set forth under this
Agreement will not violate any rule or provision of any regulatory agency having
'jurisdiction over Consultant. Consultant acknowledges that, to the best of its
knowledge, Consultant and its officers and directors are not the subject of any
investigation, claim, decree or judgment involving any violation of the SEC or
securities laws. Consultant further acknowledges that it is not a securities
Broker Dealer or a registered investment advisor. Company acknowledges that, to
the best of its knowledge, that it has not violated any rule or provision of any
regulatory agency having jurisdiction over the Company. Company acknowledges
that, to the best of its knowledge, Company is not the subject of any
investigation, claim, decree or judgment involving any violation of the SEC or
securities laws.
9. Legal Representation. The Company acknowledges that it has been represented
by independent legal counsel in the preparation of this Agreement. Consultant
represents that they have consulted with independent legal counsel and/or tax,
financial and business advisors, to the extent the Consultant deemed necessary.
10. Status as Independent Contractor. Consultant's engagement pursuant to this
Agreement shall be as independent contractor, and not as an employee, officer or
other agent of the Company. Neither party to this Agreement shall represent or
hold itself out to be the employer or employee of the other. Consultant further
acknowledges the consideration provided hereinabove is a gross amount of
consideration and that the Company will not withhold from such consideration any
amounts as to income taxes, social security payments or any other payroll taxes.
All such income taxes and other such payment shall be made or provided for by
Consultant and the Company shall have no responsibility or duties regarding such
matters. Neither the Company or the Consultant possess the authority to bind
each other in any agreements without the express written consent of the entity
to be bound.
11. Attorney's Fee. If any legal action or any arbitration or other proceeding
is brought for the enforcement or interpretation of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
or related to this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs in connection
with that action or proceeding, in addition to any other relief to which it or
they may be entitled.
12. Waiver. The waiver by either party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by such other party.
13. Notices. All notices, requests, and other communications hereunder shall be
deemed to be duly given if sent by U.S. mail, postage prepaid, addressed to the
other party at the address as set forth herein below:
6.
<PAGE>
To the Company-.
U.S. Wireless Data, Inc.
Mr. Rod Stambaugh, President
4851 Independence Street- Suite 189 Wheat Ridge, CO 80033
To the Consultant-.
Liviakis Financial Communications, Inc.
John M. Liviakis, President
2420 "K" Street, Suite 220, Sacramento, CA 95816.
It is understood that either party may change the address to which
notices for it shall be addressed by providing notice of such change to the
other party in the manner set forth in this paragraph.
14. Choice of Law, Jurisdiction and Venue. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of California.
The parties agree that Sacramento County, CA. will be the venue of any dispute
and will have jurisdiction over all parties.
15. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the alleged breach thereof, or relating to Consultant's activities
or remuneration under this Agreement, shall be settled by binding arbitration in
California, in accordance with the applicable rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrator(s) shall be
binding on the parties and may be entered in any court having jurisdiction
thereof The provisions of Title 9 of Part 3 of the California Code of Civil
Procedure, including section 1283.05, and successor statutes, permitting
expanded discovery proceedings shall be applicable to all disputes that are
arbitrated under this paragraph.
16. Miscellaneous Conditions. Company and Consultant each agree to the follow
terms and conditions:
a.) The Company shall arrange that all insiders and large shareholders
agree to a one year lockup agreement, which would include all officers and
directors- and, b.) Company will provide an Opinion Letter from the
Company's Corporate Counsel that there are no "Opt Outs" in the class
action lawsuit settlement and further that there are no other outstanding
or pending(, legal actions against the Company
7.
<PAGE>
17. Complete Agreement. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof. This Agreement and its terms may
not be changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, chance, modification, extension or
discharge is sought.
AGREED TO:
8.
<PAGE>
U.S. WIRELESS DATA, INC.
SUBSCRIPTION AGREEMENT
For the Purchase of Units
Each Consisting of
875,000 Shares of Common Stock
and
400,000 Stock Purchase Warrants
U.S. Wireless Data, Inc.
1123 Western Avenue
Mill Valley, California 94914
Ladies and Gentlemen:
1. General. U.S. Wireless Data, Inc., a Colorado corporation (the
"Company"), is offering, pursuant to Regulation D ("Regulation DI') promulgated
under the-Securities Act of 1933, as amended (the "Securities Act"), an
aggregate of up to four (4) units (the "Units"), each consisting of eight
hundred seventy-five thousand (875,000) share of the Company's Common Stock
("Common Stock"), and warrants ("Warrants") expiring August 1, 2002,
substantially in the form of warrant attached hereto as Exhibit A, to purchase
up to four hundred thousand (400,000) shares of Common Stock at an exercise
price of One Cent ($0.01) per share. The Units are being offered at a price of
One Hundred twenty-five Thousand Dollars ($125,000) per Unit.
2. Subscription. The undersigned subscriber (the "Purchaser") hereby
irrevocably subscribes for and agrees to purchase three- (3_) Unit(s) for an
aggregate purchase price of Three-Hundred Seventy-Five Thousand Dollars ($
375.000.00.) (the -subscription Price,') Funds representing the Subscription
Price shall be paid by the Purchaser to the Company against issuance of the
securities constituting the Units.
3. Representations, Warranties and Covenants of Purchaser. The Purchaser
hereby acknowledges, represents and warrants to and covenants and agrees with
the company that:
(a) Purchaser is an "accredited investor", as defined in Rule 501 of
Regulation 0 promulgated under the Securities Act. Purchaser is acquiring the
Units for Purchaser's own account and not for the account or benefit of any
other person. The Units, and the shares of Common Stock and the Warrants
constituting the Units and the shares of Common Stock for which the Warrants
may be exercised (collectively, the "Securities") will be acquired by the
Subscriber in good faith for investment and not with a view to the
distribution thereof. The Purchaser does not presently intend to sell or
otherwise dispose of all or any part of the Securities upon the occurrence or
nonoccurrence of any predetermined event;
<PAGE>
(b) The Purchaser is willing and able to bear the economic risk of an investment
in the Units in an amount equal to the amount the Purchaser has subscribed to
purchase, and the Purchaser has adequate means of providing for current needs
and reasonably anticipated contingencies and has no need for liquidity in such
investment. In making these statements, the Purchaser has taken into account
(i) that Purchaser may have to hold the Securities for an indefinite period
and (ii) that the Purchaser could experience a complete loss of Purchaser's
investment in the Units;
(c) Purchaser;
(i) has been provided with copies of all of the reports and
other documents filed by the Company with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), during the past twelve months;
(ii) has been given the opportunity to ask questions of the
Company and its management concerning the Company, the Units, the
terms and conditions of the offering and other matters pertaining to
this investment, in order for Purchaser to evaluate the merits and
risks of an investment in the Units, and Purchaser has received
satisfactory responses to all such questions; and
(iii) acknowledges that the Units were not offered to
Purchaser by way of any general solicitation or advertising and at no
time was the Purchaser presented with or solicited by means of any
leaflet, public promotional meeting, circular, radio or television
advertisement, newspaper or magazine article;
(d) Since the offer and sale of the Units and of the Common Stock
issuable upon exercise of the Warrants have not been registered under the
Securities Act in reliance upon Regulation D among other provisions, Purchaser
will only offer or resell the Securities in compliance with the provisions of
all applicable securities laws and regulations. Purchaser will offer or resell
the Securities only if the Securities are registered under the Securities Act
or an exemption from such registration, including without limitation the
exemption afforded under Rule 144, is available. Unless such registration has
been effected or such an exemption is available, the Company shall not permit
the transfer of the Securities.
The Purchaser understands and agrees that the company may
take such reasonable steps as it deems appropriate to ensure compliance with
the offer, resale and other restrictions on transfer and conversion contained
in this Subscription Agreement
2
<PAGE>
(the "Agreement") or arising under applicable securities laws, including
instituting "stop transfer" instructions with respect to the Securities and
endorsing restrictive legends, such as the following, on certificates
representing the Securities:
Of the securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act") and are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. The securities may not be
offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Securities Act or pursuant
to an exemption from registration under the Securities Act."
(e) The execution and delivery of this Agreement by Purchaser and the
consummation by Purchaser of the transactions contemplated by this Agreement
will not violate any statute or law or any judgment, decree, order, regulation
or rule of any court or governmental authority by which Purchaser is bound or,
if Purchaser is other than a natural person, the charter, bylaws or other
instruments under, which Purchaser is formed and its activities are governed.
4. Representations and Warranties of a The Company hereby represents and
warrants to the Purchaser as follows:
(a) The Company has filed all reports and other materials required by
the Exchange Act to be filed with the Securities and Exchange Commission
during the past 12 months. All such reports and materials have been
complete and accurate and have complied with the requirements of the
Exchange Act in all material respects and did not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at such dates, not misleading.
(b) The Company is, and at the time of the issuance and sale of the
Units will be, a corporation duly organized, validly existing and in good
standing under the laws of Colorado. The Company has, and at the Closing
Date will have, full power and authority to conduct all the activities
conducted by it, to own or lease all the assets owned or leased by it and
to conduct its business as described in the reports referred to in
paragraph (a) above.
(c) The Company has full corporate power and authority to enter into
this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of
the Company and is enforceable against the Company in accordance with the
terms hereof.
3
<PAGE>
(d) The Securities to be delivered at the Closing have been duly
authorized and when issued for consideration as contemplated in this
Agreement will be validly issued and outstanding, fully paid and
non-assessable.
5. Covenants of Company. The Company covenants and agrees with the
Purchaser as follows:
(a) Following an exercise of the Warrants, the Company will cause its
transfer agent promptly, at the Company's expense, to issue certificates
evidencing the shares of Common Stock being purchased through such
exercise. In the event the Company for any reason, including without
limitation the unavailability of authorized but unissued shares, does not
cause the prompt issuance of such certificates, the Company shall upon the
written demand of the Purchaser redeem from the Purchaser the Warrants the
Purchaser attempted to exercise or otherwise pay to the Purchaser by way of
liquidated damages for such breach against cancellation of such Warrants an
amount per warrant equal to the remainder calculated by subtracting (i) the
Warrant exercise price from (ii) average closing asked price per share of
Common Stock during the five trading days ending with the day on which the
Purchaser exercises or attempts to exercise the Warrant.
(b) Promptly following the written request of the purchasers of a
majority of the Units, the Company, at its expense, will prepare, file and
prosecute diligently to effectiveness a registration statement under the
Securities Act, which registration statement shall provide for the resale
by the Purchaser of the shares of Common Stock (i) constituting part of the
Units, (ii) for which the Warrants had been or may be exercised, (iii)
which are otherwise held by Purchaser, or (iv) which Purchaser then has the
right to acquire. The Company shall also prepare and file such amendments
and 'supplements to such registration statement and the prospectus
contained therein as may be necessary to make available a prospectus
meeting the requirements of the Securities Act on as continuous a basis as
practicable for such period as any Warrants issued pursuant hereto remain
outstanding and for two years thereafter.
(c) So long as any Warrants issued pursuant hereto remain outstanding
and for two years thereafter, the company (i) will timely file all reports
and other materials it is required to file pursuant to the Exchange Act and
(ii) will not take any action to terminate the registration of its common
Stock pursuantto the Exchange Act.
(d) Diligently seek qualified candidates to serve as (i) chief
executive officer, (ii) chief financial officer, (iii) vice
president-sales, and (iv) at least two non-employee directors for the
Company; afford Purchaser an opportunity to meet with any candidate to whom
the Company proposes to offer such a position;
4
<PAGE>
and offer such a position (or nomination therefore) to such a candidate
only if such candidate is approved by purchasers of a majority of the
Units.
(e) Extend the registration rights provided in the Warrants to all
shares of Common Stock which the Purchaser at the time Of any such
registration owns or has the right to acquire.
6. The representations and warranties contained in this Agreement shall
remain operative and in full force and effect regardless of any investigation
made by any party hereto, or acceptance of any of the Units and Payment
therefor.
7. Acceptance-. it Is understood and agreed that the Company shall have the
right to accept or reject this subscription, in whole or in part, for any reason
and that this Agreement shall not be binding upon the Company until so accepted.
Purchaser understands that the Company will notify it promptly upon acceptance
or rejection of this subscription.
8. closing. Following acceptance of this subscription, the Units subscribed
for hereunder shall be delivered to the Purchaser against payment of the
aggregate Subscription Price therefor at a Closing which shall be held no later
than August 8, 1997.
9. Irrevocability. The Purchaser hereby agrees that this Subscription is
irrevocable.
10. miscellaneous.
(a) All notices or other communications given or made
hereunder shall be in writing and shall be delivered or mailed by registered or
certified mail, return receipt requested, postage prepaid, to the Purchaser at
its address set forth on the signature page below and to the Company at its
principal executive office.
(b) This Agreement may be amended only by a writing executed by all
parties.
(c) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, successors and assigns.
(d) All pronouns contained herein and any variations thereof shall be
deemed to refer to the masculine, feminine, or neuter, singular or plural, as
the identity of the parties hereto may require.
<PAGE>
(e) This Agreement may be executed in several counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
(f) This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
ALTERNATIVE SIGNATURE--PAGES FOLLOW
-----------------------------------
The Purchaser should complete and sign one of the following signature
pages. One signature page is for use by individuals and the other is for use by
entities (e.g., corporation, partnership, trust).
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
TS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY
ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY
OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERM = ED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION FROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
<PAGE>
U.S. Wireless Data, Inc.
offering of Units Consisting of
875,000 Shares of Common stock and
warrants to Purchase up to 400, 000 Shares of Common Stock
(Signature Page for Subscription by Individuals)
(Check One)
INDIVIDUAL OWNERSHIP
(one signature Required Below)
JOINT TENANTS
(TWO Signatures Required Below)
TENANTS IN COMMON
(Two Signatures Required Below)
<PAGE>
EXHIBIT "A"
WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
U.S. WIRELESS DATA, INC., A COLORADO CORPORATION.
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON THE EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR REGISTERED OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY STATES AND THUS MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THAT ACT AND REGISTERED OR
QUALIFIED UNDER APPLICABLE SECURITIES LAW OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION OR QUALIFICATION IS AVAILABLE.
This Common Stock Purchase Warrant, made as of the 4th day of August,
1997, by and between U.S. WIRELESS DATA, Inc., a Colorado corporation, having-
its principal executive offices at 4851 Independence Street; Suite 189; Wheat
Ridge, CO 800-')3 (the "Company"), and I having a principal business address at
2420 "K" Street; Suite 220, Sacramento, California 95816.
WITNESSETH:
This Warrant is exercisable at any time, or from time to time, from
January 15, 1998 up to and including 5:00 p.m. Pacific daylight time, on August
4, 2002.
I . Warrant.
---------------
This certifies that, or assigns ("Warrant Holder"), is entitled, subject to
the terms set forth below, to purchase from the Company up to Thousand fully
paid and nonassessable shares of Common Stock of the Company ("Common Stock") at
an exercise price of One Cent ($0.01) per share ("Exercise Price"). The Exercise
Price and number of shares of Common Stock issuable upon exercise hereof shall
be subject to adjustment as provided in this Warrant.
2. Exercise Price.
----------------------
The exercise price shall be One Cent ($.01) per share of Common Stock.
The Company shall pay all original issue or transfer taxes on the exercise of
this Warrant and all other fees and expenses incurred by the Company in
connection herewith.
<PAGE>
Exercise of Warrant.
--------------------
All of the Warrants ,ranted hereby shall first become exercisable on
January 15, 1998. Subject to the provisions of Paragraph 4 hereof, such Warrants
shall be exercisable in whole or in part at any time and from time to time from
January 15, 1998 through 5-.00 p.m. Pacific daylight time on August 4, 2002.
In order to exercise the purchase right represented by this Warrant in
whole or in part, the Warrant Holder shall deliver to the Company a written
notice substantially in the form of Notice of Exercise of Warrants to Purchase
Shares attached hereto, delivery to be effected by personal delivery, by
overnight courier or by registered or certified mail, return receipt requested,
addressed to the Company at Its principal office. Such notice shall specify the
number of shares which Warrant Holder is purchasing under this Warrant Agreement
and shall be accompanied by the Warrant certificate and payment (in the form of
cash or certified or bank cashier's check) for the shares so being,, purchased
at the Exercise Price of One Cent ($0.01) per share of Common Stock.
As soon as practicable thereafter but in any event within five (5)
business days, Company shall cause to be delivered to the Warrant Holder
certificates issued in the Warrant Holder's name evidencing, the full number of
S hares as to which this Warrant was exercised by the Warrant Holder. Warrant
Holder shall be considered to be the holder and owner of the Shares to be
evidenced by such certificates as of the close of business on the date Company
received the notice of exercise accompanied by payment, as contemplated herein,
without regard to the date of actual issuance of the certificate (s)
representing- such Shares.
4. Divisibility and Assignability of the Warrant.
-------------------------------------------------------
(a) The Warrant Holder may elect to exercise the right to purchase
shares under this Warrant in whole or in part at any time and from time to time,
subject to the provisions of Paragraph 3 above, with respect to any whole number
of Shares included therein, but in no event may an election be may to purchase
less than ten thousand (10,000) shares at any one time, unless the remaining
shares covered by this Warrant number less than ten thousand (I 0,000), in which
case this Warrant may be exercised for such remaining balance.
(b) This Warrant can be transferred or assigned in whole or in part in
increments of no less rights to purchase ten thousand (10,000) shares if the
transferor delivers an opinion of counsel reasonably acceptable to the Company
(which counsel may be the counsel for the Company), stating,, that such transfer
is exempt from the registration requirements of the Securities Act of 19'1'), as
amended, and the registration and qualification requirements under applicable
state law.
Upon due presentment for transfer or exchange of this Warrant certificate at the
principal office of the Company, a new Warrant certificate or certificates of
like tenor and evidencing in the aggregate a like number of Warrants shall be
issued in exchange for this Warrant certificate. Subject to the terms hereof,
the Company shall deliver Warrant certificates in required whole number
denominations to Warrant Holders in connection with any transfer, exchange or
partial exercise permitted hereunder.
2
<PAGE>
5 . Stock as Investment.
-----------------------------
By accepting,, this Warrant, the Warrant Holder agrees that it is
Warrant Holder's Intention to purchase Shares hereunder for investment and
without any view towards the resale or distribution thereof. In the event Shares
to be issued upon the election to purchase shares Lender this Warrant have not
been registered at the time of proposed issuance under the Securities Act of
19-'I'), as amended (the "Securities Act"), the Warrant Holder shall deliver to
the Company at the time of such issuance a written representation that warrant
holder is acquiring(@ such Shares in good faith for investment purposes only and
not for resale or distribution. Company may place a "stop transfer" order with
respect to such Shares with its transfer a(Tent and place an appropriate
restrictive legend on the stock certificate(s) evidencing such Shares, in order
to prevent transfers unless such Shares are registered under the Securities Act
or an exemption from the registration requirements of the Securities Act is
applicable.
6. Conditions to Issuance of Shares,
-----------------------------------------
The Company shall issue and deliver certificates for Shares purchased
upon the exercise of any portion of the Warrant granted hereunder.
7. Registration Rights.
-----------------------------
(a) If, at any time during the exercise period hereof and the three
years following any exercise hereunder, the Company proposes to file a
registration statement with respect to any class of securities (other than
pursuant to a registration statement on Forms S-4 or S-8 or any successor form)
under the Securities Act, the Company shall notify the Warrant Holder at least
twenty (20) days prior to the filing of such registration statement and will
offer to include in such registration statement all or any portion of the shares
of Common Stock then owned by the Warrant Holder or which the Warrant Holder
then has the right to acquire, weather pursuant to this Warrant or otherwise
(collectively the "Shares"). In a written notice to be delivered to the Company
within twenty (20) days after receipt of any such notice from Company, the
Warrant Holder shall state the number of Shares that it wishes to register for
resale and distribution publicly under the proposed registration statement. The
Company will use its best efforts, through its officers, directors, auditors and
counsel in all matters necessary or advisable, to file at least one (1) such
registration statement by May 15, 1998. The Company will also use its best
efforts, through its officers, directors, auditors and counsel in all matters
necessary or advisable, to include within the coverage of each such registration
statement (except as hereinafter provided) the Shares that Warrant Holder has
advised company that Warrant Holder wishes to register pursuant to such
registration statement for resale and distribution, to prosecute each such
registration statement diligently to effectiveness, and to cause such
registration statement to become effective as promptly as practicable In that
re(lard, the company makes no representation or warranties as to its ability to
have any registration statement declared effective.
All registrations requested pursuant to this Paragraph 7 (a) are
referred to herein as "Piggy-back Registrations." In the event the Company is
advised by the staff of the SEC, NASDAQ or any self-regulatory or state
securities agency that the inclusion of the Shares will prevent, preclude or
materially delay the effectiveness of a registration statement filed, the
<PAGE>
Company, in good faith, may amend such registration statement to exclude the
Shares without otherwise affecting,, the Warrant Holder's rights to any other
registration statement herein.
(I)Primary Registrations. If a Piggyback Registration is an underwritten
primary registration on behalf of the Company, and if the underwriter thereof
advises the Company in writing, that in Its opinion the number of Shares
requested to be included in such registration statement exceeds the number that
can be sold in such offering without materially adversely affecting,, the
distribution of such securities by the company, then the Company will include in
such registration statement first, the securities that the Company proposes to
sell and second, the securities requested to be included in such registration
statement by selling Securityholders, such right to Inclusion being apportioned
pro rata among the Warrant Holder and the other holders of any other securities
requesting registration according- to the market value of Shares and other
securities requested to be registered.
Notwithstanding the above, if any such underwriter shall advise the
Company in writing that the distribution of the Shares being- included in the
registration statement concurrently with the securities being registered by the
Company would materially adversely affect the distribution of such securities by
the Company, then the Warrant Holder shall delay its offering and sale for such
period ending on the earliest of (a) 180 days following the effective date of
the Company's registration statement, (b) the earliest date that, in the opinion
of such underwriter, such adverse effect would no longer be caused, or (c) such
date as the Company, managing underwriter and Warrant Holder shall otherwise
agree. In the event of such delay, the Company shall file such supplements and
post-effective amendments and take any such other actions as may be necessary or
appropriate to permit such Warrant Holder to make its proposed offering and sale
for a period of at least ninety (90) days commencing immediately following the
end of such period of delay. If any party disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to the
Company, the underwriter and the Warrant Holder. Notwithstanding,, the
foregoing, the Company shall not be required to include Shares within the
coverage of a registration statement being filed pursuant to this Paragraph 7
(a) (i) if, in the opinion of counsel for both the Company and Warrant Holder,
all of the Shares proposed to be registered may be immediately transferred
pursuant to the provisions of Rule 144 under the Securities Act.
(II) Priority on Secondary Registrations. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of securities of the
Company, and the underwriter thereof advises the Company in writing that it its
opinion the number of Shares requested to be included in such registration
statement exceeds the number which can be sold in such offering,, without
materially adversely affecting,, the distribution of such securities, then the
Company will include in such registration statement the securities requested to
be included in Such registration statement by selling Securityholders on a pro
rata basis, with such rights to inclusion being,, apportioned among,, the
Warrant Holder and the other holders of any other securities requesting
registration according(, to the market value of Shares and other securities
requested by them, respectively, to be registered. Notwithstanding the
foregoing, the Company shall not be required to 'include Shares within the
coverage of a registration statement being filed pursuant to this Paragraph 9
(a) (11) 'if, in the opinion of counsel for both the Company and
4
<PAGE>
Warrant Holder, all of the Shares proposed to be registered may be immediately
transferred pursuant to the provisions of Rule 144 under the Securities Act.
(b) If at any time after August 4, 1998 and prior to the third (-')rd)
anniversary of the earlier of the expiration of the Warrant herein ,ranted and
the purchase of the final Shares remaining,, subject to such Warrant Shares
issued or issuable upon exercise of the Warrant herein (,ranted are not then
registered under one or more Piggyback Registrations and then covered by a
prospectus complying with the requirements of the Securities Act, the Warrant
Holder i-nay by written notice to the Company require Company to file a
registration statement Lender the Securities Act covering such Shares as Warrant
Holder may specify in such notice. Warrant Holder shall be entitled so to
require Company to file a registration statement pursuant to this Paragraph 7
(b) on only one ( 1) occasion. The Company will file such a registration
statement within ninety (90) days of receipt of such notice, and thereafter will
prosecute such registration statement diligently to effectiveness, will cause
such registration statement to become effective as promptly as practicable; will
promptly file all such supplements and post-effective amendments to such
registration statement and take any such other actions as may be necessary or
appropriate to make available to Warrant Holder on as continuous a basis as is
practicable a prospectus meeting the requirements of the Securities Act through
the earliest of (a) the date on which the final Shares have been sold and
distributed by Warrant Holder, (b) the date on which, in the opinion of counsel
for both the Company and Warrant Holder, all of the Shares which Warrant Holder
then holds may be immediately transferred pursuant to the provisions of Rule 144
under the Securities Act, and (c) August 4, 2004. In that regard, the Company
makes no representations or warranties as to its ability to have any
registration statement or post-effective amendment thereto declared effective.
(c) In the event of any registration of a security pursuant to this
Paragraph 7, the Company shall indemnify the Warrant Holder and its officers and
directors against all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented) relating
to such registration, or caused by any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statement
therein not misleading in light of the circumstances under which they are made
unless such statement or omission was made in reliance upon and in conformity
with information furnished to the Company by the Warrant Holder with expressly
for use therein. The Warrant Holder shall also indemnify the Company, its
officers and directors and each underwriter of the Shares so registered with
respect to losses, claims damages and Shares so registered with respect to
losses, claims damages and liabilities caused by an untrue statement or omission
made in reliance upon and in conformity with information furnished by the
Warrant Holder to the Company in writing expressly for use in such registration
statement or prospectus.
(d) All expenses of any registration referred to in this Paragraph 7,
except the fees and disbursement of counsel to the Warrant Holder, underwriting
commissions or discounts and any transfer or other taxes applicable to the
transfer of Shares by the Warrant Holder, shall be borne by the Company.
5
<PAGE>
(e) Following the exercise of the Warrant hereunder, the Warrant Holder
shall promptly advise the Company when Warrant Holder no longer holds any shares
acquired through the exercise of Warrants granted hereunder, and upon the
request of the Company, the Warrant Holder shall advise the Company from time to
time of the number of Shares then held by Warrant Holder which were acquired
through the exercise of Warrants granted hereunder.
8. Adjustments Upon Changes in Capitalization.
(a) In the event of changes in the outstanding Common Stock of the
Company by reason of stock dividends, stock splits, reverse stock splits,
recapitalization's, consolidations, combinations, exchanges of shares,
separations, reorganizations, liquidation's or any similar events or events
having similar consequences, the number and class of Shares as to which the
Warrant may be exercised shall be correspondingly adjusted so that for the same
aggregate exercise price the Warrant Holder shall be entitled to acquire the
securities and other property Warrant Holder would have held if Warrant Holder
had exercised 'its rights to purchase shares under this Warrant Agreement for
the number of Shares under consideration prior to the first of such events to
occur and continued to hold such Shares and all other securities and other
property issued with respect thereto in connection with such events. No
adjustment shall be made with respect to cash dividends or non-liquidating
dividends payable in property other than cas, so long as Company provides
Warrant Holder with written notice of any such proposed dividend at least
fifteen (I 5) days prior to the record date for such dividend. Company shall
also give Warrant Holder prompt written notice of any event resulting in an
adjustment under this Paragraph 8 (a), including a detailed computation of such
adjustment.
(b) Any adjustment in the number and kind of Shares and other
securities shall apply proportionately to only the unexercised portion of the
Warrant at the time of the event given rise to the adjustment. If fractions of a
Share would result from any such adjustment, the adjustment shall be revised to
the next hi,)-her whole number of Shares so long as such increase does not
result in the holder of the Warrant being deemed to own more than 5% of the
total combined voting,, power or value of all classes of stock of the Company or
its subsidiaries, in which case the adjustment shall be revised to the next
lower whole number of Shares.
9. Effect of Mergers, consolidations or Sales of Assets.
In the event Company should propose to merge or consolidate with, or
engage in some other form of business combination with, any other corporation or
entity on a basis in which Company is not to be the surviving entity, then as a
condition precedent to proceeding with such merger, consolidation or other
business combination, the Company shall require the surviving entity to assume
and perform all of Company's obligations under the right to acquire the same
securities and property for the Warrant exercise price specified herein as
Warrant Holder would have received if Warrant Holder had exercised the Warrant
immediately prior to such merger, consolidation or other business combination.
To the extent the above may be inconsistent with Sections 424 (a) ( 1) and (2)
of the Code, the above shall be deemed interpreted so as to comply therewith.
6
<PAGE>
10, No Rights in Warrant Stock.
Warrant Holder shall have no rights as a shareholder in respect of
Shares as to which the Warrant hereunder shall not have been exercised and
payment made as herein provided.
11. Effect Upon Employment.
This Agreement does not give the Warrant Holder any right to employment
by, or any other relationship with, the Company.
12. Binding Effect.
Except as herein otherwise expressly provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their successors,
legal representatives and assigns.
13. Miscellaneous.
This Agreement shall be construed under the laws of the State of
California applied to agreements made and to be performed entirely within such
State. Headings have been included herein for convenience of reference only and
shall not be deemed a part of this Agreement. The Company shall pay any and all
documentary, stamp or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock of the Company upon exercise of all or part
of this Warrant.
In WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"Company" U.S. WIRELESS DATA, Inc.
<PAGE>
NOTICE OF EXERCISE OF WARRANT TO PURCHASE SHARES
------------------------------------------------
TO U.S. WIRELESS DATA, INC.
The undersigned hereby elects to exercise the purchase right represented by
that Warrant dated as of August 4, 1997, between U.S. Wireless Data, Inc. and
the undersigned with an exercise price of One Cent ($0.01), and to purchase
under that Warrant, ) shares of Common Stock of U.S. Wireless Data, Inc., and
hereby makes payment in the form of cash or certified or bank cashier's check
for the Shares so being purchased at the exercise price of One Cent ($0.01)
therefor as specified in Paragraph 2 of the Warrant Agreement, and requests that
the certificates for those shares be issued in the name of, and delivered to
Signature
Social Security or Taxpayer I.D. Number:
Instructions for issuance of stock:
Name
Street Address
City State Zip Code
8
<PAGE>
U.S. WIRELESS DATA, INC.
SUBSCRIPTION AGREEMENT
For the Purchase of Units
Each Consisting of
875,000 Shares of Common Stock
and
400,000 Stock Purchase Warrants
U.S. Wireless Data, Inc.
1123 Western Avenue
Mill valley, California 94914
Ladies and Gentlemen:
1. General. U.S. Wireless Data, Inc., a Colorado corporation (the
"Company"), is offering, pursuant to Regulation D ("Regulation DI') promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), an
aggregate of up to four (4) units (the "Units"), each consisting of eight
hundred seventy-five thousand (875,000) share of the company's Common Stock
("Common Stock"), and warrants ("'Warrants") expiring August 1, 2002,
substantially in the form of warrant attached hereto as Exhibit A, to purchase
up to four hundred thousand (400,000) shares of common Stock at an exercise
price of One Cent ($0.01) per share. The Units are being offered at a price of
One Hundred twenty-five Thousand Dollars ($125,000) per Unit.
2. Subscription. The undersigned subscriber (the "Purchaser") hereby
irrevocably subscribes for and agrees to purchase one (1 ) Unit(s) for an
aggregate purchase price of One hundred twenty-five thousand Dollars 125,000.09
(the "Subscription Price,,) a representing the Subscription Price shall be paid
by the Purchaser to @e Company against issuance of the securities constituting
the Units.
3. Representations, Warranties and Covenants of Purchaser. The Purchaser
hereby acknowledges, represents and warrants to and covenants and agrees with
the Company that:
(a) Purchaser is an "accredited investor", as defined in Rule 501 of
Regulation D promulgated under the Securities Act. Purchaser is acquiring
the Units for Purchaser's own account and not for the account or benefit of
any other person. The Units, and the shares of Common Stock and the
Warrants constituting the Units and the shares of Common Stock for which
the Warrants may be exercised (collectively, the "Securities") will be
acquired by the Subscriber in good faith for investment and not with a view
to the distribution thereof. The Purchaser does not presently intend to
sell or otherwise dispose of all or any part of the Securities upon the
occurrence or nonoccurrence of any predetermined event;
<PAGE>
(b) The Purchaser is willing and able to bear the economic risk of an
investment in the Units in an amount equal to the amount the Purchaser has
subscribed to purchase, and the Purchaser has adequate means of providing
for current needs and reasonably anticipated contingencies and has no need
for liquidity in such investment. In making these statements, the Purchaser
has taken into account (i) that Purchaser may have to hold the Securities
for an indefinite period and (ii) that the Purchaser could experience a
complete loss of Purchaser's investment in the Units;
(c) Purchaser;
(i) has been provided with copies of all of the reports and
other documents filed by the Company with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act") , during the past twelve months;
(ii) has been given the opportunity to ask questions of the
company and its management concerning the Company, the Units, the
terms and conditions of the offering and other matters pertaining to
this investment, in order for Purchaser to evaluate the merits and
risks of an investment in the Units, and Purchaser has received
satisfactory responses to all such questions; and
(iii) acknowledges that the Units were not offered to
Purchaser by way of any general solicitation or advertising and at no
time was the Purchaser presented with or solicited by means of any
leaflet, public promotional meeting, circular, radio or television
advertisement, newspaper or magazine article;
(d) since the offer and sale of the Units and of the Common
Stock issuable upon exercise of the Warrants have not boon registered under
the Securities Act in reliance upon Regulation 0 among other provisions,
Purchaser will only offer or resell the Securities in compliance with the
provisions of all applicable securities laws and regulations. Purchaser will
offer or resell the Securities only if the Securities are registered under the
Securities Act or an exemption from such registration, including without
limitation the exemption afforded under Rule 144, is available. Unless such
registration has been affected or such an exemption is available, the Company
shall not permit the transfer of the Securities.
The Purchaser understands and agrees that the Company may
take such reasonable steps as it deems appropriate to ensure compliance with
the offer, resale and other restrictions on transfer and conversion contained
in this Subscription Agreement
2
<PAGE>
(the "Agreement") or arising under applicable securities laws, including
instituting "stop transfer" instructions with respect to the Securities and
endorsing restrictive legends, such as the following, on certificates
representing the Securities:
to the securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act") and are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. The securities may not be
offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Securities Act or pursuant
to an exemption from registration under the Securities Act."
(e) The execution and delivery of this Agreement by Purchaser and the
consummation by Purchaser of the transactions contemplated by this
Agreement will not violate any statute or law or any judgment, decree,
order ' regulation or rule of any court or governmental authority by which
Purchaser is bound or, if Purchaser is other than a natural person, the
charter, bylaws or other instruments under which Purchaser is formed and
its activities are governed.
4. Representations and Warrants The Company hereby represents and warrants
to the Purchaser as follows:
(a) The Company has filed all reports and other materials required by
the Exchange Act to be filed with the Securities and Exchange Commission
during the past 12 months. All such reports and materials have been
complete and accurate and have complied with the requirements of the
Exchange Act in all material respects and did not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at such dates, not misleading.
(b) The Company is, and at the time of the issuance and sale of the
Units will be, a corporation duly organized, validly existing and in good
standing under the laws of Colorado. The Company has, and at the Closing
Date will have, full power and authority to conduct all the activities
conducted by it, to own or lease all the assets owned or leased by it and
to conduct its business as described in the reports referred to in
paragraph (a) above.
(c) The Company has full corporate power and authority to enter into
this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of
the Company and is enforceable against the company in accordance with the
terms hereof.
3
<PAGE>
(d) The Securities to be delivered at the Closing have been duly
authorized and when issued for consideration as contemplated in this
Agreement will be validly issued and outstanding, fully paid and
non-assessable.
5. Covenants of an The Company covenants and agrees with the Purchaser as
follows:
(a) Following an exercise of the Warrants, the company will promptly,
at the Company's expense, to cause its transfer agent pro issue
certificates evidencing the shares of Common Stock being purchased through
such exercise. In the event the Company for any reason, including without
limitation the unavailability of authorized but unissued shares, does not
cause the prompt issuance of such certificates, the Company shall upon the
written demand of the Purchaser redeem from the Purchaser the Warrants the
Purchaser attempted to exercise or otherwise pay to the Purchaser by-way of
liquidated damages for such breach against cancellation of such Warrants an
amount per Warrant- equal to the remainder calculated by subtracting (i)
the Warrant exercise price from (ii) average closing asked price per share
of Common Stock during the five trading days ending with the day on which
the Purchaser exercises or attempts to exercise the Warrant.
(b) Promptly following the written request of the purchasers of a
majority of the 'Units, the Company, at its expense, will prepare, file and
prosecute diligently to effectiveness a registration statement under the
Securities Act, which registration statement shall provide for the resale
by the Purchaser of the shares of Common Stock (i) constituting part of the
Units, (ii) for which the Warrants had been or may be exercised, (iii)
which are otherwise held by Purchaser ' or (iv) which Purchaser then has
the right to acquire. The Company shall also prepare and file such
amendments and supplements to such registration statement and the
prospectus contained therein as may be necessary to make available a
prospectus meeting the requirements of the Securities Act on as continuous
a basis as practicable for such period as any Warrants issued pursuant
hereto remain outstanding and for two years thereafter.
(c) So long as any Warrants issued pursuant hereto remain outstanding
and for two years thereafter, the company (i) will timely file all reports
and other materials it is required to file pursuant to the Exchange Act and
(ii) will not take any action to terminate the registration of its common
Stock pursuant to the Exchange Act.
(d) Diligently seek qualified candidates to serve as (i) chief
executive officer , (ii) chief financial officer, (iii) vice
president-sales, and (iv) at least two non-employee directors for the
Company; afford Purchaser an opportunity to meet with any candidate to whom
the Company proposes to offer such a position;
4
<PAGE>
and offer such a position (or nomination therefor) to such a candidate only
if such candidate is approved by purchasers of a majority of the units.
(e) Extend the registration rights provided in the Warrants to all
shares of Common Stock which the Purchaser at the time of any such
registration owns or has the right to acquire.
6. IV . The representations and warranties contained in this Agreement
shall remain operative and in full force and effect regardless of any
investigation made by any party hereto, or acceptance of any of the Units and
payment therefor.
7. Acceptance. It is understood and agreed that the Company shall have
the right to accept or reject this subscription, in whole or in part, for any
reason and that this Agreement shall not be binding upon the Company until
co-accepted. Purchaser understands that the Company will notify it promptly upon
acceptance or rejection of this subscription.
8. Closing. Following acceptance of this subscription, the Units
subscribed for hereunder shall be delivered to the Purchaser against payment of
the aggravate Subscription Price therefor at a Closing which shall be held no
later than August 8, 1997.
9. Irrevocability. The Purchaser hereby agrees that this subscription
is irrevocable.
10. Miscellaneous.
(a) All notices or other communications given or made hereunder shall
be in writing and shall be delivered or mailed by registered or certified
mail, return receipt requested, postage prepaid, to the Purchaser at its
address set forth on the signature page below and to the Company at its
principal executive office.
(b) This Agreement may be amended only by a writing executed by all
parties.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns.
(d) All pronouns contained herein and any variations thereof shall be
deemed to refer to the masculine, feminine, or neuter, singular or plural,
as the identity of the parties hereto may require.
5
<PAGE>
(e) This Agreement may be executed in several counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
ALTERNATIVE SIGNATURE PAGES FOLLOW
----------------------------------
The Purchaser should complete and sign one of the following signature
pages. One signature page is for use by individuals and the other is f or
use by entities (a. g. , corporation, partnership, trust).
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE- THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY
OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
COUNTY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
<PAGE>
U.S. wireless Data, Inc.
offering of Units consisting of
875,000 Shares of Common stock and
warrants to Purchase up to 400, 000 Shares of Colon Stock
(Signature Page for Subscription by individuals)
(Check One)
INDIVIDUAL OWNERSHIP
(One signature Required Below)
JOINT TENANTS
(TWO signatures Required Below)
TENANTS
(Two Signatures Required Below)
(Two signatures required Below)
Number of Units subscribed for: one
Aggregate Subscription Price for units subscribed for: 125,000.00
(Please print or type all information exactly as you wish it to appear on
the Company's records)
Rcbert B. Prag
- --------------
Name(s) of Subscriber(s)
1 Sable
Sacramento, CA 95864
- --------------------
Residence Address
2420 K Street, Suite 220, Sacramento, CA 95816
- -----------------------------------------------
mailing Address (if different from above)
(916) 448-6084 (916) 448-6089 (916) 481-7779
Telephone: (Business) (Facsimile) (Residential)
DATED: August 4, 1997
<PAGE>
EXHIBIT "A"
-----------
WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
---------------------------------------------
U.S. WIRELESS DATA, INC., A COLORADO CORPORATION.
-------------------------------------------------
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON THE EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR REGISTERED OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY STATES AND THUS MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THAT ACT AND REGISTERED OR
QUALIFIED UNDER APPLICABLE SECURITIES LAW OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION OR QUALIFICATION IS AVAILABLE.
This Common Stock Purchase Warrant, made as of the 4th day of August,
1997, by and between U.S. WIRELESS DATA, INC., a Colorado corporation, having-
its principal executive offices at 4851 Independence Street; Suite 189, Wheat
Ridge, CO 800-')3 (the "Company"), and I having a principal business address at
2420 "K" Street; Suite 220, Sacramento, California 95816.
WITNESSETH
This Warrant is exercisable at any time, or from time to time, from
January 15, 1998 up to and including)- 5 - 00 p.m. Pacific daylight time, on
August 4, 2002.
1. Warrant.
----------------
This certifies that, _____________________________ or assigns ("Warrant
Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company up to Thousand fully paid and nonassessable shares of Common Stock
of the Company ("Common Stock") at an exercise price of One Cent ($0.01) per
share ("Exercise Price"). The Exercise Price and number of shares of Common
Stock issuable upon exercise hereof shall be subject to adjustment as provided
in this Warrant.
Exercise Price.
---------------
The exercise price shall be One Cent ($.01) per share of Common Stock.
The Company shall pay all original issue or transfer taxes on the exercise of
this Warrant and all other fees and expenses Incurred by the Company in
connection herewith.
<PAGE>
3 Exercise of Warrant.
---------------------------
All of the Warrants ,ranted hereby shall first become exercisable on
January 15, 1998. Subject to the provisions of Paragraph 4 hereof, such Warrants
shall be exercisable in whole or in part at any time and from time to time from
January 15, 1998 through 5:00 P.m. Pacific daylight time on August 4, 2002.
In order to exercise the purchase right represented by this Warrant in
whole or in part, the Warrant Holder shall deliver to the Company a written
notice substantially in the form of Notice of Exercise of Warrants to Purchase
Shares attached hereto, delivery to be effected by personal delivery, by
overnight courier or by registered or certified mail, return receipt requested,
addressed to the Company at its principal office. Such notice shall specify the
number of shares which Warrant Holder is purchasing under this Warrant Agreement
and shall be accompanied by the Warrant certificate and payment (in the form of
cash or certified or bank cashier's check) for the shares so being purchased at
the Exercise Price of One Cent ($0.01) per share of Common Stock.
As soon as practicable thereafter but in any event within five (5) business
days, Company shall cause to be delivered to the Warrant Holder certificates
issued in the Warrant Holder's name evidencing the full number of Shares as to
which this Warrant was exercised by the Warrant Holder. Warrant Holder shall be
considered to be the holder and owner of the Shares to be evidenced by such
certificates as of the close of business on the date Company received the notice
of exercise accompanied by payment, as contemplated herein, without regard to
the date of actual issuance of the certificate (s) representing such Shares.
4. Divisibility and Assignability of the Warrant.
-------------------------------------------------------
(a) The Warrant Holder may elect to exercise the right to purchase
shares under this Warrant in whole or in part at any time and from time to time,
subject to the provisions of Paragraph 3 above, with respect to any whole number
of Shares included therein, but in no event may an election be may to purchase
less than ten thousand (10,000) shares at any one time, unless the remaining
shares covered by this Warrant number less than ten thousand (I 0,000), in which
case this Warrant may be exercised for such remaining balance.
(b) This Warrant can be transferred or assigned in whole or in part in
increments of no less rights to purchase ten thousand (10,000) shares if the
transferor delivers an opinion of counsel reasonably acceptable to the Company
(which counsel may be the counsel for the Company), stating that such transfer
is exempt from the registration requirements of the Securities Act of 193'), as
amended, and the registration and qualification requirements under applicable
state law.
Upon due presentment for transfer or exchange of this Warrant certificate at the
principal office of the Company, a new Warrant certificate or certificates of
like tenor and evidencing in the aggregate a like number of Warrants shall be
issued in exchange for this Warrant certificate. Subject to the terms hereof,
the Company shall deliver Warrant certificates in required whole number
denominations to Warrant Holders in connection with any transfer, exchange or
partial exercise permitted hereunder.
2
<PAGE>
5 . Stock as Investment.
------------------------
By accepting this Warrant, the Warrant Holder agrees that it is Warrant
Holder's intention to purchase Shares hereunder for investment and without any
view towards the resale or distribution thereof. In the event Shares to be
issued upon the election to purchase shares Lender this Warrant have not been
registered at the time of proposed issuance under the Securities Act of 19')'),
as amended (the "Securities Act"), the Warrant Holder shall deliver to the
Company at the time of such issuance a written representation that warrant
holder is acquiring such Shares in ,good faith for investment purposes only and
not for resale or distribution. Company may place a "stop transfer" order with
respect to such Shares with its transfer agent and place an appropriate
restrictive legend on the stock certificate(s) evidencing Such Shares, in order
to prevent transfers unless such Shares are registered under the Securities Act
or an exemption from the registration requirements of the Securities Act is
applicable.
6. Conditions to Issuance of Shares.
----------------------------------------
The Company shall issue and deliver certificates for Shares purchased
upon the exercise of any portion of the Warrant granted hereunder.
7. Registration Rights.
-----------------------------
(a) If, at any time during the exercise period hereof and the three
(')) years following any exercise hereunder, the Company proposes to file a
registration statement with respect to any class of securities (other than
pursuant to a registration statement on Forms S-4 or S-8 or any successor form)
under the Securities Act, the Company shall notify the Warrant Holder at least
twenty (20) days prior to the filing of such registration statement and will
offer to include in such registration statement all or any portion of the shares
of Common Stock then owned by the Warrant Holder or which the Warrant Holder
then has the right to acquire, weather pursuant to this Warrant or otherwise
(collectively the "Shares"). In a written notice to be delivered to the Company
within twenty (20) days after receipt of any such notice from Company, the
Warrant Holder shall state the number of Shares that it wishes to register for
resale and distribution publicly Lender tile proposed registration statement.
The Company will use its best efforts, through its officers, directors, auditors
and counsel in all matters necessary or advisable, to file at least one (1) such
registration statement by May 15, 1998. The Company will also use its best
efforts, through its officers, directors, auditors and counsel in all matters
necessary or advisable, to include within the coverage of each such registration
statement (except as hereinafter provided) the Shares that Warrant Holder has
advised company that Warrant Holder wishes to register pursuant to such
registration statement for resale and distribution, to prosecute each such
registration statement diligently to effectiveness, and to cause such
registration statement to become effective as promptly as practicable In that
regard, the company makes no representation or warranties as to its ability to
have any registration statement declared effective.
All registrations requested pursuant to this Paragraph 7 (a) are
referred to herein as "Piggyback Registrations." In the event the Company is
advised by the staff of the SEC, NASDAQ or any self-regulatory or state
securities agency that the inclusion of the Shares will prevent, preclude or
materially delay the effectiveness of a registration statement filed, the
<PAGE>
Company, In good faith, may amend such registration statement to exclude the
Shares without I otherwise affecting(, the Warrant Holder's rights to any other
registration statement herein.
(1) Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and if the
underwriter thereof advises the Company in writing(, that In its opinion the
number of Shares requested to be included in such registration statement exceeds
the number that can be sold in such offering without materially adversely
affecting,, the distribution of such securities by the company, then the Company
will include in such registration statement first, the securities that the
Company proposes to sell and second, the securities requested to be included in
such registration statement by selling Securityholders, such right to inclusion
being apportioned pro rata among the Warrant Holder and the other holders of any
other securities requesting registration according to the market value of Shares
and other securities requested to be registered.
Notwithstanding the above, if any such underwriter shall advise the
Company in writing that the distribution of the Shares being included in the
registration statement concurrently with the securities being- registered by the
Company would materially adversely affect the distribution of such securities by
the Company, then the Warrant Holder shall delay its offering and sale for such
period ending,, on the earliest of (a) 180 days following the effective date of
the Company's registration statement, (b) the earliest date that, in the opinion
of such underwriter, such adverse effect would no longer be caused, or (c) such
date as the Company, managing underwriter and Warrant Holder shall otherwise
agree. In the event of such delay, the Company shall file such supplements and
post-effective amendments and take any such other actions as may be necessary or
appropriate to permit such Warrant Holder to make its proposed offering and sale
for a period of at least ninety (90) days commencing immediately following the
end of such period of delay. If any party disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to the
Company, the underwriter and the Warrant Holder. Notwithstanding, the foregoing,
the Company shall not be required to include Shares within the coverage of a
registration statement being filed pursuant to this Paragraph 7 (a) (i) if, in
the opinion of counsel for both the Company and Warrant Holder, all of the
Shares proposed to be registered may be immediately transferred pursuant to the
provisions of Rule 144 under the Securities Act,
(II) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
securities of the Company, and the underwriter thereof advises the Company in
writing that it its opinion the number of Shares requested to be included in
such registration statement exceeds the number which can be sold in such
offering without materially adversely affecting the distribution of such
securities, then the Company will include in such registration statement the
securities requested to be included in such registration statement by selling,
Securityholders on a pro rata basis, with such rights to inclusion being
apportioned among the Warrant Holder and the other holders of any other
securities requesting registration according to the market value of Shares and
other securities requested by them, respectively, to be registered.
Notwithstanding the foregoing the Company shall not be required to include
Shares within the coverage of a registration statement being filed pursuant to
this Paragraph 9 (a) (ii) if, in the opinion of counsel for both the Company and
4
<PAGE>
Warrant Holder, all of the Shares proposed to be registered may be immediately
transferred pursuant to the provisions of Rule 144 under the Securities Act.
(b) If at any time after August 4, 1998 and prior to the third (-')rd)
anniversary of the earlier of the expiration of the Warrant herein granted and
the purchase of the final Shares remaining, subject to such Warrant Shares
issued or issuable upon exercise of the Warrant herein granted are not then
registered under one or more Piggyback Registrations and then covered by a
prospectus complying with the requirements of the Securities Act, the Warrant
Holder i-nay by written notice to the Company require Company to file a
registration statement Lender the Securities Act covering Such Shares as Warrant
Holder may specify In Such notice. Warrant Holder shall be entitled so to
require Company to file a registration statement pursuant to this Paragraph 7
(b) on only one (1) occasion. The Company will file such a registration
statement within ninety (90) days of receipt of such notice; and thereafter will
prosecute such registration statement diligently to effectiveness, will cause
such registration statement to become effective as promptly as practicable; will
promptly file all such supplements and post-effective amendments to such
registration statement and take any such other actions as may be necessary or
appropriate to make available to Warrant Holder on as continuous a basis as is
practicable a prospectus meeting the requirements of the Securities Act through
the earliest of (a) the date on which the final Shares have been sold and
distributed by Warrant Holder, (b) the date on which, in the opinion of counsel
for both the Company and Warrant Holder, all of the Shares which Warrant Holder
then holds may be immediately transferred pursuant to the provisions of Rule 144
under the Securities Act, and (c) August 4, 2004. In that regard, the Company
makes no representations or warranties as to its ability to have any
registration statement or post-effective amendment thereto declared effective.
(c) In the event of any registration of a security pursuant to this
Paragraph 7, the Company shall indemnify the Warrant Holder and its officers and
directors against all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented) relating
to such registration, or caused by any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statement
therein not misleading in light of the circumstances under which they are made
unless such statement or omission was made in reliance upon and in conformity
with information furnished to the Company by the Warrant Holder with expressly
for use therein. The Warrant Holder shall also indemnify the Company, its
officers and directors and each underwriter of the Shares so registered with
respect to losses, claims damages and Shares so registered with respect to
losses, claims damages and liabilities caused by an untrue statement or omission
made in reliance upon and in conformity with information furnished by the
Warrant Holder to the Company in writing expressly for use in such registration
statement or prospectus.
(d) All expenses of any registration referred to in this Paragraph 7,
except the fees and disbursement of counsel to the Warrant Holder, underwriting
commissions or discounts and any transfer or other taxes applicable to the
transfer of Shares by the Warrant Holder, shall be borne by the Company.
5
<PAGE>
(e) Following the exercise of the Warrant hereunder, the Warrant Holder
shall promptly advise the Company when Warrant Holder no longer holds any shares
acquired through the exercise of Warrants granted hereunder, and upon the
request of the Company, the Warrant Holder shall advise the Company from time to
time of the number of Shares then held by Warrant Holder which were acquired
through the exercise of Warrants granted hereunder.
8. Adjustments Upon Changes in Capitalization,
(a) In the event of changes in the outstanding Common Stock of the Company
by reason of stock dividends, stock splits, reverse stock splits,
recapitalization's, consolidations, combinations, exchanges of shares,
separations, reorganizations, liquidation's or any similar events or events
haven,, similar consequences, the number and class of Shares as to which the
Warrant may be exercised shall be correspondingly adjusted so that for the same
aggregate exercise price the Warrant Holder shall be entitled to acquire the
securities and other property Warrant Holder would have held if Warrant Holder
had exercised its rights to purchase shares Lender this Warrant Agreement for
the number of Shares under consideration prior to the first of such events to
occur and continued to hold such Shares and all other securities and other
property issued with respect thereto in connection with such events. No
adjustment shall be made with respect to cash dividends or non-liquidating
dividends payable in property other than cas, so long as Company provides
Warrant Holder with written notice of any such proposed dividend at least
fifteen (I 5) days prior to the record date for such dividend. Company shall
also give Warrant Holder prompt written notice of any event resulting in an
adjustment under this Paragraph 8 (a), including a detailed computation of such
adjustment.
(b) Any adjustment in the number and kind of Shares and other securities
shall apply proportionately to only the unexercised portion of the Warrant at
the time of the event given rise to the adjustment. If fractions of a Share
would result from any such adjustment, the adjustment shall be revised to the
next higher whole number of Shares so long as such increase does not result in
the holder of the Warrant being deemed to own more than 5% of the total combined
voting power or value of all classes of stock of the Company or its
subsidiaries, in which case the adjustment shall be revised to the next lower
whole number of Shares.
9. Effect of Mergers, consolidations or Sales of Assets.
In the event Company should propose to merge or consolidate with, or
engage in some other form of business combination with, any other corporation or
entity on a basis in which Company is not to be the surviving entity, then as a
condition precedent to proceeding with such merger, consolidation or other
business combination, the Company shall require the surviving entity to assume
and perform all of Company's obligations under the right to acquire the same
securities and property for the Warrant exercise price specified herein as
Warrant Holder would have received if Warrant Holder had exercised the Warrant
immediately prior to such merger, consolidation or other business combination.
To the extent the above may be inconsistent with Sections 424 (a) ( 1) and (2)
of the Code, the above shall be deemed interpreted so as to comply therewith.
6
<PAGE>
10. No Rights in Warrant Stock.
Warrant Holder shall have no rights as a shareholder in respect of
Shares as to which the Warrant hereunder shall not have been exercised and
payment made as herein provided.
11. Effect Upon Employment.
This Agreement does not give the Warrant Holder any right to employment
by, or any other relationship with, the Company.
12. Binding Effect.
Except as herein otherwise expressly provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their successors,
legal representatives and assigns.
13. Miscellaneous.
This Agreement shall be construed under the laws of the State of
California applied to agreements made and to be performed entirely within such
State. Headings have been included herein for convenience of reference only and
shall not be deemed a part of this Agreement. The Company shall pay any and all
documentary, stamp or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock of the Company upon exercise of all or part
of this Warrant.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"Company" U.S. WIRELESS DATA, INC.
<PAGE>
NOTICE OF EXERCISE OF WARRANT TO PURCHASE SHARES
------------------------------------------------
TO: U.S. WIRELESS DATA, INC.
The undersigned hereby elects to exercise the purchase right represented by
that Warrant dated as of August 4, 1997, between U.S. Wireless Data, Inc. and
the undersigned with an exercise price of One Cent ($0.01), and to purchase
under that Warrant, ) shares of Common Stock of U.S. Wireless Data, Inc., and
hereby makes payment in the form of cash or certified or bank cashier's check
for the Shares so being purchased at the One Cent ($0.01) exercise price of
therefor as specified in Paragraph 2 of the Warrant Agreement, and requests that
the certificates for those shares be issued in the name of, and delivered to
Signature
Social Security or Taxpayer I.D. Number:
Instructions for issuance of stock:
Name
Street Address
City State Zip Code
8
CDPD NATIONAL DATA
SERVICE AND EQUIPMENT
AGREEMENT
PREPARED FOR
U.S. WIRELESS DATA INC.
<PAGE>
NATIONAL CORPORATE CDPD
SERVICE AND EQUIPMENT AGREEMENT
TABLE OF CONTENTS
1. Agreement
11. Exhibit A - GTEMC Markets
Ill. Exhibit B - Service and Pricing
IV. Exhibit C - Joint Marketing Operating Terms
<PAGE>
U.S. WIRELESS DATA INC.
National Corporate Account CDPD Service and Equipment Agreement
This CDPD Service and Equipment Agreement (this "Agreement") is between GTE
Mobile Communications Service Corporation on its behalf and on behalf of GTE
Mobilnet Incorporated and Contel Cellular Inc. and their respective affiliates
and partnership interests (collectively referred to as "GTEMC") and U.S.
Wireless Data Inc. ("Customer") for the provision of Cellular Digital Packet
Data Services ("CDPD Services") in the those markets (the "Markets") set forth
on Exhibit A hereto, as modified from time to time by GTEMC. The parties agree
as follows:
1. Term. The term of this Agreement shall be for an initial period of two
(2) years, which shall commence as set forth in paragraph 13. Upon the
expiration of the initial period, this Agreement shall automatically
and perpetually renew for additional periods of two (2) years each,
unless canceled by either party upon written notice given to the other
party at least ninety (90) days prior to the expiration of the initial
term and any renewal term then in effect.
2. Service Pricing. Pricing for CDPD Services will be in accordance with
the Pricing Plan which is attached hereto and incorporated herein as
Exhibit B. The parties agree that GTEMC will be the exclusive provider
of CDPD Services in all GTEMC markets listed in Exhibit A. Customer
optionally may purchase GTEMC's CDPD services in markets not owned by
GTEMC using the same pricing shown in Exhibit B. It is specifically
acknowledged and agreed by the parties that GTEMC cannot and will not
attempt to set, influence or determine the service rates or pricing of
other carriers.
3. Minimum Requirement. In consideration for the CDPD Services provided
herein, Customer is required to meet the revenue commitments as defined
in Exhibit B.
4. Specification of Service. GTEMC or an affiliate company will provide
and procure for Customer CDPD Services for Customers application in the
Markets. The areas effectively served may be subject to transmission
limitations caused by atmospheric and other natural or artificial
conditions, including the type and condition of Customers equipment.
GTEMC assumes no responsibility to Customer or its CDPD Services users
for marginal transmissions arising from or related to interruptions or
limitations caused by any natural, atmospheric or artificial causes.
The names assigned to GTEMC's CDPD Services, "Coverage" and "Local,
State, Regional and National" are representative terms that do not
<PAGE>
imply or denote that actual CDPD Services coverage is coterminous with
these respective geographical areas. In any geographical area there may
be sections in which CDPD Services coverage does not exist.
5. NEls. In connection with its provision of CDPD Services hereunder,
GTEMC shall provide Customer with an NEI for each user device. Customer
shall acquire no proprietary interest in any such NEI designated for
its use, and GTEMC reserves the right to change such NEls or to
re-assign such NEls to other customers.
6. Equipment. GTEMC may, but shall not be obligated to, make available
CDPD equipment (the "Equipment") for purchase by Customer. In such
event, GTEMC will provide to Customer the terms and conditions for the
purchase of such Equipment.
7. Data Services Reporting and Billing. For CDPD Services charges,
payment terms are as follows:
Payment for CDPD Services is due within thirty (30) days of the date of invoice.
Overdue balances shall accrue a late payment fee equal to the lesser of one and
one-half percent (1.5%) per month on any amount not paid when due, or the
highest amount allowable by applicable state law or tariff. The fee shall be
paid every month on all outstanding overdue balances, and shall be prorated for
each day that the payment is overdue. Such late payment fee will not be
compounded monthly. If timely payment is not received in full, GTEMC may, at its
sole option and without limiting any other remedy available under law or in this
Agreement, disconnect CDPD Services, subject to a reconnection charge for
service restoration. Customer must meet GTEMC's established credit criteria in
order to receive CDPD Services hereunder.
8. Taxes. Prices are exclusive of all federal, state, municipal or other
government, excise, sales, use, occupational, or like taxes. The amount
of any present or future tax applicable to the sale of the Equipment or
CDPD Services shall be paid by the Customer or, in lieu thereof, the
Customer shall furnish GTEMC with a tax-exemption certificate
acceptable to the appropriate tax authorities.
9. Limitation of Liability. GTEMC shall not be liable to Customer or to
CDPD Services users for interruptions caused by failure of equipment
or CDPD Services, failure of communications, power outages, or other
interruptions not within the complete control of GTEMC. There shall be
no credits, reductions, or setoff against the charges for CDPD
Services for downtime or interruption of CDPD Services unless such
CDPD Services interruption exceeds twenty-four (24) hours in duration.
GTEMC shall provide Customer with a credit equal to one thirtieth
(1130) of the recurring monthly charge for CDPD Services for each
twenty-four (24) hour period from the time of notice of interruption
until CDPD Services restoration, provided that Customer timely
notifies GTEMC of the CDPD Services interruptions.
2
<PAGE>
The liability of GTEMC for any cause whatsoever, including but not
limited to any failure or disruption of CDPD Services provided under
this Agreement, regardless of the form of action, whether in contract
or tort or otherwise, shall be limited to an amount equivalent to
charges payable by Customer under this contract 'for the services or
products furnished hereunder during the period such claim arose.
Notwithstanding any provision contained herein, GTEMC shall not be
liable to Customer, or to its users of CDPD Services, for any special,
incidental, consequential or punitive damages of any kind, including,
but not limited to, loss of business opportunity, loss of profits, or
loss of use of the Equipment.
10. General Provisions.
A. Service Disclaimer. Except as expressly set forth herein, GTEMC make
no warranties or representations, either express or implied, concerning
the CDPD Services and GTEMC expressly disclaims warranties of fitness
for a particular use or purpose, the warranty of merchantability and any
other warranty implied by law.
B. Force Majeure. Neither party shall be liable for any delays or
failure to perform resulting directly or indirectly from acts of God,
any governmental authority, accidents and disruptions, including fires,
explosions, war, insurrection, riots, labor disputes and strikes. In
addition to such causes, neither party shall in any event be liable for
delay or failure to perform resulting directly or indirectly from any
cause which is beyond that party's reasonable control.
C. Regulations. This Agreement shall at all times be subject to the
decisions, orders, statutes and rules of the federal and state
regulatory authorities having jurisdiction over the CDPD Services
provided under this Agreement.
D. Events of Default.
1. It shall be a Customer default under this Agreement if
Customer is sixty (60) days overdue on any undisputed payments
under Exhibit B.
2. Any one of the following events shall constitute a default
by either party under this Agreement:
a. Either party becomes insolvent or makes an assignment for
the benefit of creditors;
b. A receiver, trustee, conservator, or liquidator of all or
a substantial part of either party's assets is appointed
with or without said party's application or consent;
c. A petition is filed by or against (without dismissal
within 60 days) either party under the Bankruptcy Code or
any amendment
3
<PAGE>
thereto or under any other insolvency law or laws providing
for the relief of debtors; or
d. Either party assigns or attempts to assign this contract
to a third party, except as set forth in Section 1 OF.
E. Remedies and Termination. Either party may terminate this Agreement
in the event of the other party's material default, as set forth in
Section 10, which remains unresolved for a period of sixty (60) days
following written notice by the non-defaulting party. GTEMC may
terminate this Agreement, without liability to Customer, in any of the
areas set forth on Exhibit A, wherein GTEMC or an affiliate company
sells, ceases to own, manage or operate the network therein. Should
GTEMC terminate this Agreement, the Customer shall be entitled to a
refund of any payment made in advance of the actual provision of
services.
F. Non-assignment. Neither party may assign this Agreement, except to
an affiliate company or upon GTEMC's sale of any market as provided
hereinafter, without the other's prior written consent, and such
consent shall not be unreasonably withheld. However, in the event of
the sale of any market or the cessation of ownership, management or
control by GTEMC, GTEMC may seek the assignment of this Agreement to
its successor without the requirement of Customers consent. However,
nothing contained herein shall be construed as an obligation or
requirement by GTEMC to obtain any such assignment or as a condition
of sale of any market or customer base.
G. Non-waiver. Failure of either party to this Agreement to enforce
any right shall not constitute a waiver of such right or any other
right, whether of a similar or dissimilar nature, and shall not
prohibit the exercise of the same right at a future date.
H. Severability. In the event that any provision of this Agreement
shall be found to be void or unenforceable, such finding shall not be
construed to render any other provision of this Agreement either void
or unenforceable, and all other provisions which are invalid or
unenforceable shall not substantially affect the rights or obligations
granted to or undertaken by either party.
I. Headings. The headings of the provisions of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
J. Law Governing. This Agreement is entered into under the laws of the
State of Georgia and shall be construed thereunder.
Notice. Any notice to be given hereunder by either party to the other shall be
in writing and shall be deemed given when sent by postage prepaid certified or
registered United States mail.
4
<PAGE>
Notices to GTEMC shall be addressed to:
GTE Mobile Communications Service Corporation
Data Products Department
245 Perimeter Center Parkway 2NLA
Atlanta, Georgia 30346
Attn.: William Warford (770-391-8467)
Attn.: Ed Huelsman (972) 527-3268
cc: Business Development/Contracts Counsel (same address)
Notices to Customer shall be addressed to:
Rod Stambaugh
U.S. Wireless Data Inc.
1123 Western Avenue
Mill Valley, CA 94941
Phone: (415) 389-1755
If either party changes its address during the term hereof, it shall so
advise the other party in writing and any notice thereafter required to
be given shall be given to such new address.
12. Entire Agreement. This Agreement, including all Exhibits, constitutes
the entire and only agreement between the parties with regard to the
subject matter hereof, and any representation, promise or condition,
whether oral or in writing, including prior or contemporaneous
representations of sales representatives or other personnel of GTEMC,
which is not fully set forth herein or expressly incorporated herein by
reference shall not be binding upon either party. Any addition to or
waiver, alteration or modification of the foregoing conditions shall not
be valid or binding upon either party unless made in writing, and signed
on behalf of both parties by an authorized representative.
13. Term. The term of this Agreement is from August 1, 1997 to August 1, 1999.
5
<PAGE>
The parties hereto have executed this Agreement through duly authorized
representatives and wishing to be legally bound hereto are so bound as of this
first day of August, 1997.
U.S. WIRELESS DATA INC. GTE MOBILE COMMUNICATIONS SERVICE CORPORATION
SKEWED BY
6
<PAGE>
Exhibit A
GTEMC MARKETS
GTE Markets
City State
Akron OH
Austin TX
Bakersfield CA
Brandenton FL
Canton OH
Cleveland OH
Frankfort KY
Fresno CA
Honolulu HI
Houston TX
Galveston TX
Greensboro NC
Greenville VA
Indianapolis IN
Lakeland-Winter Haven FL
Lorain-Elyria OH
Louisville KY
Memphis TN
Nashville TN
Newport News VA
Norfolk VA
Petersburg-Colonial Heights VA
Raleigh-Durham NC
Richmond VA
San Diego CA
San Francisco-Oakland CA
San Jose CA
Tampa FL
Visalia-Tulare CA
7
<PAGE>
Mobilnet
8
<PAGE>
Exhibit A
(continued)
Non-GTE Markets
AMERITECH
Chicago IL
Cincinnati OH
Dayton OH
Aurora-Elgin IL
Joliet IL
Gary IN
Detroit-Ann Arbor MI
Flint MI
St. Louis MO
9
<PAGE>
Exhibit A
(continued)
Non-GTE Markets
BELL ATLANTIC/NYNEX
Allentown PA
Atlantic City NJ
Baltimore MD
Boston MA
Bridgeport/Stamford CT
Norwalk/Danbury CT
Charlotte NC
Frederick MD
Hartford CT
Hunterdon NJ
Long Branch-Asbury Park NJ
Manchester-Nashua NH
New Brunswick NJ
New Haven CT
New London/Norwich CT
NYC NY
Petersburg-Colonial Heights PA
Philadelphia PA
Pittsburgh PA
Trenton NJ
Washington DC
Wilmington DE
Worchester-Fitchburg MA
<PAGE>
Mobilnet
11
<PAGE>
Exhibit A
(continued)
Non-GTE Markets
AT&T WIRELESS
Dallas TX
Denver co
Jacksonville FL
Las Vegas NV
Miami-Ft Lauderdale FL
Minneapolis-St. Paul MN
Modesto CA
Oklahoma City OK
Orlando FL
Poftland OR
Reno NV
Sacramento CA
Salt Lake UT
San Antonio TX
Seattle-Everett WA
Stockton CA
Tulsa OK
West Palm Beach FL
SOUTHWESTCO
Albuquerque NM
Cococino AZ
El Paso TX
Las Cruces NM
Phoenix AZ
Tucson AZ
<PAGE>
Mobilnet
13
<PAGE>
Exhibit B
PRICE PLANS & TERMS
1. Primary Service Rate Plan:
- -----------------------------
(Confidentially for this item of this document has been requested
pursuant to Commission rule 24b-2. The omitted material has been filed
separately with the Commission.)
2. Minimum Cumulative Revenue Commitments To GTF-MC:
- ---------------------------------------------------------
Year 1 Year 2
Ql Q2 Q3 Q4 Q1 Q2 Q3 Q4
$20K $140K $380K $700K $1.1M $1.5M $2.0M $2.75M
3. Penalty Terms & Fees:
- --------------------------
At the end of each quarter, should Customer not generate the minimum schedule
revenue shown above, GTEMC will invoice the Customer the difference between
actual revenue generated and the minimum schedule revenue. Customer will be
required to submit payment to GTEMC within 30 days of receipt of invoice.
14
<PAGE>
Exhibit B
(continued)
4. Alternate Service Rate Plan Selection:
At any time during this agreement term, Customer will be allowed the option once
to change to the service rate plan listed below along with the associated
committed revenue schedule.
(Confidentially for this page of this document has been requested pursuant
to Commission rule 24b-2. The omitted material has been filed separately
with the Commission.)
Year 1 Year 2
01 Q2 Q3 Q4 Ql Q2 Q3 Q4
$15K $75K $200K $400K $500K $700K $800K $1 M
If Customer exercises this option, GTEMC will re-compute all revenue generated
from the beginning of the agreement according to this rate plan. Also GTEMC will
invoice the customer for any penalty fees associated with this schedule
according to penalty fee calculations defined in 3 above. Customer will not be
allowed additional changes to rate plans once this option is exercised.
1 6
<PAGE>
EXHIBIT C
JOINT MARKETING OPERATING TERMS
The parties to the Agreement agree to jointly market the US Wireless Data (USWD)
Solution (as defined below) pursuant to the following terms and conditions:
1) USWD SOLUTION. The "USWD Solution" includes:
a) A USWD Tranz Enabler product; and
b) A GTE CDPD NEI address; and
c) A USWD provided credit/debit card transaction payment service with a
competitive rate to that paid by a fixed location retail merchant who
currently uses a VeriFone T330 or T380.
2) GTE RESPONSIBILITIES
a) The GTE sales representatives will utilize appropriate sales
channels to solicit retail merchants that meet the criteria set forth
in Section l.c) above to convert their existing dial line credit card
merchant service to a wireless credit card merchant service offered
from USWD.
b) Should the retail merchant wish to convert its present service, the
GTE sales representative will provide the merchant with an application
to filled out. The GTE sales representative will submit the completed
application, along with the merchant application fee and any additional
activation fees, to USWD.
The GTE "Wireless Merchant Program" encompasses a variety of retail
merchant solutions, one of which is the USWD Solution offering. As
other retail merchant solutions become available in the industry, GTE
will incorporate them into the "Wireless Merchant Program" provided
they do not violate terms of this agreement with USWD.
GTE will make available the USWD retail merchant solution in the
"Wireless Merchant Program" to all GTE commercial sales representatives
in GTE CDPD markets using dedicated CDPD channels for service.
In each selected GTE CDPD market, GTE will purchase, lease, or rent
fully operational demonstration units through USWD for the GTE sales
1 8
<PAGE>
representatives who are participating in this program. The local CDPD
market will provide the IP addresses for their respective
demonstration units.
f) GTE will provide GTE sales trainers to attend and learn the USWD
program for future training of GTE sales representatives
g) The responsibilities of the GTE sales representative will be the
following:
i) Make good faith efforts to attend scheduled training sessions
conducted by USWD;
ii) Solicit the USWD specified type of retail business merchant;
iii) Collect the merchant application fee and any additional
activation fees for each retail merchant who submits a merchant
application for the USWD wireless service. Should there be a
negotiated fees with the retail merchant other than the standard
rate, it must first be approved by GTE and USWD.
iv) Deliver completed application to the USWD representative
along with the merchant application fee.
Optionally, participate with the USWD representative in the deployment
of all approved retail merchants in this program
h) GTE will fund promotional programs that may include but not limited
to the following elements for marketing this solution in the "Wireless
Merchant Program":
i) Development of joint collateral material (data slicks, 4 color
brochures, etc.) using both GTE and USWD logos;
ii) Direct mail campaign and local advertising to generate leads
for GTE sales representatives;
iii) Sales incentives/contests for GTE sales representatives;
iv) Press releases on this solution for the "Wireless Merchant
Program";
19
<PAGE>
Printing of all USWD developed sales materials to the GTE sales
representatives.
3) USWD RESPONSIBILITIES
a) USWD will process the application for the merchant service and, if
approved according to Visa & Mastercard regulations, will implement the
wireless merchant service using GTE CDPD services as the communications
transport of the USWD merchant service.
b) USWD will order GTE CDPD NEls for all merchants under this program
offering. The minimum revenue generated for each merchant will be as
defined in Exhibit B of the contract.
For each GTE CDPD market identified to participate in the "Wireless
Merchant Program", USWD will provide the following:
i) Development and distribution of all sales training material
for each GTE sales representative who will be soliciting retail
merchants;
ii) A minimum of one USWD sales representative residing in the
GTE selected market to coordinate all USWD responsibilities for
this program; and
iii) Delivery of a fully operational demonstration unit that will
be purchased, leased, or rented by the GTE sales office at a
discounted rate.
The USWD sales representative will perform the following functions in
the selected GTE market:
i) Full training of each GTE sales representative, which includes
classroom training and joint sales calls;
ii) Provide each GTE sales representative with all retail
merchant application paperwork, procedures and checklists
necessary for the GTE sale representative to execute a successful
solicitation;
iv) Process all merchant applications according to USWD internal
procedures;
v) Negotiate any non-standard price quotations with the retail
merchant; and
20
<PAGE>
vi) Timely provision and deploy the terminal device for the
merchant upon approval of the application.
e) USWD will order all CDPD NEls for approved retail merchants from
GTE. The process for this procedure will be jointly developed by USWD
& GTE.
USWD will pay GTE $45 each for the first 2 NEI activated for each
approved retail merchant that is solicited by the GTE sales
representative in this program. For any additional activation's for the
same retail merchant, USWD will pay GTE $30 for each NEI. GTE will
invoice USWD on a monthly basis for such fees; in all other respects,
billing shall be carried out as set forth in the Agreement. Should
there be a negotiated application fee that is less than the standard
USWD application fee, USWD and GTE must both approve the decrease if it
means that GTE will receive less than the stated activation fees.
USWD will provide GTE with weekly sales reports indicating approved
retail merchants as well as identification of each GTE sales
representative who solicited that approved merchant.
USWD will be responsible for all retail merchant operational
training, either directly or indirectly.
USWD will be responsible, either directly or indirectly, for all
first level help desk (24x7) support of the retail merchant for this
program.
USWD agrees to deploy a fully configured merchant system within a
period of 1 0 business days following the approval of the merchant
application by the credit card processor used by USWD provided the
quantity of hardware is less that 25 units. for any quantity above 25,
USWD agrees to schedule deployment in a timely manner with the retail
merchant.
USWD agrees to submit the completed merchant application to the
credit card processing company within 2 days of the submission of the
application from the GTE sales representative.
4) EXCLUSIVITY. USWD agrees to use GTE CDPD services exclusively in all GTE CDPD
markets for the duration of this agreement except for those customers referred
to USWD by an alternative CDPD service provider.
GTE agrees to distribute the USWD retail merchant solution exclusively as one of
the offerings in the "Wireless Merchant Program" for the term of this
agreement." Other offerings in the "Wireless Merchant Program" will not be the
21
<PAGE>
same as the USWD offering as defined in section 1 of the USWD solution above.
This exclusivity is limited to GTE's distribution of USWD's hardware only as
described in section 1 A above. It does not preclude GE from entering into other
3rd party services agreements.
5) EVENTS OF DEFAULT. It shall be an event of default for either party to fail
to comply with such party's responsibilities as set forth hereinabove.
6) REMEDIES OF DEFAULT. The party in default will be required to submit to the
other party a mutually agreed plan within 1 0 days to resolve the default. If no
plan is presented or agreed upon, the other party may terminate this agreement
without liability.
22
MEMBER SERVICE PROVIDER SALES AND SERVICE
CREDIT CARD PROCESSING AGREEMENT
THIS MEMBER SERVICE PROVIDER CREDIT CARD PROCESSING AGREEMENT (this
"Agreement') is made and entered into 1 day of January, 1997. by and among NOVA
Information Systems, Inc.,. a Georgia corporation with its principal place of
business at One Concourse Parkway, Suite 300, Atlanta, Georgia 30328, ("NOVA!'),
REGIONS BANK, a principal member of VISA U.S.A.,, Inc., and Mastercard
International Incorporated and a bank chartered under the laws of the State of
Alabama with its principal place of business at 25 Washington Avenue, Suite 600,
Montgomery, Alabama 36104, ("Member") and U.S. Wireless Data, Inc. a Colorado
corporation with its principal place of business at 1123 Western Ave., Mill
Valley, CA 94941("MSP").
PURPOSE OF AGREEMENT; The purpose of this agreement is to set forth the
terms and conditions under which MSP shall refer to NOVA and Member prospective
merchants meeting the qualifications of NOVA and Member for the purpose of
providing to such merchants credit card processing services, and to set forth
the referral fees NOVA and Member shall, from time to time. pay to MSP for such
referrals and other services, as described herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged and intending to be legally bound hereby, MSP, NOVA and
Member agree as follows;
DEFINITIONS As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms
defined):
A. "Acceptable merchant' shall mm a merchant who does not performing
the services or sales described in Schedule A-Exhibit 1, and who is
acceptable to NOVA 'and Member, as determined in their sole
discretion, based upon a credit card of the merchant.
B. "Assessment Fee' shall mean the fee that is collected from a
Referred Merchant on behalf of the Credit Card issuer for a
Transaction-
C. "Cardholder, shall mean (i) the person in whose name a Credit Card
has been issued, and shall also mean (ii) any person who possesses and
uses a Credit Card and who purports to be the person in whose name the
Credit Card was issued or whose signature appears on the Credit Card
as an authorized user,
D. "Cause" shall mean the occurrence of any one or more of the
following- (i) any failure by MSP to comply in all material respects
with the provisions of this Agreement; (ii) any failure by MSP to
follow the credit policies and procedures established by NOVA and
Member from time to time; (iii) any failure by MSP to comply with the
Rules and all applicable laws and regulatory requirements, whether
Federal or state, (iv) any intentional misrepresentation by an
employee, officer or director of MSP in connection with the referral
of a prospective merchant or an application by a prospective merchant
for services hereunder', (v) any failure by MSP to advise NOVA and
Member of adverse or material changes in any Merchant's financial
condition of which MSP becomes aware during the Merchant's association
with NOVA. and member; (vi) the financial insolvency or bankruptcy of
MSP; (vii) the occurrence of any event or any action by MSP which NOVA
or Member determine in good faith to constitute unsound business
practices or which might impose a risk of financial loss to NOVA or
Member; and (viii) any failure by MSP to provide appropriate sales
agent support (including without limitation merchant application
review, site inspection, monthly reporting, terminal support,
commission payment, etc.),
<PAGE>
E. "Chargeback" shall mean a Transaction charged back by a Cardholder
pursuant to the Rules.
F. "Credit-Card" shall mean a (i) VISA card or other card bearing the
symbol(s) of VISA U.S.A. Inc. or VISA International Inc. (including
VISA Gold cards) or (ii) a MasterCard card or other card bearing the
symbol(s) of MasterCard International Incorporated (including
MasterCard Gold cards).
G. "Credit Card Associations" shall mean VISA U.S.A. Inc., VISA
International Inc., MasterCard International Incorporated and any
successor organization or association.
H. "Interchange Fee" shall mean the charge levied and collected in
accordance with the Rules with respect to Credit Card transactions.
I. "MasterCard" shall mean MasterCard International, Incorporated (a
Delaware corporation).
J. "Member" shall mean Regions Bank (or a successor financial
institution and principal member of VISA and MasterCard to whom the
rights and obligations of Member hereunder may be assigned by Regions
Bank).
K. "Merchant Agreement" shall mean a written contractual agreement (in
a form approved by NOVA and Member and unaltered) executed among NOVA,
Member and a Referred Merchant, as referenced in Section 2.D hereof,
for services related to Credit Cards and Transactions. The initial
form of Merchant Agreement shall be the form attached hereto as
Exhibit 1; provided, however, the form of Merchant Agreement may be
changed by NOVA and Member in their sole discretion.
L. "Merchant Services" shall mean the credit card processing services
offered or provided by NOVA and Member (or their designees) pursuant
to Merchant Agreements.
M. "Merchant Operating Account" shall mean a deposit account
maintained by a Referred Merchant at a FDIC-insured financial
institution which is acceptable to NOVA and Member and is a member of
Automated Clearing House ("ACH")').
N. "Referred Merchant" shall mean any seller of goods, services, or
both, referred to NOVA and Member by MSP, and which is a party to a
Merchant Agreement. During the term and subject to the provisions of
this Agreement, MSP shall provide to all Referred Merchants the
services described in Section 2. H below.
0. "Rules" shall mean the bylaws, rules, regulations and procedures
issued by a Credit Card Association or other card issuer/licensor
similar to MasterCard or VISA, as such bylaws, rules, regulations and
procedures may be amended or supplemented from time to time.
P. "Sales Draft" shall mean a charge form or draft evidencing the
purchase by a Cardholder of goods or services at a Referred Merchant
location, by use of a Credit Card.
Q. "Transaction" shall mean the purchase or credit by a Cardholder of
goods or services at a Referred Merchant's location, by use of a
Credit Card.
R. "VISA" shall mean VISA U.S.A. Inc. (a Delaware corporation).
2
<PAGE>
2. MERCHANTS AND MERCHANT AGREEMENTS
A. Recruitment of Merchants. In accordance with the policies and
procedures set forth on Schedule ------------------------ A
hereto, MSP shall use its best efforts to locate, investigate and
refer merchants MSP believes to be likely candidates for Credit
Card processing relationships with NOVA and Member. MSP will
market the Merchant Services offered by NOVA and Member at its
own expense, in accordance with all Rules relating to third party
service providers and in accordance with all policies and
procedures of Member and NOVA (including without limitation the
pricing terms for Referred Merchants) as such policies and
procedures may be amended from time to time. Merchants referred
to NOVA and Member by MSP which enter into a Merchant Agreement
will have a direct business relationship with NOVA and Member,
and will be subject to the terms of the applicable Merchant
Agreement entered into by and among NOVA, Member and Merchant.
MSP shall not be a @ to any Merchant Agreement and MSP shall have
no additional obligations imposed upon it by any Merchant
Agreement.
B. Trademarks and Logos. MSP will not use the name, trademarks,
service marks or logos of NOVA or -------------------- Member
without the express prior written consent of such party. MSP
acknowledges and agrees that MasterCard and VISA are the sole and
exclusive owners of these respective trademarks and service
marks, and that MSP will not contest the ownership of such marks.
Additionally, MSP will use the VISA and MasterCard trademarks and
service marks only in accordance with the Rules and after prior
written approval of NOVA and Member (and the Credit Card
Associations, if required). MSP acknowledges and agrees that the
Credit Card Associations may at any time immediately and without
advance notice prohibit MSP from using the marks of the Credit
Card Association for any reason. Member must be prominently
identified by name and city on any program materials describing
the Merchant Services. MSP shall have no authority to permit use
of the VISA or MasterCard program marks by any third party. Any
solicitation material used by MSP must clearly disclose that the
merchant agreement is by and among NOVA, Member and the
individual merchant.
C. Approval of Merchants. Member, or NOVA acting as its agent, shall
review all applications submitted by prospective merchants
referred by MSP. Member and NOVA each reserve the right in their
sole discretion to refuse to sign a Merchant Agreement with any
merchant referred by MSP.
D. Merchant Agreements. Merchant Agreements shall be on forms
provided by NOVA and Member and shall define the terms upon which
NOVA and Member will provide Merchant Services to Merchant.
E. Merchant Reserves. Upon request MSP will assist NOVA and Member
in coordinating the implementation of such safeguards as NOVA or
Member determine is prudent or necessary to create or require,
with respect to any Referred Merchant, reserves, holdbacks,
deposits or other safeguards against merchant losses. Without
limitation as to additional or different safeguards, NOVA or
Member may require a Referred Merchant to pay up to 100% of the
funds deposited by a Referred Merchant for up to six months or
more.
F. Services Provided by NOVA. NOVA shall provide the following
services on behalf of Member, to MSP and the Referred Merchants:
i. NOVA Network Authorization 24 x 7 x 365 toll-free Network
Help Desk;
ii. Merchant Enrollment Service, including new merchant
set-up and administration of credit policy;
3
<PAGE>
iii. Chargeback and Retrieval Processing;
iv. Collections and Fraud Monitoring Service; and
v. Merchant Settlement Service, including Referred Merchant
statement processing and ACH file preparation (provided,
however, Member shall be responsible for effecting all
settlements of Transactions).
G. Optional Services Provided by NOVA. Upon the written election of MSP, NOVA
shall also provide and charge for (in accordance with Schedule B) any one or
more of the following services to the Referred Merchants:
i. Referred Merchant Set-Up Service, including new merchant
set-up kit, telephone training and re-programming
assistance;
ii. Equipment Repair Service, including emergency swap-outs
and deployment and repair service;
iii. Merchant Supply Fulfillment Service and equipment
fulfillment service;
iv. 24 x 7 x 365 Customer Support, including full Point of
Sale ("POS") Help Desk and Settlement Support;
V. Training Support, including MSP sales representative
training, product and service overviews and competitive
selling tips; and
vi. Collateral and Marketing Materials, including merchant
user guides, newsletters, product brochures and equipment
templates.
H. Services Provided by MSP. In addition to the duties of MSP described
elsewhere in this Agreement, MSP shall provide the following services
on behalf of NOVA and Member to the Referred Merchants:
Training. MSP shall provide to each Referred Merchant necessary training in the
procedures and Rules applicable to the acceptance of Credit Cards, the operation
of terminal equipment and the use of NOVA products and services. MSP shall
initially train the Referred Merchants, including, when appropriate,
distribution of a merchant set-up kit. MSP shall also train new employees of the
Referred Merchant as necessary.
ii. Merchant Support. MSP shall provide reasonable ongoing support to
ensure Referred Merchants are continually apprised of their customer
service requirements and to remedy any customer service problems
encountered by such Referred Merchants. MSP shall supervise such personnel
it may engage as employees or agents in activities hereunder. The
responsibility for all such personnel it may be that of MSP only, including
the responsibility of assuring full compliance by all such personnel with
the terms and provisions of this Agreement.
I. Excluded Types of Merchants. MSP agrees that it or its designee
will not market the Merchant Services to any existing NOVA or Member
merchant, any existing merchant of a NOVA agent or any customer of
NOVA. MSP also agrees to follow the guidelines set forth on Schedule A
with respect to soliciting and referring merchants. If MSP has any
uncertainty as to whether a particular merchant is covered by these
restrictions or by
4
<PAGE>
Schedule A, MSP will discuss the matter in good faith with NOVA prior
to proposing that such Merchant enter into a Merchant Agreement with
NOVA and Member.
J. Adverse Information. During the term of this Agreement, MSP agrees to
notify NOVA and Member promptly in writing if MSP becomes aware of any
information about the insolvency or bankruptcy (voluntary or
involuntary) or change in ownership or business of any Referred
Merchant, or if MSP becomes aware of any other significant adverse
information about noncompliance with the Rules by a Referred Merchant,
or any information indicating that any Referred Merchant's acceptance
of Credit Cards is other than the bona fide sale of products or
services by such Referred Merchant.
K. Advertising/Sales Materials. All advertising and/or sales materials
used by MSP shall be in compliance with the Rules. NOVA and Member
shall give MSP notice of any noncompliance that comes to the attention
of such party.
L. Information. MSP shall distribute to its sales representatives, in a
timely fashion, changes ----------- in operating mode, and Rules
received from NOVA or Member, that would affect the manner in which
the Merchant Services are marketed by such representatives. MSP shall
keep accurate records with respect to Referred Merchants' inquiries,
orders, transactions and contacts which MSP makes pursuant to this
Agreement. On behalf of NOVA and Member, MSP will request and use
reasonable efforts to obtain and provide latest fiscal year business
balance sheet and profit and loss statement on Referred Merchants and
personal financial statements on principals, if requested by NOVA or
Member.
3. COMPLIANCE WITH RULES
A. Registration. In connection with the services provided by MSP
under this Agreement, MSP has registered and executed all
applicable documents and agreements with VISA and MasterCard
and is in full compliance with the Rules. MSP further agrees
to the following:
i. maintain its registration with VISA and MasterCard and
fully comply with the terms of any documents and agreements
executed therewith;
ii. comply with all reporting requirements of MasterCard and
VISA; and
iii. promptly give written notice to NOVA and Member of the
identity and location of all sales locations of MSP. MSP
acknowledges and agrees it may not delegate any of its
rights or obligations hereunder to any other person or
entity, except pursuant to a valid assignment complying with
the requirements set forth in Section 9 below
B. Compliance with MasterCard Rules. In accordance with the
MasterCard Rules regarding member service providers, MSP
acknowledges and agrees as follows:
i. MSP understands and agrees to comply in all respects with
the MasterCard Rules (including without limitation the Rules
regarding member service providers);
ii. MSP acknowledges and agrees that MasterCard has the
right to enforce any provision of the MasterCard Rules and
to prohibit any conduct by MSP that creates a risk of injury
to MasterCard or that may adversely affect the integrity of
MasterCard's systems, information or both. MSP agrees to
refrain from taking any action that would have the effect of
interfering with or preventing an exercise of such right by
MasterCard; and
5
<PAGE>
in the event of any inconsistency between any provision of
this Agreement and the MasterCard Rules, the MasterCard
Rules will be afforded precedence and shall apply.
4. CONDENSATION TO MSP
A. Processing Rates and Fees. NOVA, acting on its own behalf and as
Member's agent, shall pay to ----------------- MSP as fall
consideration and compensation for the performance of all MSP's
duties and obligations under this Agreement, any Referred
Merchant discount revenues and/or fees collected in excess of
NOVA's fees and other charges as set forth on Schedule B. Such
payments shall be made within thirty (30) days following the end
of each month; provided, however, NOVA shall use its best efforts
to make such payments within fifteen (15) days following the end
of each month. For example, amounts payable to MSP for Referred
Merchant revenues collected for March Transactions shall be paid
to MSP by April 30, but NOVA will attempt to pay such revenues by
April 15).
B. Pass-Through of Certain Fees. NOVA and Member reserve the right
to pass through to MSP certain ----------------------------- fees
or penalties imposed by any Credit Card Association as a result
of the activities, acts or omissions of MSP. Additionally, MSP
agrees to pay promptly any fees or penalties imposed by the
Credit Card Associations with respect to MSP's registration as a
service provider for Member. MSP acknowledges that NOVA and
Member, in their discretion and in accordance with the terms of
the Merchant Agreements, may pass through to Referred Merchants
any fees or expenses related to implementing changes to
software/hardware requirements deemed necessary by the Credit
Card Associations or other service providers.
5. DUE CARE AND LIABILITY
MSP hereby agrees to indemnify and hold NOVA, Member, the Credit Card
Associations, the Referred Merchants and the members of the Credit Card
Associations harmless from and against any claim, demand, loss, financial or
otherwise, damage, liability or cost (including reasonable legal fees and
expenses), caused by or in any way arising from: (i) any failure by MSP to fully
comply with the Rules and all other rules, regulations, policies and procedures
of NOVA, Member, MasterCard, VISA and any other similar Credit Card licensor;
(ii) any breach or default by MSP of this Agreement or any other agreement
between MSP and (a) NOVA, (b) Member or (c) any Referred merchant; (iii) any
negligent or wrongful act of MSP in performing or failing to perform the
obligations hereunder; or (iv) any termination of this Agreement pursuant to
Section 8 hereunder. The obligations of MSP hereunder are not intended to cover
typical credit losses (including chargebacks) incurred by NOVA or Member as a
result of Referred Merchants' refusal or inability to pay, unless such credit
losses are incurred by NOVA or Member as a result of any act or omission or MSP
described in (i) - (iv) above.
6. GENERAL
A. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
B. Entire Agreement. All Schedules and Exhibits attached to this
Agreement and the Rules arc hereby made a part of this Agreement
for all purposes. This Agreement represents the entire
understanding among NOVA, MSP and Member with respect to the
matters contained herein and, except as otherwise provided in
this Agreement, it may be amended only by an instrument in
writing signed by each of the parties hereto.
6
<PAGE>
C. No Partnership or Agency. Nothing in this Agreement shall be
deemed to constitute a partnership or joint venture between the
parties hereto or be deemed to constitute MSP as an agent for
NOVA or Member for any purpose whatsoever. MSP is an independent
contractor and not an employee of NOVA or Member.
D. Third Party Rights. This Agreement is solely for the benefit of
the parties hereto and nothing herein, express or implied, shall
be deemed to be for the benefit of any third party or create any
third party rights or standing to sue.
E. Notices. Any notice required or permitted under this Agreement
shall be in writing and may be delivered by personal service
or by U.S. certified mail, return receipt requested and
postage prepaid, to the addresses of the parties set forth
below, or such other addresses as may be provided by written
notice to the other parties in accordance with the terms of
this notice provisions. Any such notice shall be effective
upon the earlier of (i) five days after deposit in the mail
properly addressed and postage prepaid, or (ii) actual
receipt.
If to NOVA: NOVA Information Systems, Inc.
One Concourse Parkway, Suite 300
Atlanta, Georgia 30328
Attn.: James M. Bahin, Chief Financial Officer
Facsimile No.: (404) 698-1046
With a copy to: NOVA Information Systems, Inc.
One Concourse Parkway, Suite 300
Atlanta, Georgia 30328
Attn.: Cathy A. Harper, General Counsel
Facsimile No.: (404) 698-1046
If to Member: Regions Bank
25 Washington Avenue, Suite 600
Montgomery, Alabama 36104
Attention: Jackie D. Oliver
With a copy to: Steiner, Cnnn & Baker
8 Commerce Street, 8th Floor
Montgomery, Alabama 36104
Attention: Debra L. Loard, Esquire
If to MSP: U.S. Wireless Data, Inc. 1123 Western Ave.
NEII Valley, CA 94941
Attention: Rod L. Stambaugh
F. Dispute Resolution. Any controversy, dispute or claim arising out
of, or in connection with ------------------- this Agreement must
be settled by final and binding arbitration to be held in
Atlanta, Georgia in accordance with the miles of the American
Arbitration Association ("AAA"), as may be amended from time to
time (the "AAA Rules"). Judgment upon award rendered by the
arbitrators may be entered in any court: (i) having jurisdiction
thereof, (ii) having jurisdiction over the party against whom
enforcement thereof is sought,- or (iii) having jurisdiction over
any such party's assets. The procedures and law applicable during
the arbitration of any controversy, dispute or claim will be both
the AAA Rules and the internal substantive laws of the State of
Georgia (excluding, and without regard to, its or any other
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<PAGE>
jurisdiction's rules concerning any conflict of laws). In any
arbitration pursuant to this Agreement, the award of decision
must be rendered by at least a majority of the members of an
arbitration panel consisting of three (3) members, one of whom
will be appointed by each of the parties hereto. All arbitrators
must be persons who are not employees, agents or former employees
or agents of any party. In the event that any of the parties
hereto fails to appoint an arbitrator within thirty (30) days
after submission of the dispute to arbitration, such arbitrator
will be appointed by the AAA in accordance with the AAA Rules.
G. Force Majeure. Neither party shall be liable to the other for
any failure or delay in its performance of this Agreement in
accordance with its terms if such failure or delay arises out
of causes beyond the control and without the fault or
negligence of such party.
H. Waiver. Any waiver or delay by any party hereto in asserting
or exercising any right, shall not constitute a waiver of any
further or other rights of said party. If any part of this
Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the
remainder of the Agreement shall not in any way be affected or
impaired thereby.
1. Attorney's Fees. In the event any party hereto is determined,
in connection with a final and binding arbitration pursuant to
Section 6.F above, to have breached this Agreement, then the
non-defaulting party shall be entitled to recover expenses
incurred in enforcing the provisions of this Agreement,
including reasonable attorneys' fees and costs.
J. Severability, If any provision of this Agreement is found
illegal, invalid or unenforceable, such finding will not
affect any other provision hereunder. This Agreement shall be
deemed modified to the extent necessary to render enforceable
the provisions hereunder, and to comply with the Rules.
7. TERM OF AGREEMENT The term of this Agreement shall be for a period of
three (3) years commencing from the date of this Agreement. Thereafter,
this Agreement shall renew automatically for additional successive
one-year terms, unless any party hereto provides the other parties
written notice of intent not to renew this Agreement at least ninety
(90) days prior to the expiration of the then current term. The terms
of this Agreement shall remain in force with respect to all
Transactions processed hereunder and all Chargebacks, fees and
liabilities relative thereto.
8. TERMINATION
A. Termination for Cause. Any party hereto may terminate this
Agreement upon a material default ----------- hereunder by
another party if such default is not cured within (30) days of
receipt of written notice thereof from the non-breaching party.
NOVA or Member may also terminate this Agreement at any time for
Cause. This Agreement shall terminate automatically upon the
occurrence of either of the following: (i) the termination of
Member's MasterCard and VISA licenses and membership; (ii) the
termination of the NOVA/Member Agreement (provided, NOVA will
attempt to give, MSP at least sixty (60) days notice prior to
termination); or (iii) the termination by MasterCard or VISA of
MSP's registration as a third party service provider for Member.
B. Other Termination. NOVA or Member may, at its option,
terminate this Agreement immediately without notice to MSP in
the event of any one of the following events:
i. the filing of a bankruptcy petition, insolvency,
inability to meet its debts (in the ordinary course of
business) or dissolution of MSP;
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<PAGE>
ii. MSP making an assignment by MSP for the benefit of its
creditors or an offer of settlement or extension to its
creditors generally;
iii, the appointment of a trustee, conservator, receiver or
similar fiduciary for MSP or for substantially all of MSP's
assets;
the ace of any material adverse change in ft nature or
conduct of the business of MSP as carried on at the date
hereof-, or
V. failure by MSP to perform its obligations under this
Agreement.
Certain Post-Termination Rights. In the event of
termination of this Agreement, NOVA and Member shall
have the right in addition to the other rights and
remedies under this Agreement and at law and in equity,
to exercise a right of set-off such funds payments
otherwise due to MSP pursuant to Section 4. A., for any
amounts due to NOVA or Member hereunder pursuant to
Section 4.B., and, in the event of termination of this
Agreement for cause, any damages suffered by NOVA or
Member hereunder and at law, then owing or which may
thereafter become owing. No termination of this
Agreement shall affect any Merchant Agreement that is
in effect as of the time of termination, After
termination, MSP agrees to cooperate in all reasonable
respects with NOVA and Member throughout the remaining
term of each Merchant Agreement, MSP agrees not to
solicit or encourage any Referred Merchant to terminate
a Merchant Agreement in force with NOVA or Member for
any man after the termination of this Agreement.
Sections 5, 6.F, 9,C and 10 shall survive termination
of @ Agreement.
Upon T@ of MSP, NOVA shall offer to enter into a
servicing only agreement following the termination of
this Agreement to enable MSP to continue servicing the
Referred Merchants and receiving fees for such
servicing responsibilities, provided this Agreement has
not been terminated for cause by NOVA or Member.
9. ASSIGNMENT This Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and
assigns. Notwithstanding the foregoing sentence, however, this
Agreement may not be assigned by MSP without the prior written
consent of NOVA and Member, and the receipt of all required
consents from the Credit Card Associations.
10, CONFIDENTIALITY - MSP, NOVA and Member each agree that it will @
in strictest confidence all information and data belonging to or
relating to the business of the other parties to this Agreement,
which is designated confidential by the @ to which such
information or data belongs or relates (including without
rotation the terms of this Agreement and information related to
Referred Merchants), and that each party will safeguard such
information and data by using the same degree of cm and
discretion that it uses with its own data that such party regard
as confidential.
<PAGE>
Credit Card Processing Agreement
Schedule A - Credit Policy
--------------------------
INTRODUCTION
The following documentation represents the current NOVA and Member new merchant
Credit Policy. These guidelines are intended to govern the circumstances under
which new merchant applications will be approved or declined.
APPLICATION APPROVAL
The following represents the minimum review requirements for new merchant
applications generated by MSP and its representatives. These are minimum
requirements and additional information may be requested by NOVA and Member. Any
changes or exceptions to the following guidelines must be approved by NOVA and
Member. Every new merchant application submitted for approval by MSP must
include or comply with the following requirements:
The type of business on the merchant application must not appear on the
"Prohibited Products" or "Prohibited Methods of Selling" categories of the
"Restricted Merchant List" (See Exhibit 1). Certain @s of businesses that
appear in the "Restricted Business List" category of the "Restricted
Merchant List" may be considered for approval when Additional Documentation
Required for Exceptional Merchants as listed below is provided.
The new merchant application must be completed, including: type of
business; officer/owner information including ownership structure;
VISA/MasterCard volumes and average ticket; signatures of the
officers/owncrs; site survey; percentage of the Mail Order/Telephone Order
("MO/TO") volume.
A properly executed,, unaltered NOVA/Member Merchant Processing Agreement.
Execution of the Agreement should be witnessed by an authorized
representative of MSP.
A properly executed receipt for Referral Merchant funds, if applicable.
A completed debit/credit authorization form signed by an authorized
officer/owner of the merchant, together with voided check with the complete
transit and routing and demand deposit account numbers attached.
Completed site survey report which designates the correct type of business
and inventory sufficient to support the projected VISA/MasterCard sales.
The site survey report must be signed by a MSP representative or an
independent third party inspection service acceptable to NOVA.
Adequate personal information to allow NOVA and Member to perform a credit
review. A negative credit review (for example, prior or outstanding tax
liens, judgments, collection accounts, multiple slow pay accounts, etc.) or
lack of personal credit may result in the application being declined. NOTE:
At least two of the following credit bureaus must be used to provide credit
information: CBI Equifax; TRW; TransUnion; Dun & Bradstreet Report;
Acceptable Combined Terminated Merchant File inquiry.
One month current merchant statements from previous processor.
<PAGE>
Credit Card Processing Agreement
Schedule A - Credit Policy (continued)
In cases where the disposition of the merchant application is not apparent
based on the above information, the following information may be required
by NOVA/Member:
- Audited Financial Statements,
- Corporate Tax Returns;
- Personal Tax Returns (Principals);
- Copy of Printed Sales Material;
- Copy of Return Policy;
- Copy of Articles of Incorporation or Business License;
- Detailed description of how merchant conducts business relative
to deliveries, deposits and telephone sales;
- Six months of most recent VISA/MasterCard processing statements OR
six months of most recent business checking statements.
Derogatory Background Information:
- In general, payments now current that were past due will not be
questioned unless they are the norm for the report
- In general, payments past due of 30-60 days will not hold up the
application unless they exceed $500 or are the non-n for the report
- Proof of satisfaction will be requested for any outstanding judgment or
lien over $500
- Further explanation and possibly proof of satisfaction will be requested
for any legal item with a dollar amount attached in excess of $500
- Any charge off in excess of $500 will be viewed as a substantially
derogative piece of the overall report
- Any single negative item in excess of $1,000 will be viewed as seriously
derogative
- Foreclosure and repossessions are considered seriously derogative
Exceptional Merchants Include the Following:
- Merchants processing greater than 25% MO/TO
- Merchant processing Out of Home Sales
- Merchants with bankcard volume greater than $2.5 million annually
- Merchants with type of business appearing in "Restricted Business List"
category of "Restricted Merchant List"
The following Additional Documentation will be required in order for
Exceptional Merchants to be considered for approval:
- Most recent audited Balance Sheet & Income Statement OR 2 years of
corporate tax returns (personal if business in not incorporated)
- Copy of [] Business Certification, OR [I Business License, OR [] Articles
of Incorporation
- Detailed description of how merchant conducts business relative to
deliveries, deposits and telephone sales
- 6 months of recent processing statements OR, if processor statements not
available, 6 months most recent checking account statements
- 2 photographs of merchant location: Outside displaying signage and Inside
displaying inventory
<PAGE>
Credit Card Processing Agreement
Schedule A - Credit Policy (continued)
SCHEDULE A
Exhibit I
Restricted Merchant List
Restricted Business List
Apartment Houses
Auctions
Bail Bond Service
Bars/Tavems (not serving food)
Car Rental Agencies
Card Rooms
Cellular Telephone Companies
Charitable Organizations
Check Cashing Institutions
Collection Agencies
Companion or Escort Services
Computer Hardware and Software
Cooperative Consumer Discount Groups
Credit Restoration/Repair Agencies
Dating Services
Employment Agencies
Gambling Establishments
General Contractors/Home Improvement/ Home Repairs
Health Spas/Clubs (except country clubs)
Income Tax Services
Insurance Agencies
Lawyers/Law Finns Engaged in Bankruptcy
Limousine or Taxi Service
Long Distance Providers (blocks of phone time)
Mall Kiosks
Massage Parlors
Modeling Agencies/Star Search
Monthly recurring billing by MO/TO
Professional Billing Services
Resort Land Promotions
Restune Preparers
Restricted Business List (con't)
Sexual Encounter Firms
Software Vendors
Sports Forecasting
Talent Booking Agencies
Third Party Hotel Reservation Services
Towing Services
Travel Agencies/Clubs
Used Car Lots/Sales
Prohibited Products
Drug Paraphernalia
Investment Opportunities
Lotteries or Raffles
Pawn Shops
Phone Cards
Pomographic/Adult Materials
Real Estate Services
Time Share Condo Sales
Water Purification
Prohibited Methods of Selling
Door to Door
Flea Markets
Membership Type Business @d/Multi Level Sales Sales Out of Home
Neighborhood Party Type Sales Future Services
This list is not meant to be all inclusive and applications for businesses not
on this list may be declined for of business.
<PAGE>
SCHIEDULE B
(Confidentially for this page of this document has been requested pursuant to
Commission rule 24b-2. The omitted material has been filed separately with the
Commission.)
Insert Unicard Exhibit here
WELLEX
THIS PURCHASE AGREEMENT is entered into as of this 7th day of August-1997, by
and between Wellex CORPORATION, a California corporation, whose principal place
of business is located at 44141 S. Grimmer Blvd., Fremont CA 94538 (hereinafter
referred to as ("Manufacturer") and, U. S. Wireless Data Inc. a Colorado (state
whether a corporation, partnership or proprietorship), and if a corporation,
incorporated under the laws of the State of Colorado having its principal.
office at 4851 Independence St. #189, Wheat Ridge, CO 80033 (hereinafter
referred to as "purchaser").
TERM
----
This Agreement shall become effective on the date hereof and the body
of the Agreement shall nominally be in effect for one year; however,
Manufacturer, reserves the right to automatically extend the term of
the Agreement, unless notified in writing by PURCHASER. Prior to
anniversary. dates, MANUFACTURER will provide revised volume pricing
for the next year.
2. SPECIFICATION COMMENTS
All items covered under this Agreement shall be in accordance with
Purchaser's specifications AND drawings and approval,.
3. SHIPPING
All shipments shall be made by Wellex,-, F.O.B. Manufacturer's
manufacturing- facility it-i California.
4. PAYMENT TERMS
Net 30 days from date of invoice.
5. COMMODITY List
Items listed in Attachment A may be added to or deleted from, providing such
additions or deletions meet all of the terms and conditions of this contract-
<PAGE>
6. REQUIREMENT FOR PURCHASING
All purchase orders issued shall contain the following information:
a) Purchasers part number, description and revision level of product to
be shipped.
b) The delivery or completion schedule.
c) The unit price,
7, PURCHASE ORDERS/FORECASTS
a) PURCHASER will provide to MANUFACTURER firm purchase orders for a minimum
of three (3) months in advance of delivery, Further, Purchaser, will
provide to MANUFACTURER an additional six (6) month forecast to be updated
monthly, MANUFACTURER, will purchase materials per purchase order and
forecast based on lead-times, minimum buys, and inventory class buy
policy. PURCHASER is responsible for material purchased in case of
schedule reduction or cancellation.
b) PURCHASER reserves the right to reschedule deliveries on orders that are
due sixty (60) days or more, from the date such change notice is given to
MANUFACTURER. If such reschedule represents a delay in shipment, the
reschedule cannot be for more than sixty (60) days from the original
delivery date and PURCHASER will be responsible for a one percent (I%) per
month carrying charge on, material acquired pursuant to the original
delivery date that MANUFACTURER cannot mitigate,
If such reschedule represents an acceleration or increase, MANUFACTURER will
make best effort to meet the request, subject to material and capacity
availability. Any extra or unrecoverable costs incurred to meet the Request will
be the liability of PURCHASER.
C) 'PURCHASER may cancel any order scheduled for delivery more than ninety
(90) days from the date such cancellation notice is given to Manufacturer.
Upon cancellation, Purchaser is liable to Manufacturer for' all material
and return charges plus handling charges acquired pursuant to Paragraph I
for canceled or non-returnable products.,
Notwithstanding purchaser's liability, MANUFACTURER, will attempt to mitigate
any such liability. Any costs incurred to make such mitigation are the liability
of the i>YjRcHAsER and will be reviewed and approved by the PURCHASER prior to
their incurrance.
<PAGE>
8. WARRANTY
(a) MANUFACTURER. Warrants that the PRODUCT sold hereunder will be free
from defects in material and workmanship according to IPC-61O
Workmanship Standards. Wellex Corporation for a period of ninety (90)
days from the date of shipment Of PURCHASER, provided that. (i)
MANUFACTURER is notified in writing by PURCHASER within thirty (30)
days after Purchaser's discovery of such failure or (11) the defective
PRODUCT is returned to MANUFACTURER no longer than ten (10) days
following the last day of the warranty period. MANUFACTURER shall
include serial numbers and/or date stamps, as designated by PURCHASER,
on each PRODUCT to facilitate warranty tracking. PURCHASER shall
forward defective product to MANUFACTURER freight prepaid, and
MANUFACTURER will make best effort to return the repaired or replaced
product freight prepaid by MANUFACTURER to PURCHASER, no later than
thirty (30) days from the date manufacturer receives the defective
PRODUCT.
(b) The foregoing warranty shall not be valid if the PRODUCT or component
parts have been subjected to abuse, misuse, accident, alteration,
neglect, unauthorized repair or installation. manufacturer shall make
the final determination as to the existence or cause of any alleged
defect,
(c) The foregoing warranty provisions set forth the Manufacturer's sole
liability and the Purchaser's exclusive remedies for claims (except as
to title) based on defects in, or failure of, any PRODUCT sold hereunder
when the claim is based in warranty, Upon the expiration of the
applicable warranty for any PRODUCT sold hereunder, all such liability
shall terminate,
(d) The above warranty periods shall not be extended by the repair or
replacement of PRODUCT pursuant to any of the above warranties. The
above warranties shall apply to PURCHASER, its successors, assigns and
those who purchase or use said PRODUCT. purchaser shall deal directly
with MANUFACTURER for returns and repairs
<PAGE>
(e) EXCEPT AS HFREIN ABOVE PROVIDED, THE fOREGOING WARRANTIES AR.E
EXCLUSIVF AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, OR
STATUTORY, INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR. PURPOSE.
9, DELIVERY
a:) Product shall be delivered to PURCHASER in accordance with required
delivery dates as specified on PURCHASER'S purchase orders that have
been agreed to by MANUFACTURER,
b) Upon learning of any potential delays, MANUFACTURER Will immediately
notify PURCHASER in writing as to the cause and extent of such delay.
10. TERMINATION
a) For Cause -- This Agreement may be terminated by either party at any
time upon the occurrence of any one or more of the following Events of
Default:
(1) failure of the other party: a) to perform pursuant to the terms
and conditions of this Agreement; and b) to me such performance
deficiency within sixty (60) days after receiving written notice
thereof given by the aggrieved party;
(2) the entering into or filing,- by the other party of a petition,
arrangement or proceeding seeking an order for relief under the
bankruptcy laws of the United States, a receivership for any of
the assets of the other party; a composition with or assignment
for the benefit of its creditors; a readjustment of debt or the
dissolution or liquidation of the other party;
(3) or the insolvency of the other p@,
b) For Convenience - Either party may terminate this Agreement for
convenience upon ninety (90) day written notice to the other party. If
Manufacturer doesn't have sufficient material to cover material
leadtime, Manufacturer's notice to PURCHASER must be at least as far 4.n
advance as the longest leadtime item.
Upon termination, PURCHASER shall be liable for any material acquired plus
handling charge pursuant to purchase orders , minimum buys and long lead items
purchased to forecast. Any such material shall be shipped promptly to PURCHASER
upon termination and shall be subject to the then-current pricing and payment
terms, PURCHASER shall also be liable for any unamoritized investment incurred
by MANUFACTURER at the time of termination, as specified on Attachment, B.
II. INSPECTION
a) Source Inspection
Upon request from PURCHASER, MANUFACTURER agrees to allow PURCHASER'S source
inspector to inspect and review the work being performed under this Agreement,
including materials and supplies being used. However, shipments will not be
delayed if PURCHASER fails to effect such source inspection. Source inspection
does not constitute acceptance. Final acceptance shall be at PURCHASER'S
facility.
II.
a) Source Inspection (continued)
PURCHASER shall have ten (10) days, after actual receipt of the goods,
within which to inspect prior to Purchaser's acceptance thereof
Purchaser's acceptance of each type of Goods shall be based On
PURCHASER'S standard test procedures for such Goods, including the Goods
satisfying the AQL established by PURCHASER,
b) Approved Manufacturers
In the course of purchasing component pans on behalf Of PURCHASER,
MANUFACTURER Must follow Purchaser's Approved Vendors List for all component
parts. If MANUFACTURER offers alternative to Purchaser's AVL, the alternative
must be approved in writing by PURCHASER prior to any production at
MANUFACTURER'S facility.
It is recognized that from time to time MANUFACTURER will be asked to
implement ECOS. The following delineates the proper procedures,
a) PURCHASER to notify MANUFACTURER in writing of proposed ECO. This
notification should include the documentation of the change to
effectively support MANUFACTURER'S investigation of the impact of
this proposal.
b) Upon notice of a change, MANUFACTURER'S will make best effort to
review all costs impacted within one (1) week,,. All cost impacts
and material availability issues will be mutually reviewed and
agreed to with PURCHASER prior to implementation.
c) Emergency ECOs will be immediately implemented at PURCHASER'S
request.
d) PURCHASER'S, will be liable for costs associated with emergency ECO
implementation,
13. CONFIDENTIALITY
Both parties acknowledge that, by reason of their relationship, they, may have
access to certain information and materials concerning the other's business,
plans, and products (including, but not limited to, information and materials
contained in technical data provided to the other party) which is confidential
and of substantial value to the other party, which value would be impaired ;f
such information were disclosed to third parties. Both parties agree that they
shall not use in any way, for their own account or the account of any third
party, nor disclose to any third party, any such confidential information which
is revealed to it by the other party hereto,
13. CONFIDENTIALITY (continued)
without written authorization from the other party. Each party will
take every reasonable precaution to protect the,- confidentiality of
such information consistent with the efforts exercised by it with
respect to its 01,7@-,l Confidential information, Each party shall
advise the other if it considers any particular information or
materials to be confidential, 'This provision shall survive
termination of this Agreement.
14.1 INDEMNIFICATION
Each party shall indemnify and. defend the other party against all
claims, suits, losses, expense-s and liabilities for bodily injury,
personal injury, death and property damage directly or indirectly
caused by any Products or through the intentional acts or negligence
of a party or of any person for whose actions said parts, is legally
liable. Both parses shall carry and maintain liability insurance
coverage to satisfactorily cover its obligations under this
Agreement-.nt.
15. COMPLIANCE WITH APPLICABLE LAWS
Manufacture has been, and shall. continue to be, in material
compliance with the provisions of all applicable federal, state and
local laws, regulations, rules and ordinances applicable to the
transactions governed by this Agreement,
16. FORCE MAJEURE
In the event that performance by either party of its obligations under this
Agreernent is prevented due to any Act of God, fire, casualty, flood,
earthquake, ,war, strike, lockout, epidemic, destruction of production
facilities, riot, insurrection, material unavailability, or any other- cause
beyond the reasonable control of the party, invoking this section - and if such
party shall give prompt written notice to the other party - its performance
shall be excused, and the time or the performance shall be, extended for the
period of delay or inability to perform due to such occurrences.
17. MISCELLANEOUS
a) In the event that one or more of the provision, or parts thereof,
contained in the Agreement shall for any reason be field to be
invalid, illegal, or unenforceable by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect
any other provision in the Agreement, and the Agreement shall be
construed as if such invalid, illegal or unenforceable provision
had never been contained therein.
<PAGE>
17. MISCELLANEOUS (continued)
b) Entire Agreement: Modification - The Agreement constitutes the
entire and exclusive statement by 'PURCHASER and ',MANUFACTURER
of the terms of their agreement, notwithstanding any additional
or different terms that may be contained in any quotation,
acknowledgment, confirmation, purchase order, invoice or other
form of PURCHASER Or MANUFACTURER. All prior and contemporaneous
proposals, negotiations. representations and agreements are
merged in the Agreement. These terms of the Agreement may not be
altered, modified, superseded, amended or rescinded and no
additional terms shall become a part of the Agreement, except
pursuant to a writing specifically referencing the Agreement and
signed by a representative of the party against whom enforcement
is sought.
c) Notice - Unless otherwise specified in the Agreement, all notices
and other communications permitted ------ or required by the
provisions of those documents shall be in writing and shall be
mailed, telecopied, telegraphed, telexed or delivered to the
other party at the address set forth below (or at such other
address as either party shall designate in writing to the other
party during the term of this Agreement) and shall be effective
and deemed received-. 1) if mailed, when actually ----------
received; ii) if telecopied, when actually received; iii) if
telegraphed, when actually received; iv) if telexed, when
dispatched; or v) if personally delivered, when delivered. Each
notice to MANUFACTURER or PURCHASER shall be addressed, until
notice of change thereof, as follows:
i) If intended for MANUFACTURER, to:
Wellex Corporation 44141 S. Grimmer Blvd, Fremont, CA 94538
ii) If intended for PURCHASER, to:
U. S. Wireless Data Inc.
4851 Independence St. # 189
Wheat Ridge, Colorado 80033
d) - This Agreement shall not be assignable by either party without
the prior written consent of the other party.
e) Waiver - No failure or delay on the part of either party hereto
in exercising any right or remedy under the Agreement shall
operate as a waiver thereof; nor shall any single or partial
exercise of any such right or remedy, No provision of the
Agreement may be waived except in writing signed by the party
granting such waiver,
<PAGE>
17, MISCELLANEOUS (continued)
Governing Law: Interpretation - 'the Agreement shall be governed
by and construed in accordance with the laws of the State of
California. Acceptance or acquiescence in a course of performance
rendered under the Agreement shall not be relevant to determining
the Meaning of the Agreement, even though the accepting or
acquiescing party had knowledge of the nature of the performance
and an opportunity for objection, No course of prior dealing
between the parties and usage of the trade shall be relevant to
supplement or explain any terms used in the Agreement.
g) Consequential Damages - In no event shall PURCHASER or
MANUFACTURER. be liable for any special , incidental or
consequential damages including without limitations loss of
profits, even if advised of the possibility thereof
18.
1. Prices and commitments for Products sold wider this Agreement
are defined in Attachment A.
2. Every three (3) months, PURCHASER and MANUFACTURER will review
the actual volume purchased. If actual volume purchased, is >10%
less of the. annualized volume assumptions in Attachment A,
prices will be increased to the actual lower volume purchased
and be effective retroactively,
1
3, Notwithstanding Part, 2 of this section. if significant
fluctuations occur at any time in the material cost of components
required under this Agreement, PURCHASER and MANUFACTURER will
review the impact of such fluctuations and mutually agree to any
pricing changes arising therefrom, (Significant fluctuation is
defined to mean +/- 31% of the quoted Bill of Material cost,)
19. RETURN MATERIAL- AUTHORIZATION
If product is found to be defective per Section 8 or II of this Agreement,
PURCHASER will notify MANUFACTURER and MANUFACTURER will provide a Return
Material Authorization number prior to PURCHASER returning the Product.
MANUFACTURER will make best effort to provide an RMA number within forty eight
(48) hours.
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
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<RECEIVABLES> 136,434
<ALLOWANCES> 15,903
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0
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<COMMON> 5,531,184
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