U S WIRELESS DATA INC, PRE 14A, 1997-12-19

U S WIRELESS DATA INC
PRE 14A, 1997-12-19
CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS)

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SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S 240.14a-11(c) or S 240.14a-12

U.S. Wireless Data, Inc.
(Name of Registrant as Specified In Its Charter)
------------------------------------------------

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (se forth the amount on which
the filing fee is calculated and state how it was determined):

4) Proposed maximum aggregate value of transaction:
________________________________________________________________
5) Total fee paid:

[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:

2) Form, schedule or Registration Statement No.:

3) Filing Party:
_
4) Date Filed:
_

<PAGE>
U.S. WIRELESS DATA, INC. [PRELIMINARY COPY]

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To be Held January 30, 1998

The Annual Meeting of Shareholders of U.S. Wireless Data, Inc., a Colorado
corporation (the "Company"), will be held on January 30, 1998, at ________
__.m., Pacific Time, at , Emeryville, California, for the following purposes:

1. To elect six directors to the Company's Board of Directors;

2. To approve amendments to the Company's Articles of
Incorporation to increase the number of shares of authorized
no par value Common Stock (the "Common Stock") to 40,000,000;

3. To approve amendments to the Company's Articles of
Incorporation to authorize up to 15,000,000 shares of no par
value preferred stock (the "Preferred Stock"), up to 4,000,000
of which will then be immediately designated and issued as
Series A Cumulative Convertible Redeemable Preferred Stock
(the "Series A Preferred Stock");

4. To approve an amendment to the Company's 1992 Stock Option
Plan (the "Plan") to increase the number of shares available
for issuance upon exercise of options issuable under the Plan
to 2,680,000 shares.

5. To ratify the selection of Price Waterhouse LLP as the
Company's Independent Accountants.

6. To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
- -------------

All shareholders are cordially invited to attend the meeting, although
only shareholders of record at the close of business on December 15, 1997 will
be entitled to notice of and to vote at the meeting. The minutes of the last
Annual Shareholders' Meeting and the Shareholders' list of their share
eligibility to vote at the 1997 Annual Meeting will be open to inspection by the
shareholders at the Company's principal office, 2200 Powell Street, Suite 450,
Emeryville, California, for a period of 10 days prior to the Annual Meeting.

Shares can only be voted at the meeting if the holder is present in
person or represented by proxy. We urge you to date and sign the enclosed proxy
and return it in the accompanying envelope promptly so that your shares may be
voted in accordance with your wishes and the presence of a quorum may be
assured. We encourage you to do so even if you plan to attend the meeting in
person. The prompt return of your signed proxy, regardless of the number of
shares you hold, will aid the Company in reducing the expense of additional
proxy solicitation. The giving of such proxy does not affect your right to vote
in person in the event you attend the meeting.

By Order of the Board of Directors

Robert E. Robichaud,
Assistant Secretary
Emeryville, California
_____________, 1997

YOUR PROXY

PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE.
SHOULD YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN THOUGH YOU HAVE
GIVEN A PROXY. THE PROMPT RETURN OF YOUR PROXY WILL BE OF GREAT HELP IN
PREPARATION FOR THE MEETING.

<PAGE>

U.S. WIRELESS DATA, INC. [PRELIMINARY COPY]
2200 POWELL STREET, SUITE 450
EMERYVILLE, CALIFORNIA 94608

PROXY STATEMENT

Solicitation, Exercise and Revocability of Proxy

The enclosed proxy is solicited by the Board of Directors of U.S.
Wireless Data, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held on January 30, 1997, or at any adjournment or
postponement thereof (the "Annual Meeting"). The Annual Meeting will be held at
______ _.m., Pacific Time, at , Emeryville, California. It is anticipated that
this Proxy Statement and the accompanying form of proxy will first be mailed to
the shareholders of the Company on or about ____________, 1997. The Company's
principal executive offices are located at 2200 Powell Street, Suite 450,
Emeryville, California 94608 and its telephone number at those offices is (510)
596-2025.

A proxy is revocable at any time, before it is voted, by written notice
to the Company, the giving of a subsequent proxy, or attending the meeting and
voting in person. Unless contrary instructions are indicated on the proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
not properly revoked before they are voted) will be voted as follows: (1) for
the election of the six nominees to the Board of Directors named elsewhere
herein; (2) for the amendment to the Company's Articles of Incorporation to
increase the number of shares of authorized Common Stock to 40,000,000; (3) for
approval of the amendment to the Company's Articles of Incorporation to
authorize the issuance of up to 15,000,000 shares of Preferred Stock; (4) for
approval of the amendment to the Company's 1992 Stock Option Plan (the "Plan")
to increase the number of shares available for issuance upon exercise of options
issuable under the Plan to 2,680,000 shares; (5) for retention of Price
Waterhouse LLP as the Company's Independent Accountants; and (6) in the
discretion of the Board of Directors as to such other business as may properly
come before the meeting. In the event a shareholder specifies a different choice
on his proxy, his shares will be voted in accordance with the specifications so
made.

Cost of Solicitation

The cost of soliciting proxies will be borne by the Company.

Voting

Only shareholders of record at the close of business on December 15,
1997 will be entitled to vote at the meeting. On that date there were
______________ shares of the Common Stock issued and outstanding, entitled to
one vote per share on all matters being submitted to shareholders at the
meeting. Shareholders are not entitled to cumulate their votes in the election
of directors, which means that the holders of more than half the shares voting
for the election of directors can elect all the directors if they choose to do
so. Approval of the amendments to the Company's Articles of Incorporation
(Proposals 2 and 3) requires the affirmative vote of a majority of the shares of
Common Stock outstanding on the record date. On all other matters, a favorable
vote consists of a simple majority of the votes represented at a meeting at
which a quorum is present. A quorum consists of a majority of the shares
entitled to vote at the meeting. The Company believes that as of ______________,
1997, the approximate number of shareholders of record of its common stock was
_____________. This includes shares held in nominee or "street" accounts.

The Board of Directors knows of only two shareholders who owned more than
five percent of the outstanding voting securities of the Company as of the
record date: John M. Liviakis and Robert B. Prag. See "Beneficial Ownership of
Common Stock."

<PAGE>
INFORMATION RELATING TO VARIOUS PROPOSALS

Information Concerning Directors

At the time of the Annual Meeting, the Board of Directors will consist
of six incumbent members who are seeking to be elected at the meeting to hold
office until the next meeting of shareholders and until their successors are
elected and qualified. The Company's Articles of Incorporation and Bylaws
presently provide for a Board of no less than three and no more than nine
directors.

Evon A. Kelly, Rod L. Stambaugh, Richard S. Barton, Caesar Berger, Alan
B. Roberts and Chester N. Winter, all of whom are incumbent directors, have been
nominated by the Board of Directors for election as directors of the Company.
All of the nominees have informed the Company that they are willing to serve, if
elected, and management has no reason to believe that any of the nominees will
be unavailable. In the event a nominee for director should become unavailable
for election, the persons named in the proxy will vote for the election of any
other person who may be recommended and nominated by the Board for the office of
director.
Information regarding nominees and directors is set forth below.
<TABLE>
<CAPTION>
Nominees for Election as Directors

Name Age Principal Occupation Director Since

<S> <C> <C> <C>
Evon A. Kelly 56 Chief Executive Officer August 1997
of the Company

Rod L. Stambaugh 37 President of the Company August 1991

Richard A. Barton __ CEO and President of December 1997
ADATOM, Inc.

Caesar Berger 50 Vice President - Cardservice December 1995
International, Inc.

Alan B. Roberts 51 Director of Product Development October 1994
and Vice President of U.S.
Operations for International
Verifact, Inc.

Chester N. Winter 66 General Partner of Colorado February 1994
Incubator Fund, L.P.
</TABLE>
Business Experience of Director Nominees

Evon A. Kelly. Until joining the Company in August of 1997, and since
1991, Mr. Kelly was president of Kelly Learning Alliance, a consulting firm he
founded, which addresses areas in human resource development, organizational
development and sales dynamics. Kelly Learning Alliance clients have included
Motorola, Xerox Corp. and NEC Corp. From 1988 to 1991, Mr. Kelly was vice
president of sales and operations at Wilson Learning Corp., where he was
responsible for developing and implementing sales and marketing strategies. From
1986 to 1988, Mr. Kelly was a regional vice president of store operations for
Federated Department Stores Inc., where he supervised over 1,500 employees and
was responsible for profit and loss performance. From 1973 to 1983, Mr. Kelly
held several key positions with Xerox Corp., including manager of supply
business center where he directed a national sales force of 400. Mr. Kelly
received his bachelor's degree in liberal arts from Boston College.

-2-
<PAGE>
Rod L. Stambaugh. Mr. Stambaugh served as Chief Executive Officer of the
Company from October 1996 until August 1997, when Mr. Kelly joined the Company.
He was Vice President in charge of marketing and business development for the
Company from 1991 through October 1996. Mr. Stambaugh was also the Corporate
Secretary from September 1995 until October 1996. Mr. Stambaugh is one of the
founders of the Company and has devoted his full business time to the Company
since August 1991. He co-founded U.S. Wireless, Inc., a nonaffiliated retail
cellular phone center, at which he worked full time from January 1990 through
July 1991. Mr. Stambaugh served on the Company's Board of Directors from July
1991 through October 1994, rejoining the Board as Chairman in July 1995. Mr.
Stambaugh graduated from Baker University in 1982 with a B.S. degree in
psychology, and a minor in business administration.

Richard A. Barton. Mr. Barton is Chairman, Chief Executive Officer and
President of ADATOM, Inc., a California corporation which markets and sells
retail and shopping solutions, including electronic catalogues and stores. He
completed a Sloan Fellowship at Stanford University in Palo Alto, California
from September 1995 through September 1996. From October 1993 through August
1995, Mr. Barton was a vice president with Xerox Corporation in charge of United
States Customer Operations. From 1991 until October 1993 Mr. Barton was
President of Xerox Canada, Inc. Mr. Barton joined Xerox in 1971 as a sales
representative and held various positions in addition to those described above,
including executive assistant to the President, Chairman and CEO from 1985
through 1987, Vice President, Marketing Operations for Xerox' United States
Marketing Group from 1987 through 1989 and Vice President, North American
Systems Sales for Xerox' Integrated Systems Operations from 1989 through 1991.
Mr. Barton has a Bachelor of Arts Degree from Adelphi University, completed the
Wharton Executive Development Program and the Wharton International Forum's
China, Japan, Europe and United States' segments at the University of
Pennsylvania and holds a Master's Degree in Business Management from Stanford
University. Mr. Barton also serves on the boards of Avon Products, Inc., a
publicly traded company, and the United States Chamber of Commerce.

Caesar Berger. Mr. Berger is a senior Vice President of Cardservice
International, Inc. where he is responsible for the Technology Group. Mr. Berger
joined Cardservice International in August of 1994. Prior to that, Mr. Berger
served for more than ten years as President, and was the founder of, Computer
Based Controls, Inc. a wholly-owned subsidiary of Electronic Clearing House Inc.
Mr. Berger was a principal on the American Express Money Order project which
resulted in the deployment of over 17,000 of the Money Order dispensers
operating today in over 10,000 retail locations nationwide. Mr. Berger graduated
in 1970 from Lvov Polytech Institute with the equivalent of an M.S. degree in
Electronics and Computer Science.

Alan B. Roberts. Mr. Roberts is the Director of Product Development and
Vice President of U.S. Operations for International Verifact, Inc. He was
President and Chief Executive Officer of the Company from October 1, 1994, until
July 10, 1995, and Vice President of Operations for Direct Data, Inc. (the
Company's wholly-owned subsidiary that was dissolved in October 1995) from
February 1994 until September 1994. Prior to that time, Mr. Roberts was Director
of Product Marketing for Verifone, Inc., the industry leader in point-of-sale
terminal products. While at Verifone from 1986 to 1994, he also held various
management positions, including Director of Product Management. Mr. Roberts
graduated from the University of Texas in 1967 with a bachelors degree in
Mathematics and in 1969 with a masters degree in Computer Sciences.

Chester N. Winter. Mr. Winter is a general partner of Colorado Incubator
Fund, L.P., a venture capital fund, and also works as a business consultant at
Paradigm Partners, L.L.C. From 1989 to 1992, he was Chairman and Chief Executive
Officer of Clinical Diagnostics, Inc., a home health care product distributor.
Also from 1989 to 1992, he was Senior Vice President of Sinco International
Investments, Inc., a real estate investment and development company. He received
a Masters degree from the University of Colorado.

Board of Directors and Committees

The Company has a standing audit committee which consists of Messrs. Winter
and Roberts. The audit committee recommends engagement of the Company's
independent accountants, approves services performed by such accountants, and
reviews and evaluates the Company's accounting system of internal controls. The
audit committee did not meet during fiscal year 1997; however, these issues were
discussed at the board meeting. The
-3-
<PAGE>
Company does not have standing nominating or compensation committees. The
functions which these committees would perform are performed by the Board as a
whole.

The Company's Board of Directors met once during fiscal year 1997. All
directors attended the meeting. Business of the Company was conducted primarily
through consultation among management and directors followed by consent
resolutions adopted by all members of the Board of Directors.
<TABLE>
<CAPTION>
Other Executive Officers

Other executive officers of the Company who are not also directors are:

Name Age Position with the Company Officer Since
---- --- ------------------------- -------------

<S> <C> <C> <C>
Robert E. Robichaud 44 Chief Financial and AccountingSeptember 1997
Officer, Treasurer and
Assistant Secretary

Clyde F. Casciato 42 Vice President, Sales August 1997

Raymond J. Mueller 55 Vice President, Operations December 1997

Kelle Ansel 30 Secretary October 1996
</TABLE>
Business Experience of Executive Officers

Robert E. Robichaud. Since 1985 Mr. Robichaud has held several key
financial management positions at Triad Systems Corp. including Director of
Financial Planning and Analysis and most recently, Director of Finance. Triad
Systems is a provider of software, hardware and information management solutions
which recorded 1997 revenues in excess of $175 million. Triad Systems was a
NASDAQ listed company and was acquired by Cooperative Computing Inc. on February
27, 1997. Prior to 1985, Mr. Robichaud held several financial positions with
Mohawk Data Services Corp. since 1978. Mr. Robichaud received a bachelors degree
in economics from Fairfield University in 1976 and an M.B.A. from Rutgers
Graduate School of Business in 1978.

Clyde F. Casciato. Since 1989, Mr. Casciato has held several management
positions at AT&T Wireless Services, the wireless business unit of AT&T Corp.,
including Director of Sales and Marketing, District Manager - Major/National
Accounts and most recently, Western U.S. Regional Sales/Distribution Manager -
Wireless Data. Mr. Casciato played a key role in helping to establish AT&T
Wireless Services as the market leader in the emerging wireless data (packet and
circuit switched) business segment. From 1984 to 1989, he held key sales
management positions at Xerox Corp. including Major Account Manager and Program
Sales Manager.

Raymond J. Mueller. Mr. Mueller served as Director of Sales and Marketing
for Nicor, Inc., a pneumatic tool company, from 1995 until joining the Company.
From 1993 until joining the Company, Mr. Mueller was self- employed as a
consultant on compensation matters. Prior to that, he was Director of Sales and
Marketing for Wilson Learning Corp. from 1989 through 1993. Prior to 1993, he
also served as Manager of Corporate Compensation and Director of Human resources
at Borden, Inc., Manager of Compensation at Avon Products, Inc. and Manager of
Employment at Bristol Meyers. He holds a Bachelors degree in economics from
Xavier University.

Kelle Ansel. Ms. Ansel has been with the Company since February 1994,
serving as Manager of Human Resources. She became the Corporate Secretary in
October 1996. Prior to that, Ms. Ansel was employed by SCC Communications as an
executive assistant since May 1991. Ms. Ansel holds a bachelor's degree in
management from Mesa College, Grand Junction, Colorado.

The Company has no other executive officers as defined under the Securities
Exchange Act of 1934 (the "Exchange Act").

-4-
<PAGE>
Executive Compensation

The following table shows all the compensation paid by the Company to its
Chief Executive Officer (the "Named Executive Officer") during the fiscal year
ended June 30, 1997. Mr. Stambaugh, the Company's CEO at June 30, 1997, did not
serve as CEO for the Company during the fiscal years ended June 30, 1996 and
1995. No other executive office of the Company received total compensation
during the fiscal year ended June 30, 1997 in excess of $100,000.
<TABLE>
<CAPTION>

Summary Compensation Table

=============================================================================================================================
Annual Compensation Long Term Compensation
- -----------------------------------------------------------------------------------------------------------------------------
Other Restricted
Annual Stock Securities All Other
Name and Principal Fiscal Salary Bonus Compen- Awards Underlying Compensa-
Position Year ($) ($) sation ($) ($) Options (#) tion ($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rod L. Stambaugh, 1997 $79,881 $-0- (2) $-0- -0- $-0-
Chief Executive
Officer(1)
=============================================================================================================================
<FN>
(1) Mr. Stambaugh commenced service as CEO as of October 23, 1996. Mr.
Stambaugh succeeded Mr. Michael Brisnehan, who resigned as CEO at
that time.
(2) No amounts are shown under "Other" as the aggregate incremental cost
to the Company of personal benefits provided to the executive officer
did not exceed 10% of his annual salary and bonus during the year.
</FN>
</TABLE>
Option Grants in Last Fiscal Year

As reflected in the following table, no options were granted to the Named
Executive Officer during the fiscal year ended June 30, 1997. Also reported are
the values for "in-the-money" options, which represent the positive spread
between the exercise price of any existing stock options owned by the Named
Executive Officer and the year-end price of the Company's Common Stock.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values

=========================================================================================================================
Value of
Number of Securities Unexercised In-the-
Shares Underlying Unexercised Money Options at
Acquired on Value Options at FY-End (#) FY-End ($)
Name Exercise (#) Realized ($) Vested/Unvested Vested/Unexercisable(1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rod L. Stambaugh -0- $-0- 133,400/21,600 $20,010/$3,240
=========================================================================================================================
<FN>
(1) Based on the average traded price of the underlying shares of Common Stock of $.28 per share at June 30,
1997, less the per share exercise price of the options.
</FN>
</TABLE>
-5-

<PAGE>
Director Compensation

Directors who are not employees of the Company receive an annual stock
option to purchase 20,000 shares of the Company's Common Stock. The grant is
made pursuant to the Company's 1992 Stock Option Plan as of each director's
anniversary date, with an exercise price equal to the market value of the
underlying stock as of the date of grant. Options vest 25% on each six month
anniversary following the date of grant. This is the only arrangement for
compensation of directors. A total of 20,000 stock options were granted to one
non-employee director during the fiscal year ended June 30, 1997, and an
additional 40,000 options are issuable to two non-employee directors for
services rendered during fiscal year 1997. 20,000 options have been or will be
issued to each non-employee director (presently four people) during fiscal year
1998.

Employment Agreements and Change In Control Provisions

The Company presently has an employment agreement with Evon A. Kelly, its
current CEO, pursuant to which Mr. Kelly receives $150,000 in cash compensation
per year, plus certain bonus compensation to be determined by the Board of
Directors. Mr. Kelly has also been granted a non-qualified stock option to
purchase up to 600,000 shares of the Company's Common Stock at $1.00 per share,
exercisable as to 10% as of the date of grant (August 4, 1997) and vesting at
the rate of 3% per month thereafter so long as Mr. Kelly remains in the employ
of the Company. All options must be exercised within 10 years of the date of
grant. All options immediately vest and become exercisable upon a change in
control of the Company. The Company has agreed to indemnify Mr. Kelly for a
portion of the tax liability differential between non-qualified stock option and
incentive stock option tax treatment, when and if he should exercise his options
and dispose of the shares.

The Company has an arrangement under which it pays Rod L. Stambaugh, its
President, $130,000 per year. Mr. Stambaugh may also be granted stock options as
approved by the Board of Directors.

The Company also has employment arrangements with Robert E. Robichaud,
Clyde F. Casciato and Raymond J. Mueller. Mr. Robichaud receives a salary of
$125,000 per year and may be entitled to a performance bonus of up to $25,000
for fiscal year 1998, based on the performance of the Company. He was granted
options to purchase up to 50,000 shares of Common Stock at $3.95 per share under
the Company's 1992 Stock Option Plan, with a vesting schedule of 10% as of his
date of hire (September 5, 1997) and 3% per month thereafter. Mr. Casciato
receives a salary of $80,000 per year, and may be entitled to a bonus of $30,000
for fiscal year 1998, based on the Company's performance. Mr. Mueller receives a
salary of $100,000 per year and may be entitled to a bonus of $25,000 for fiscal
year 1998, based on the Company's performance. Messrs. Casciato and Mueller have
been granted stock options under the Company's 1992 Stock Option Plan to
purchase 50,000 shares of Common Stock, exercisable at $4.24 per share (for Mr.
Casciato's options) and $6.34 per share (for Mr. Mueller's options). The options
have the same vesting schedule as Mr. Robichaud's options. Mr. Casciato's date
of hire was August 25, 1997; Mr. Mueller was hired on November 24, 1997. These
executive officers may also be granted up to an additional 50,000 options based
on the attainment by the Company of certain performance goals. The executive
bonus plan is subject to approval by the Board of Directors. Pursuant to the
Amended 1992 Stock Option Plan, all granted options immediately vest and become
exercisable upon a merger, acquisition, sale of all assets or other change in
control of the Company.

Stock Option Plan

General. The Company's Amended 1992 Stock Option Plan (the "Plan") was
adopted for the purpose of granting employees, directors and consultants of the
Company options to purchase Common Stock so that they may have the opportunity
to participate in the growth of the Company and to provide these people with an
increased incentive to promote the interests of the Company.

Administration of the Plan. The Plan is administered by at least two
disinterested members of the Board of Directors (the "Board") or the Board
itself. The Board may from time to time adopt rules and regulations as it deems
advisable for the administration of the Plan, and may alter, amend or rescind
any such rules and regulations in its discretion. The Board has the power to
interpret, amend or discontinue the Plan.

-6-
<PAGE>
Grant of Options. Options may be granted under the Plan for a total of
2,680,000 shares of Common Stock. The number of shares underlying options
available to the Plan was increased to 2,680,000 from 880,000 on August 6, 1997,
by the Board of Directors, subject to shareholder approval at the next Annual
Meeting of Shareholders. As of November 30, 1997, there were a total of 645,181
options outstanding under the Plan, 263,731 of which were vested. Additional
grants of options may be made only to employees, directors and consultants of
the Company and any parent or subsidiary. The Board determines the terms of
options granted under the Plan, including the type of option (which can be an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or a non-qualified stock option), the
exercise price, the number of shares subject to the option, and the
exercisability thereof. The Board also determines, at the time of grant, the
period during which the option will be exercisable, subject to the limitations
of the Plan. Unless otherwise provided at the time of grant, options to
employees vest 10% at the time of grant and 3% per month thereafter. An option
to purchase 20,000 shares at fair market value is automatically issued under the
Plan to each non-employee director as of the director's anniversary date.
Options granted to non-employee directors vest 25% at the time of grant and 25%
at each six month anniversary thereafter. See "Director Compensation," above.

Terms and Conditions of Options. The Board may impose on an option any
additional terms and conditions which it deems advisable and which are not
inconsistent with the Plan. The exercise price of any stock option granted under
the Plan must not be less than 100% of the fair market value of a share of
Common Stock on the date of grant, except that as to an optionee who at the time
an incentive stock option is granted owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, the exercise
price of such incentive stock option must be at least equal to 110% of the fair
market value of the shares as of the date prior to the date of the grant. In
addition, no incentive stock option can be granted to any employee where the
aggregate fair market value of the shares (determined at the date of such option
grant) for which such incentive stock options are exercisable for the first time
in any calendar year exceeds $100,000. In connection with a merger, sale of all
of the Company's assets, or other transaction which results in the replacement
of the Company's Common Stock with the stock of another corporation, all granted
options (including unvested options) become exercisable immediately prior to the
consummation of the transaction, unless other provisions are made with respect
to those options.

Exercise of Options. An optionee may exercise less than all of the vested
portion of an option, in which case such unexercised, vested portion shall
continue to remain exercisable, subject to the terms of the Plan, until the
option terminates. Vested options must be exercised within three months of an
optionee's termination of employment with the Company.

Federal Income Tax Consequences.

Incentive Stock Options. The Company anticipates that all options granted
under the Plan and treated by the Company as "incentive stock options," that is,
a stock option described in Section 422 of the Code, will have the following
anticipated (but not guaranteed) federal income tax consequences, among others:
the optionee will recognize no income at the time of grant; upon exercise of the
incentive stock option, no income will result to any party; if there is no
disposition of the shares until a date that is both (i) two years from the grant
of an incentive stock option and (ii) one year from its exercise, no amount will
be ordinary income and, upon disposition in a taxable transaction, the employee
will receive long-term capital gain or loss treatment equal to the difference
between his amount realized and the option price; any gain realized upon a
disposition other than as set forth above may result in ordinary income tax
treatment to the optionee; generally, the Company receives no deduction in
connection with the transaction; and, certain optionees may incur alternative
minimum tax treatment under the Code upon exercise of an incentive stock option.

-7-
<PAGE>
transaction, the individual disposing of such shares will have a realized and
recognized capital gain or loss equal to the difference, if any, between the
amount realized and the adjusted basis of such shares to him; such gain or loss
will be long-term or short-term depending on whether or not such shares are held
for longer than six months; and, the adjusted basis usually (but not always)
will include the option price plus any ordinary income described above with
respect to such shares.

Form S-8 Registration of Shares of Common Stock
Issuable Pursuant to Options Under the Plan

The Company has registered up to 880,000 shares of Common Stock
underlying options issuable under the Plan with the United States Securities and
Exchange Commission (the "SEC") under a Form S-8 Registration Statement that was
effective as of September 1995. If Proposal 4 is approved, and the number of
shares issuable pursuant to exercise of options issuable under the Plan is
increased by 1,800,000 shares, the Company intends to amend its Form S-8
Registration Statement to add the 1,800,000 additional shares of Common Stock to
those registered under that Registration Statement.

Beneficial Ownership of Common Stock

The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock (the only class of the
Company's stock outstanding), as of November 30, 1997, by (i) each director and
nominee for director, (ii) the Named Executive Officer and the current Chief
Executive Officer, (iii) all persons, including groups, known to the Company to
own beneficially more than five percent (5%) of the outstanding Common Stock of
the Company, and (iv) all executive officers and directors as a group. A person
(or group) is deemed to be a beneficial owner of Common Stock that can be
acquired by such person or group within 60 days from November 30, 1997 upon the
exercise of warrants, options or other rights exercisable for, or convertible
into, Common Stock. As of November 30, 1997, there were a total of 9,212,420
shares of Common Stock outstanding.

Except as otherwise indicated, the address of each of the following
persons is c/o U.S. Wireless Data, Inc., 2200 Powell Street, Suite 450,
Emeryville, CA 94608.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1)
Percent
of
Name of Beneficial Owner Number Class
- ------------------------ ------ -----
<S> <C> <C>
Rod L. Stambaugh................................ 427,700 (2) 4.5%
Evon A. Kelly................................... 150,000 (3) 1.6%
Richard S. Barton............................... -0- 0.0%
Caesar Berger................................... 202,704 (4) 2.2%
Alan B. Roberts................................. 18,740 (5) *
Chester N. Winter............................... 100,281 (6) 1.1%
John M. Liviakis................................ 3,971,250 (7) 37.4%
2420 "K" Street, Suite 220
Sacramento, CA 95816
Robert B. Prag.................................. 1,470,000 (8) 14.9%
2420 "K" Street, Suite 220
Sacramento, CA 95816
Liviakis Group 5,295,250 (9) 47.8%
2420 "K" Street, Suite 220
Sacramento, CA 95816
-8-
<PAGE>
entrenet Group, LLC 580,000 (10) 5.9%
5213 El Mercado Parkway, Suite D
Santa Rosa, CA 95403...........................
All directors and executive officers
as a group (9 persons)...................... 920,925 (11) 9.5%

- ------------------
<FN>
* Represents less than 1% of outstanding shares.
(1) Except as specifically indicated in the footnotes hereto, the persons named
in this table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable and except as otherwise indicated
in the other footnotes to this table. Beneficial ownership is determined in
accordance with the rules of the United States Securities and Exchange
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options, warrants or rights held by that person that are
currently exercisable or exercisable, convertible or issuable within 60
days of November 30, 1997, are deemed outstanding. Such shares, however,
are not deemed outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Includes shares underlying a total of 75,200 options exercisable within 60
days of November 30, 1997.
(3) Includes shares underlying a total of 150,000 options exercisable within 60
days of November 30, 1997.
(4) Includes 192,704 shares owned of record by Cardservice International, Inc.
("CSI"), a company for which Mr. Berger serves as executive vice president
and which is a significant customer of the Company. See "Certain
Transactions." Mr. Berger disclaims any beneficial ownership of the shares
owned of record by CSI. Also includes 10,000 shares underlying options
exercisable within 60 days of November 30, 1997.
(5) Includes shares underlying a total of 10,000 options and 2,631 warrants
exercisable within 60 days of November 30, 1997.
(6) Includes shares underlying a total of 77,781 options exercisable within 60
days of November 30, 1997.
(7) The information shown is based upon Schedule 13D/A (Amendment No. 2) dated
November 26, 1997 filed on behalf of Liviakis Financial Communications,
Inc. ("LFC"), John M. Liviakis, Renee A. Liviakis and Robert B. Prag
(collectively the "Liviakis Group"). John M. and Renee A. Liviakis are the
owners of LFC and Robert B. Prag is an executive officer of LFC. The number
of shares shown includes a total of 2,625,000 shares of Common Stock and
1,200,000 shares of Common Stock underlying warrants owned by Mr. Liviakis
as an individual, plus 146,250 shares of Common Stock issuable to LFC
pursuant to a consulting agreement between the Company and LFC dated July
25, 1997, under which the Company was obligated to issue 123,750 of the
shares as of November 15, 1997 and 22,500 additional shares of Common Stock
within 60 days of November 30, 1997. See "Certain Transactions."
(8) The information shown is based upon Schedule 13D/A (Amendment No. 2) dated
November 26, 1997 filed on behalf of the Liviakis Group. Robert B. Prag is
an executive officer of LFC. The number of shares shown includes a total of
875,000 shares of Common Stock and 400,000 shares of Common Stock
underlying warrants owned by Mr. Prag as an individual, plus 48,750 shares
of Common Stock issuable to Mr. Prag pursuant to the consulting agreement
between the Company and LFC described in footnote (7) to this table, under
which the Company was obligated to issue 41,250 shares as of November 15,
1997 and 7,500 additional shares of Common Stock to Mr. Prag within 60 days
of November 30, 1997. The number of shares shown also includes the 146,250
shares of Common Stock issuable to LFC as described in footnote (7) to this
table which are reported in the Schedule 13D/A as being subject to shared
voting and dispositive power between Mr. Liviakis, Ms. Liviakis, Mr. Prag
and LFC. See "Certain Transactions."
(9) The information shown is based upon Schedule 13D/A (Amendment No. 2) dated
November 26, 1997 filed on behalf of the Liviakis Group. The number of
shares shown includes all shares of Common Stock included in footnotes (7)
and (8) to this table as to which any person in the Liviakis Group
exercises sole or shared voting and disposition power, except that the
146,250 shares issuable to LFC are included only once in the share number
shown. See "Certain Transactions."
(10) Includes 300,000 shares underlying a convertible debenture issued as a
consulting fee to entrenet. Also include 280,000 shares issuable to
entrenet as a finder's fee as of August 6, 1997, at such time as the
Company has obtained shareholder approval for an increase in authorized
Common Stock to no less than 40,000,000 shares. See "Certain Transactions."

-9-
<PAGE>
(11) Includes all shares underlying options and warrants as described in
footnotes (2) - (6) of this table. Also includes a total of 31,500 shares
underlying options issued to three additional executive officers which
are exercisable within 60 days of November 30, 1997. See "Management -
Executive Compensation."
</FN>
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.

The information required to be disclosed in this section of this Proxy
Statement is incorporated by reference from Amendment No. 1 to the Company's
Annual Report on Form 10-KSB/A for the fiscal year ended June 30, 1997, from
Item 9, under the caption "Compliance with Section 16(a) of the Exchange Act." A
copy of that report is being mailed to shareholders with this Proxy Statement.

Certain Transactions

Transactions with Cardservice International, Inc.

Mr. Caesar Berger, a director of the Company, is also an officer of
Cardservice International, Inc. CSI has been involved with the Company in what
is primarily a customer - vendor relationship, and CSI purchased approximately
$698,000 and $398,000 in product from the Company in the fiscal years ended June
30, 1997, and 1996, respectively. In fiscal 1996, CSI advanced the Company
$162,500 for the purchase of raw materials in exchange for warrants to purchase
a total of 142,544 shares of Common Stock, exercisable at 150% of the then
current market price, including registration rights on the underlying shares.
CSI exercised those warrants as of April 26, 1996; however, rather than exercise
its registration rights, CSI has been selling shares from time to time under SEC
Rule 144. The Company is obligated to pay royalties to CSI on future sales of
POS-50(R) product built with the inventory in the amount of $150 per unit on the
first 1,000 units and $100 per unit on any additional units.

Transactions with Liviakis Financial Communications, Inc. ("LFC") and
Affiliates of LFC

In July of 1997, the Company entered into a Consulting Agreement with
Liviakis Financial Communications, Inc. ("LFC") pursuant to which LFC provides
the Company with financial and business consulting and public and investor
relations services. The Company is obligated to pay Liviakis $10,000 in cash and
issue a total of 300,000 shares of its Common Stock as consulting fees over the
one year term of the Consulting Agreement. 75% of the shares are issuable to LFC
and 25% are issuable to Mr Robert B. Prag, an executive officer of LFC. As of
November 30, 1997, the Company was obligated to issue 123,750 shares to LFC and
41,250 shares to Mr. Prag under the Consulting Agreement. Pursuant to the
Consulting Agreement, the Company must also pay LFC cash equal to 2.5% of the
gross proceeds received in any direct financing located for the Company by LFC.
As of December 10, 1997, the Company was obligated to pay LFC $76,500 as a
finder's fee in connection with the closing of a $3,060,000 private placement of
the Company's 8% Adjustable Rate Convertible Subordinated Debentures Due
December 31, 1999 (the "8% Debentures"), by reason of LFC's having located JW
Charles Securities, Inc., the finder used by the Company in the offering of the
8% Debentures. See "8% Debenture Offering and Relationship to Proposals 2 and
3," below.

The Company also sold a total of 3,500,000 shares of Common Stock and
warrants to purchase up to an additional 1,600,000 shares of Common Stock at
$.01 per share (the "Liviakis Warrants") to two affiliates of LFC, Messrs. John
Liviakis and Robert B. Prag, in August 1997, for $500,000 in cash. Pursuant to
this transaction, Messrs. Liviakis and Prag became significant shareholders of
the Company. See "Beneficial Ownership of Common Stock." The Common Stock issued
(and issuable pursuant to the Consulting Agreement and upon exercise of the
Liviakis Warrants) to LFC and Messrs. Liviakis and Prag carries registration
rights (which include the right to register any other shares of the Company
which they may possess at the time of any registration in which they have

-10-
<PAGE>
a right to include shares), including a one-time demand registration and
unlimited "piggyback" registrations, with the costs thereof to be borne by the
Company. The registration rights expire at the earlier of three years from
August 4, 1997 or at such time as all shares may be sold without restriction
under SEC Rule 144. Pursuant to the agreement by which they purchased the
interests, Messrs. Liviakis and Prag were granted the right to approve the
appointment of a Chief Executive Officer, Chief Financial Officer and Vice
President of Sales, which they have done. They also have the right to approve
the nominations of up to two non-employee directors. They have approved the
appointment of Richard A. Barton as a director of the Company but have not
exercised their rights regarding another director as of the date of this Proxy
Statement.

At the time the Liviakis Warrants were sold to Messrs. Liviakis and Prag,
the Company did not (and presently does not) have an adequate number of
authorized and unissued shares of Common Stock available to allow for the
exercise of the warrants. The subscription agreement pursuant to which they
purchased their shares and the Liviakis Warrants therefore provides that the
Liviakis Warrants are not exercisable until January 15, 1998, and in the event
that the Company is unable to issue the shares of Common Stock underlying the
Liviakis Warrants at the time of an attempted exercise, the Company is obligated
to repurchase any Liviakis Warrants for which the Company cannot issue shares
for the difference between the then-current market price of the Common Stock and
the exercise price of the warrants. Messrs. Liviakis and Prag entered into a
Letter Agreement with the Company as of October 20, 1997, pursuant to which they
agreed that the Liviakis Warrants would not become exercisable until the later
of January 15, 1998, or the time immediately following the next Annual Meeting
of Shareholders of the Company. The Company agreed it would submit a proposed
amendment to its shareholders at that meeting to increase the number of
authorized shares of Common Stock to no less than 40,000,000. If the Company's
shareholders do not approve Proposal 2 being submitted at this meeting, Messrs.
Liviakis and Prag's repurchase rights as to warrants for which the Company
cannot issue shares upon attempted exercise will again become effective. As of
November 11, 1997, Messrs. Liviakis and Prag entered into a Shareholder Voting
Agreement with the Company to vote all shares owned by them as of the record
date of this meeting in favor of Proposals 2 and 3. See "Proposal 2" and
"Proposal 3."

Between October 14 and November 30, 1997, the Company received several
bridge loans from LFC in the total amount of $475,000. The Company was obligated
to pay LFC interest on the amount borrowed at the rate of 9% per annum. The
Company paid LFC the amount due on these loans, with interest at the stated
rate, from the proceeds of the sale of the 8% Debentures sold on December 10,
1997. See "8% Debenture Offering and Relationship to Proposals 2 and 3," below.

Transactions with entrenet Group, LLC

In June 1997, the Company entered into a consulting agreement with
entrenet Group, LLC ("entrenet"), for purposes of assisting the Company in
strategic planning, the creation of a detailed business and marketing plan and
in locating financing sources. For its services, the Company issued a $150,000
convertible debenture to entrenet, with interest payable at 10% per annum, due
in full on or before June 2, 1998. Principal and interest are convertible into
Common Stock of the Company over the year ending June 2, 1998, at $.50 per
share. See "Beneficial Ownership of Common Stock." In addition, the Company was
obligated to pay entrenet a finder's fee of 8% for any direct financings it
located for the Company. entrenet located LFC and was therefore entitled to a
finder's fee for that $500,000 financing. A difference developed over
interpretation of the consideration payable to entrenet as its finder's fee for
locating LFC. The matter was resolved by the Company and entrenet agreeing that
the Company would issue entrenet a total of 280,000 shares of its Common Stock
at such time as the Company has obtained shareholder approval for an increase in
authorized Common Stock to no less than 40,000,000 shares. See "Proposal 2." The
Company has also granted entrenet "piggyback registration rights" covering all
shares of Common Stock issuable to it under the debenture and as payment of the
finder's fee which entitle entrenet to have their shares included in any
registration filed by the Company.

8% Debenture Offering and Relationship to Proposals 2 and 3

On December 10, 1997, U.S. Wireless Data, Inc. (the "Company") closed a
private offering of $3,060,000 principal amount of 8% Adjustable Rate
Convertible Subordinated Debentures due December 31, 1999 (the "8%

-11-

<PAGE>
Debentures"). The net proceeds to the Company from the offering were $2,769,300,
after paying finder's fees of $290,700, but before paying additional expenses of
the offering, which are estimated at $50,000.

The Debentures will automatically convert into shares of no par value
Series A Cumulative Convertible Redeemable Preferred Stock, with a stated value
of $1.00 per share (the "Series A Preferred Stock") at any time prior to
maturity, unless previously redeemed or converted into shares of the Company's
no par value common stock (the "Common Stock"), upon effectiveness of an
amendment to the Company's Articles of Incorporation authorizing the Company to
issue up to 15,000,000 shares of Preferred Stock, up to 4,000,000 of which may
be designated by the Board of Directors as shares of Series A Preferred Stock.
That amendment is being submitted to shareholders at this meeting as Proposal 3.
The conversion rate will be equal to one share of Series A Preferred Stock for
each dollar of principal face amount of the Debentures being converted. Any
accrued but unpaid interest owing on the Debentures to the date of conversion
will be paid either in cash or in Common Stock of the Company. No fractional
shares of Series A Preferred Stock will be issued upon conversion.

The Debentures or the shares of Series A Preferred Stock into which they
have been converted will be further convertible at the option of the holder into
shares of Common Stock effective upon (a) an amendment to the Company's Articles
of Incorporation increasing the number of shares of authorized Common Stock
(which is being submitted to shareholders at this meeting as Proposal 2) and (b)
the earlier of (i) a declaration of effectiveness by the Securities and Exchange
Commission (the "SEC") of a registration statement covering the shares of Common
Stock into which the Debentures or Series A Preferred Stock are convertible (the
"Common Stock Registration Statement") or (ii) 150 days from December 10, 1997.
The rate at which the Debentures or Series A Preferred Stock are convertible
(either per dollar of Debenture or per share of Series A Preferred Stock, into
Common Stock (the "Conversion Price") is equal to the lesser of (i) $6.00 per
share of Common Stock or (ii) 80% of the average of the closing bid price of the
Common Stock over the five trading days prior to conversion. The Conversion
Price is no less than $4.00 per share of Common Stock for 270 days from December
10, 1997 (the "Minimum Conversion Price"). After that 270 day period, the
Minimum Conversion Price no longer applicable. No fractional shares of Common
Stock will be issued upon conversion of Debentures or shares of Series A
Preferred Stock; rather, the Company will either pay cash for such fractional
share or apply a rounding formula to issue only full shares of Common Stock.

The Debentures (or the Series A Preferred Stock into which the Debentures
have become converted) automatically convert to Common Stock (if a sufficient
number of shares are available) if the Company closes a $5,000,000 public
offering at a minimum share price of $10.00. The shares of Common Stock into
which the Debentures and/or the Series A Preferred Stock are convertible and
which are issuable as interest on the Debentures and dividends on the Series A
Preferred Stock are hereafter referred to as the "D/PS Common Stock."

Interest on the Debentures (or cumulative dividends on the Series A
Preferred Stock which become payable once the Debentures have become converted
to Series A Preferred Stock) are payable in arrears to holders of record as of
March 31, June 30, September 30 and December 31 of each year, beginning December
31, 1997, at an initial rate of 8% per annum, subject to reduction to 4% per
annum upon effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering the Common Stock issuable upon
conversion of the Debentures (or the Series A Preferred Stock into which the
Debentures have become converted) (the "Common Stock Registration Statement").
Unless converted or redeemed, the Debentures will be due and payable in full on
December 31, 1999. Interest on the Debentures (or dividends on the Series A
Preferred Stock if the Debentures have become converted to Series A Preferred
Stock) is payable in Common Stock, if possible.

The Company does not presently have an adequate number of shares of
Common Stock authorized to allow payment of interest on the Debentures (or
dividends on the Series A Preferred Stock) to be paid in shares of Common Stock
or to allow for conversion of the Debentures or Preferred Stock into shares of
Common Stock, nor does the Company have shares of Preferred Stock presently
authorized. Proposal 2 submits to shareholders an amendment to the Company's
Articles of incorporation to increase the number of shares of Common Stock from
its present number of 12,000,000 shares to 40,000,000 shares to its
shareholders. Proposal 3 submits to shareholders an amendment to the Company's
Articles of Incorporation to authorize a total of 15,000,000 shares of no par
value "blank check" Preferred Stock (up to 4,000,000 of which would then be
immediately designated

-12-
<PAGE>
by the Board of Directors as Series A Preferred Stock into which the Debentures
would then automatically become converted). If Proposal 2 is approved but
Proposal 3 is not, the Debentures would not be converted into shares of Series A
Preferred Stock but would become convertible directly into shares of Common
Stock as described above. If Proposal 2 is not approved, interest or dividends
on the Debentures will be payable in cash and the Debentures (or Series A
Preferred Stock, if Proposal 3 is approved but Proposal 2 is not) will remain as
unsecured, subordinated, interest or dividend bearing obligations of the
Company, payable in cash.

Assuming approval of Proposal 2 by shareholders, the number of shares of
Common Stock issuable at each interest or dividend payment date will be
determined by applying the applicable interest rate to determine the dollar
amount of the payment due, then converting that amount to the appropriate number
of shares based on the average closing bid price of the Common Stock over the
last five trading days of the quarter, as quoted on the OTC Electronic Bulletin
Board or the price as quoted on The Nasdaq Stock Market or another exchange, if
and when the stock is listed on any such exchange. No fractional shares of
Common Stock will be issued as interest or dividends; rather, a Holder entitled
to a fractional share will receive at the Company's option, either a cash
payment for such fractional share or the next higher or lower number of whole
shares, as calculated using a rounding formula.

The Company also entered into an agreement with the purchasers of the
Debentures to file a registration statement with the SEC covering the D/PS
Common Stock within 90 days of December 10, 1997. The Company will use its best
efforts to obtain effectiveness of the registration statement. However, if the
Company is unable to do so within 150 days of December 10, 1997, the Conversion
Price (or Minimum Conversion Price, if then in effect) for the Debentures and/or
Preferred Stock will be discounted by 2% off the then-existing conversion price
for each thirty day period (or fraction of any thirty day period) during which
the registration statement is not effective after such 150th day and such
discount will apply thereafter to determine the Conversion Price or Minimum
Conversion Price applicable to the Debentures and/or Preferred Stock. The
Company is to use its best efforts to maintain effectiveness of the registration
statement for 16 months from June 30, 1998. The Company will be required to
include up to approximately 6,385,000 additional shares in the registration
statement which are the subject of "piggyback" registration rights granted to
other holders of the Company's securities. A total of 5,100,000 of those shares
are registrable for the benefit of Liviakis Financial Communications, Inc.
("LFC") and two affiliates of LFC, Messrs. John M. Liviakis and Robert B. Prag.
LFC and Messrs. Liviakis and Prag have agreed that they will not sell any shares
under the registration (even if they elect to have their shares included in the
registration) until at least July 31, 1998. See "Certain Transactions."

The Company may redeem the Debentures and/or the Preferred Stock at any
time during the first 270 days following the initial closing date of this
offering (and for 60 days thereafter under certain circumstances) if the closing
bid price (or last sale price, if available) of the Common Stock for at least 20
trading days in any consecutive 30 trading day period is less than the Minimum
Conversion Price. The Company must pay 118% of the holder's initial cash
investment to redeem either Debentures or Preferred Stock, plus pay accrued but
unpaid dividends to the date of redemption. The Company may also redeem any
Preferred Stock outstanding three years from December 10, 1997, at stated value
plus accrued and unpaid dividends.

The Company has agreed with the purchasers of the Debentures that it will
not offer any equity securities in private offerings pursuant to SEC Regulations
D or S or otherwise, for 150 days from December 10, 1997. After such period, and
continuing until the shares underlying the Debentures and/or Series A Preferred
Stock have been registered for public sale, the Company has granted a first
right of refusal to the purchasers of the Debentures to purchase any equity
securities offered privately by the Company pursuant to SEC Regulations D or S
or otherwise.

The offering of 8% Debentures was made pursuant to Rule 506 of Regulation
D and Section 4(2) of the Securities Act. The Debentures, the Series A Preferred
Stock and the D/PS Common Stock (hereafter collectively referred to as the
"Securities") are or will, when issued, be "restricted securities" as defined
under Rule 144 of the Securities Act. Holders will not be able to resell the
Securities absent an effective registration statement covering the Securities or
an exemption from such registration requirements, the availability of which must
be demonstrated to the satisfaction of the Company. There is currently no public
market for the Debentures or the Preferred Stock and there is no intention that
any public trading market develop for the Debentures or Preferred Stock.

-13-
<PAGE>
JW Charles Securities, Inc. of Boca Raton, Florida, acted as finder for the
Company in connection with the offering. JW Charles received a finder's fee of
7% of the gross offering proceeds and a Stock Purchase Warrant to purchase
50,000 shares of the Company's Common Stock at $6.525 per share, exercisable
until December 9, 2000. The shares underlying the Warrant have both demand and
"piggyback" registration rights. The Company is also obligated to pay a finder's
fee of 2.5% of the gross offering proceeds, or $76,500, to Liviakis Financial
Communications, Inc. for its assistance in locating JW Charles Securities. See
"Certain Transactions."

The foregoing summarizes the terms and conditions of certain agreements
entered into between the Company and the purchasers of the 8% Debentures. The
descriptions of the terms of the agreements are qualified in their entirety by
reference to copies of the operative documents, including the Debenture
Agreement (including the form of 8% Debenture Certificate), the Registration
Rights Agreement and the Form of Subscription Agreement which have been filed by
the Company with the SEC as Exhibits to its Form 8-K Current Report Reporting an
Event of December 14, 1997. Copies of these documents as filed by the Company
are available through the SEC's Edgar database and will also be made available
to any shareholder upon written request to the Company at its principal offices
located at 2200 Powell Street, Suite 450, Emeryville, CA 94608, Attn: Robert E.
Robichaud, Asst. Secretary. The proposed form of Articles of Amendment to the
Company's Articles of Incorporation including the Designation of Series A
Cumulative Convertible Redeemable Preferred Stock to be authorized by the Board
of Directors for filing with the Colorado Secretary of State if Proposal 3 is
approved is included as Exhibit B to this Proxy Statement.

PROPOSALS FOR VOTING

PROPOSAL 1: ELECTION OF DIRECTORS

The Board of Directors has nominated the persons named above for election
as directors of the Company to serve until the next Annual Meeting of
Shareholders and until their successors are duly elected and qualified.

Vote Required

In order to be elected as a director, a nominee will have to receive a
majority of the votes cast for that nominee, assuming a quorum (which consists
of a majority of the shares entitled to vote at the meeting) is present at the
meeting. Cumulative voting in the election of directors is not allowed. See
"Voting," above.

Board Recommendation

The Board of Directors recommends that the shareholders vote FOR the
reelection of the six incumbent directors described above under "Information
Relating to Various Proposals - Information Concerning Directors."

PROPOSAL 2: AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO AMEND
ARTICLE 4 TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK TO
40,000,000

The Board of Directors has adopted resolutions to approve an amendment to
Article 4 of the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock from 12,000,000 to 40,000,000. The proposed
Amendment to the Articles of Incorporation which would be filed with the
Colorado Secretary of State upon approval of Proposals 2 and 3 is included as
Exhibit A to this Proxy Statement. If either Proposal 2 or 3 is rejected by
shareholders, appropriate modifications will be made to Exhibit A prior to
filing to reflect the actions taken by the Company's shareholders.

Need to Increase Authorized Common Stock

The Company does not presently have enough authorized and unissued Common
Stock to honor the exercise or conversion of outstanding options, warrants and
rights entitling the holders thereof to acquire shares of Common

-14-
<PAGE>
Stock (the "Common Stock Instruments"). As of November 30, 1997, the Company had
a total of 9,212,240 shares of Common Stock outstanding. There were a total of
approximately 4,695,760 additional shares of Common Stock issuable pursuant to
outstanding Common Stock Instruments as of November 30, 1997, although by reason
of vesting schedules and agreements with the holders of certain of those Common
Stock Instruments, only approximately 2,069,580 shares are presently issuable.
Once fully vested, or the agreements to postpone issuance rights expire, the
Company would be short by approximately 1,908,000 shares of Common Stock if all
holders of Common Stock Instruments invoked their rights to shares of the
Company's Common Stock.

In addition, since November 30, 1997, the Company has issued the 8%
Debentures and the 50,000 share Common Stock Purchase Warrant to JW Charles
Securities, Inc. described above. At a conversion price of $6.00 per share of
Common Stock, the $3,060,000 of 8% Debentures or 3,060,000 shares of Series A
Preferred Stock would require 510,000 shares of Common Stock upon conversion; at
$4.00 per share (the Minimum Conversion Price which is in effect for 270 days
from December 10, 1997), 765,000 shares of Common Stock would be issuable on
conversion. See "8% Debenture Offering and Relationship to Proposals 2 and 3"
above.

Most of the Common Stock Instruments are backed by the representation of
the Company that it would at all times keep an adequate number of shares of
Common Stock reserved to honor the Common Stock Instrument or, more recently,
that it would repurchase the Common Stock Instrument for a specified amount
(generally the fair market value of the issuable shares less the consideration
to be received therefor) if it is unable to issue the shares of Common Stock
underlying the Instrument. It is therefore imperative that the Company's
Articles of Incorporation be amended to increase the authorized number of shares
of Common Stock in order for the Company to be able to honor existing
obligations. The deficit between the number of available, authorized and
unissued shares of Common Stock and the Company's obligations also makes it
impossible for the Company to pursue any additional financings or other
transactions requiring Common Stock.

Certain Effects Of Authorized But Unissued Common Stock, Including
Anti-Takeover Implications

Upon approval of Proposal 2, there will be approximately 26,042,000
shares of Common Stock available for future issuance without further shareholder
approval (less additional reservations of shares to honor conversion rights of
the Debentures and/or Series A Preferred Stock). The additional authorized
shares of Common Stock would also be available for issuance (subject to further
shareholder approval if required by law or applicable stock exchange rules) at
such times and for such proper corporate purposes as the Board of Directors may
approve. These additional shares may be utilized for a variety of corporate
purposes including future private or public offerings to raise additional
capital, to pay Company debts or to facilitate corporate acquisitions,
conversions of convertible securities, employee benefit plans, stock splits
effected in the form of stock dividends, and other general corporate purposes.
Increasing the authorized Common Stock will give the Company greater flexibility
and will allow the Company to issue additional Common Stock for the purposes
described above.

One of the effects of the existence of unissued and unreserved Common
Stock may be to enable the Board of Directors to issue shares to persons
friendly to current management which could render more difficult or discourage
an attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or otherwise, and thereby protect the continuity of the Company's
management. For example, the issuance of shares of Common Stock in a public or
private sale, merger, or similar transaction would increase the number of the
Company's outstanding shares, thereby diluting the interest of a party seeking
to acquire control of the Company.

The Company does not currently have any plans to issue additional shares
of Common Stock other than shares of Common Stock as interest on, or in
conversion of, the 8% Debentures, as dividends on, or in conversion of, the
Series A Preferred Stock (if Proposal 3 is approved), and upon the exercise or
conversion of the Common Stock Instruments which have been issued to date or
which may be issued in the future to the Company's employees, nonemployee
directors, consultants or others.

-15-
<PAGE>
Vote Required

The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is needed for the approval of this proposal. Abstentions
and broker non-votes will have the same effect as a vote against Proposal 2.

Each of the Company's officers, directors and 5% owners have executed
voting agreements with the Company pursuant to which they have agreed to vote
any and all shares they own as of the record date of this meeting in favor of
Proposal 2. See "Beneficial Ownership of Common Stock," above.

Recommendation of the Board of Directors

For the reasons stated above, the Board of Directors believes that
approval of Proposal 2 is essential to the ability of the Company to pursue its
business plan and to honor the obligations it has to holders of Common Stock
Instruments and the 8% Debentures. The Board of Directors therefore recommends
that the shareholders vote FOR Proposal 2.

PROPOSAL 3: AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO AMEND
ARTICLE 4 TO AUTHORIZE 15,000,000 SHARES OF "BLANK CHECK PREFERRED STOCK, UP TO
4,000,000 OF WHICH ARE TO BE IMMEDIATELY DESIGNATED AS SERIES A PREFERRED STOCK

Reasons for Proposal 3

The Board of Directors has adopted resolutions to approve an amendment to
Article 4 of the Company's Articles of Incorporation to authorize 15,000,000
shares of what is commonly known as "blank check" Preferred Stock. The term
"blank check" Preferred Stock refers to stock for which the designations,
preferences, conversion rights, cumulative, relative, participating, optional or
other rights, including voting rights, qualifications, limitations or
restrictions thereof are determined by the board of directors of a company. If
Proposal 3 is approved, the Board of Directors will act immediately to designate
up to 4,000,000 shares of Preferred Stock as Series A Preferred Stock to effect
conversion of the 8% Debentures into shares of Series A Preferred Stock. See "8%
Debenture Offering and Relationship to Proposals 2 and 3" above.

The purpose of Proposal 3 is thus two-fold: first, to authorize shares of
undesignated Preferred Stock which may be designated and issued from time to
time by the Board of Directors for a variety of corporate purposes including
future private or public offerings to raise additional capital, to pay Company
debts or to facilitate corporate acquisitions, conversions of convertible
securities, employee benefit plans, stock splits effected in the form of stock
dividends, and other general corporate purposes; second, to authorize the class
of stock needed to allow the Board of Directors to designate up to 4,000,000
shares of such class as Series A Preferred Stock, which will effect conversion
of the 8% Debentures.

Description of "Blank Check" Preferred Stock, Including Anti-Takeover
Implications

If Proposal 3 is approved, the Board could authorize the issuance, at any
time or from time to time, of one or more series of Preferred Stock, generally
without any further shareholder approval unless required by law or applicable
stock exchange rules. The Company is not presently subject to any stock exchange
rules which would require such shareholder approval. In addition, the Board
would determine all designations, relative rights, preferences, and limitations
of such stock including but not limited to the following: designation of series
and numbers of shares; dividend rights; rights upon liquidation or distribution
of assets of the Company; conversion or exchange rights; redemption provisions;
sinking fund provisions; and voting rights.

One of the primary purposes of authorizing the Board of Directors to
designate and issue shares of Preferred Stock is to eliminate delays associated
with a shareholder vote on specific issuances. The Board of Directors may,
however, subject to their duties to existing shareholders, issue Preferred Stock
with voting and conversion rights which could adversely affect the voting power
of the holders of Common Stock, and which could, among other

-16-
<PAGE>
things, have the effect of delaying, deferring or preventing a change in control
of the Company. The Board of Directors is required to make any determination to
issue shares of Preferred Stock based on its judgment as to the best interests
of the shareholders and the Company; however, the Board of Directors could issue
shares of Preferred Stock that could, depending on the terms of such series,
make more difficult an attempt to obtain control of the Company by merger,
tender offer, proxy contest or other means.

While the Company may consider effecting an equity offering of Preferred
Stock or otherwise issuing such stock in the future for purposes of raising
additional capital or for acquisitions, the Company, other than the Series A
Preferred Stock to be immediately designated upon approval of Proposal 3 as
described herein, has no agreements or understandings as of the date hereof with
any third party to effect any such offering or acquisition, or to purchase any
shares offered in connection therewith, or to vote any such shares, and no
assurances are given that any offering will in fact be effected or that an
acquisition pursuant to which such shares may be issued will be proposed and
consummated. Therefore, the terms of any Preferred Stock subject to this
proposal (other then the Series A Preferred Stock described herein) cannot be
stated or estimated with respect to any or all of the securities authorized.

Description of Series A Preferred Stock

Generally

As described above under "8% Debenture Offering and Relationship to
Proposals 2 and 3," the Board of Directors will designate up to 4,000,000 shares
of Preferred Stock as Series A Preferred Stock to allow the 8% Debentures to be
converted into shares of Series A Preferred Stock. As of the date hereof, a
total of 3,060,000 shares of Series A Preferred Stock would be required to
effect conversion of the 8% Debentures. Any shares not required to honor such
conversion rights would be removed from the Designation.

The shares of Series A Preferred Stock will carry a stated value of $1.00
per share. When issued, the Series A Preferred Stock will be duly and validly
issued, fully paid and nonassessable and the holders will have no preemptive
rights. The Series A Preferred Stock will not be subject to any sinking fund or
other obligation of the Company to redeem or retire the Series A Preferred
Stock. Unless earlier redeemed by the Company, the Series A Preferred Stock will
have a perpetual maturity. Any Series A Preferred Stock redeemed or otherwise
acquired by the Company will, upon cancellation, have the status of authorized
but unissued Preferred Stock subject to reissuance by the Board of Directors as
Series A Preferred Stock or as shares of Preferred Stock of any one or more
other, different series.

Dividends

Holders of the Series A Preferred Stock are entitled to receive
cumulative quarterly dividends, when, as and if declared by the Board of
Directors, out of the funds of the Company legally available therefor, initially
at a per annum rate of 8% per share. The dividend rate will be reduced to 4% per
annum upon initial effectiveness of an SEC registration statement covering the
shares of Common Stock into which the Series A Preferred Stock is convertible.
Dividends are payable as of the record dates of March 31, June 30, September 30
and December 31 of each year, commencing on the first date following the date of
original issuance of the Series Preferred Stock. Dividends on the Series A
Preferred Stock will be cumulative from the date of original issuance, and will
be payable to holders of record as they appear on the stock books of the Company
on such record dates. Payment dates shall be no more than 15 days after the
record dates. Any unpaid dividends will bear interest at the same rate as the
dividend rate then in effect for the Series A Preferred Stock.

Unless the full amount of cumulative dividends on the Series A Preferred
Stock have been paid or sufficient funds set aside therefor, dividends may not
be paid or declared and set aside for payment and other distribution may not be
made on the Common Stock or any other stock of the Company ranking junior to the
Series A Preferred Stock as to dividends.

-17-
<PAGE>
Under Colorado law, dividends or distributions to shareholders may be
made only under certain circumstances. Dividends or distributions may not be
paid in cash or property of the Company (including shares of the corporation's
stock) if after giving effect to such distribution the corporation (1) would not
be unable to pay its debts as they become due in the ordinary course or (2) the
corporation's total assets would be less than its total liabilities plus the
amount that would be needed, if the corporation were to be dissolved at the time
of the distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. The Company's ability to pay dividends in the future may therefore
depend upon its financial results, liquidity and financial condition.

Conversion into Common Stock

The Series A Preferred Stock is convertible at the option of the holder
into shares of Common Stock effective upon (i) an amendment to the Company's
Articles of Incorporation increasing the number of shares of authorized Common
Stock (which is being submitted at this meeting as Proposal 2) and (ii) a
declaration of effectiveness by the SEC of a registration statement covering the
Common Stock into which the Series A Preferred Stock are convertible. The Series
A Preferred Stock will be convertible into Common Stock at per share rate, based
upon the stated value of $1.00 per share (the "Conversion Price") equal to the
lesser of (i) $6.00 per share of Common Stock or (ii) 80% of the average of the
closing bid price of the Common Stock as reported on the OTC Electronic Bulletin
Board (or, if available, the closing bid price as quoted on NASDAQ or any other
national securities exchange upon which the Common Stock is then listed) over
the five trading days prior to conversion. The Conversion Price will in no case
be less than $4.00 per share of Common Stock for the first 270 days from
December 10, 1997 (the "Minimum Conversion Price"). After such 270 day period,
the Minimum Conversion Price will be eliminated. No fractional shares of Common
Stock will be issued upon conversion of Series A Preferred Stock; rather, a
holder entitled to a fractional share may receive the next higher whole number
of shares of Series A Preferred Stock if the fractional share to which such
holder is otherwise entitled is equal to 0.5 or greater, or the next lower
number of whole shares if the fractional share to which such holder is otherwise
entitled is less than 0.5. Instead of applying the rounding formula, the
Company, at its election, may pay cash in lieu of any fractional share otherwise
issuable upon conversion of Series A Preferred Stock.

The Company has agreed to file a registration statement with the SEC
covering the shares of Common Stock issuable as dividends on the Series A
Preferred Stock and upon conversion thereof. The registration statement is to be
filed within 90 days of December 10, 1997. If the registration statement is not
effective within 150 days of the initial closing date, then the Conversion Price
and the Minimum Conversion Price are reduced by 2% off the then-applicable
conversion prices. For each additional 30 days (or any fraction of a 30 day
period that the registration statement remains ineffective), the applicable
conversion price is reduced another 2%. This reduced price then remains in
effect for the remaining period during which the Series A Preferred Stock
remains outstanding.

Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, before any distribution of assets is made to holders
of Common Stock or any other stock of the Company ranking junior to the shares
of Series A Preferred Stock upon liquidation, dissolution or winding up, the
holders of Series A Preferred Stock shall receive a liquidation preference of
$1.00 per share and shall be entitled to receive all accrued and unpaid
dividends through the date of distribution. If, upon such a voluntary or
involuntary liquidation, dissolution or winding up of the Company, the assets of
the Company are insufficient to pay in full the amounts payable with respect to
the Series A Preferred Stock, the holders of the Series A Preferred Stock will
share ratably in any such distributions of assets of the Company first in
proportion to their respective liquidation preferences until such preferences
are paid in full, and then in proportion to their respective amounts of accrued
but unpaid dividends. After payment of any liquidation preference and accrued
dividends, the shares of Series A Preferred Stock will not be entitled to any
further participation in any distribution of assets by the Company. A
consolidation or merger of the Company with or into any other corporation is not
deemed to be a liquidation, dissolution or winding up of the Company, provided
it is approved by a majority of the Series A Preferred Stock.

-18-
<PAGE>
Optional Redemption

The Series A Preferred Stock is subject to redemption in whole or in part
at the election of the Company upon not less than 30 nor more than 60 days'
notice by mail, at any time up to 270 days following December 10, 1997 if,
during such period, the closing bid price of the Common Stock for at least 20
trading days in any consecutive 30 trading day period is less than $4.00 per
share. To redeem the Series A Preferred Stock, the Company must pay 118% of the
principal amount being redeemed, together with accrued but unpaid dividends
owing to the date of redemption. If the 20 day period falls wholly within the
last 60 days of the 270 day period, then the Company will have a full 60 days
from the end of the 270 day period within which to redeem the Series A Preferred
Stock.

The Company may also redeem any Preferred Stock outstanding after 36
months from December 10, 1997 by payment of $1.00 per share plus all accrued and
unpaid dividends to the date of redemption.

If fewer than all of the shares of Series A Preferred Stock are to be
redeemed, the shares to be redeemed shall be pro rata among all shares
outstanding. On and after the date fixed for redemption, provided that the
redemption price (including any accrued and unpaid dividends to but excluding
the date fixed for redemption) has been duly paid or provided for, dividends
shall cease to accrue on the Series A Preferred Stock called for redemption,
such shares shall no longer be deemed to be outstanding and all rights of the
holders of such shares as shareholders of the Company shall cease, except the
right to receive the monies payable upon such redemption, without interest
thereon, upon surrender of the certificates evidencing such shares.

Voting Rights

The holders of the Series A Preferred Stock will have no voting rights
except as described below or as required by law. In exercising any such vote,
each outstanding share of Series A Preferred Stock will be entitled to one vote,
excluding shares held by the Company or any affiliate of the Company, which
shares shall have no voting rights.

As long as any Series A Preferred Stock is outstanding, the Company may
not, without the affirmative vote or consent of the holders of at least 50%
(unless a higher percentage shall then be required by applicable law) of the
outstanding shares of Series A Preferred Stock amend or repeal any provision of
the Company's Articles of Incorporation (including the Designation) or Bylaws
which would have the effect of altering, changing or amending the preferences,
rights, privileges, or powers of, or the restrictions provided for the benefit
of, the Series A Preferred Stock.

Vote Required

The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is needed for approval of Proposal 3. Abstentions and
broker non-votes will have the same effect as a vote against Proposal 3.

Each of the Company's officers, directors and 5% owners have executed
voting agreements with the Company pursuant to which they have agreed to vote
any and all shares they own as of the record date of this meeting in favor of
Proposal 3. See "Beneficial Ownership of Common Stock," above.

Recommendation of the Board of Directors

The Board of Directors believes that approval of Proposal 3 is in the
best interests of the Company and its shareholders. The Board of Directors
therefore recommends that the shareholders vote FOR Proposal 3.

PROPOSAL 4: APPROVAL OF AMENDMENTS TO THE COMPANY'S 1992 STOCK OPTION PLAN (THE
"PLAN") TO INCREASE THE NUMBER OF SHARES UNDERLYING OPTIONS THAT MAY BE GRANTED
UNDER THE PLAN FROM 880,000 TO 2,680,000 SHARES

-19-
<PAGE>
The Board of Directors has approved, and recommends that shareholders
approve, an amendment to the Company's 1992 Stock Option Plan (the "Plan") that
would increase the number of shares of Common Stock underlying options that may
be granted under the Plan from its present number of 880,000 shares to 2,680,000
shares.

The Plan was originally adopted in September 1992 for use in encouraging
employees, directors and others in a position to contribute to the success of
the Company by granting them a right to participate in the Company through
exercise of stock options. In December 1995, the shareholders approved
amendments to the Plan which had been previously adopted by the Board of
Directors, which were primarily adopted to assure compliance with federal tax
and securities laws, but which were also adopted to allow the Plan to better
serve the intended purpose of motivating employees, consultants and directors to
exert their best efforts on behalf of the Company.

Reasons for the Proposed Amendment

The Company has embarked on a vigorous program to expand the business of
the Company. As part of that expansion, the Company has brought on new officers
and personnel, many of whom it has desired to motivate to contribute to the
success of the Company through the grant of stock options. Shareholders had
previously approved a total of 880,000 shares of Common Stock for issuance
pursuant to options that could be granted under the Plan. As of June 30, 1997,
only 190,951 shares remained available for issuance of options under the Plan.
Consequently, on August 6, 1997, the Board of Directors adopted an amendment to
the Plan to increase the number of shares reserved under it by 1,800,000, to a
total of 2,680,000 shares, and approved submission to shareholders for their
approval at the next Annual Meeting.

Description of the Plan

A description of the Plan is set forth in the foregoing section of this
Proxy Statement entitled "Executive Compensation - Stock Option Plan." A copy of
the Plan (including the proposed amendment) is included as Exhibit C to this
Proxy Statement.

Options Presently Outstanding under the Plan

As of November 30, 1997, there were a total of 645,181 options
outstanding under the Plan, 263,731 of such options being vested at that date.
Of the total options, 222,781 were held by directors (one of whom is also an
officer of the Company), 152,400 were held by other executive officers, and
272,400 were held by employees or consultants of the Company. See also
"Executive Compensation - Stock Option Plan." The following table sets forth a
summary of option grants and outstanding options held by certain persons and the
terms of those options. Information is also included regarding the number of
options that have been exercised by each person or group.
<TABLE>
<CAPTION>
==================================================================================================================================
Option Grants # of Options
- ----------------------------------------------------------------------------------------------------------------------------------
# of
Optionee Exercise Options
(Name and Position) # Shares Date Price Vested Unvested Exercised
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rod L. Stambaugh, 75,000 09/16/92 $0.13 - - 75,000
President, Director, 80,000 12/05/95 $0.13 70,400 9,600 -0-
Director-nominee
- ----------------------------------------------------------------------------------------------------------------------------------
Evon A. Kelly, Chief (1)
Executive Officer, Director,
Director-nominee
- ----------------------------------------------------------------------------------------------------------------------------------
Robert E. Robichaud, Chief 50,000 09/05/97 $3.95 8,000 42,000 -0-
Financial Officer

-20-

- ----------------------------------------------------------------------------------------------------------------------------------
Raymond J. Mueller, Vice 50,000 11/24/97 $6.34 5,000 45,000 -0-
President - Operations
- ----------------------------------------------------------------------------------------------------------------------------------
Current Executive Officers 325,000 09/16/92- $0.13- 92,900 139,500 92,600
as a Group (6 persons) 11/24/97 $6.34
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
Richard A. Barton, (2) - -
Director and Director-
nominee
- ----------------------------------------------------------------------------------------------------------------------------------
Caesar Berger, Director 20,000 12/05/95 $0.13 - 5,000 15,000
and Director-nominee 20,000 12/05/96 $0.218 5,000 15,000 -0-
(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Alan B. Roberts, Director 35,068 12/05/95 $0.13 - - 35,068
and Director-nominee 20,000 09/29/96 $0.16 - 10,000 10,000
20,000 09/29/97 $6.15 - 20,000 -0-
(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Chester N. Winter, 47,781 12/05/95 $0.13 42,781 5,000 -0-
Director and Director- 20,000 02/09/96 $0.13 15,000 5,000 -0-
nominee 20,000 02/09/97 $0.125 5,000 15,000 -0-
(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Non-Employee Directors as 202,849 12/05/95- $0.125- 72,781 70,000 60,068
a Group (4 persons) (2) 02/09/97 $6.15
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
All Employees as a group 575,250 08/24/93- $0.13- 103,050 169,350 297,800
(3) 11/25/97 $7.41
==================================================================================================================================
<FN>
(1) Mr. Kelly was granted a stock option to purchase 600,000 shares of
the Company's Common Stock at the time he was hired; however, the
option was not granted under the Plan. See "Executive Compensation -
Employment Agreements and Change in Control Provisions," above.

(2) Each non-employee director is entitled to a 20,000 share option grant
on the anniversary date of becoming a director. Options grantable to
these directors after November 30, 1997, and through the end of the
fiscal year ended June 30, 1998, are not included in the table. See
"Executive Compensation Director Compensation," above.

(3) Includes 215,000 options granted to Michael Brisnehan, the former
President and Chief Financial Officer of the Company. The options
were granted in 1993 (125,000 options) and 1995 (90,000 options) at
the exercise price of $.13/share. All of the options have been
exercised.

</FN>
</TABLE>
Need for Shareholder Approval of the Amendment to the Plan

In order to allow the options that have been issued as incentive stock
options to receive the favorable tax treatment such options are allowed, as well
as to obtain certain exemptions from Exchange Act Section 16 "short-swing
profits" rules that would otherwise apply, shareholders of the Company must
approve the amendment to the Plan within twelve months of the date it was
adopted by the Board of Directors.

-21-
<PAGE>
Vote Required

Approval of the amendment to the Plan requires the affirmative vote of a
majority of the shares of Common Stock present and voting at a meeting if a
quorum is present.

Recommendation of the Board of Directors

The Board of Directors recommends a vote FOR approval of Proposal 4.

PROPOSAL 5: TO RATIFY THE SELECTION OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.

The Board has selected Price Waterhouse LLP, independent public
accountants, as independent auditors for the Company for 1998. A resolution is
being submitted to shareholders at the meeting for ratification of such
selection and the accompanying proxy will be voted for such ratification, unless
instructions to the contrary are indicated therein. Although ratification by
shareholders is not a legal prerequisite to the Board's selection of Price
Waterhouse LLP as the Company's independent public accountants, the Company
believes such ratification to be appropriate. If the shareholders do not ratify
the selection of Price Waterhouse LLP, the selection of independent public
accountants will be reconsidered by the Board; however, the Board may select
Price Waterhouse LLP, notwithstanding the failure of the shareholders to ratify
its selection.

The Board expects that representatives of Price Waterhouse LLP will be
present at the meeting, will have an opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.

Price Waterhouse LLP has been the Company's independent public
accountants since 1994. During the fiscal year ended June 30, 1997, Price
Waterhouse LLP performed audit and other services for the Company including
consultations during the year on matters related to accounting, financial
reporting and the review of financial and related information that was included
in filings with the Securities and Exchange Commission.

The appointment of auditors is approved annually by the Board.

Vote Required

Approval of Proposal 5 requires the affirmative vote of a majority of the
shares of Common Stock present and voting at a meeting if a quorum is present.

Recommendation of the Board of Directors

The Board of Directors recommends a vote FOR approval of Proposal 5.

OTHER MATTERS

The Board of Directors of the Company knows of no other matters to be
presented at the annual meeting other than those described above. However, if
any other matters properly come before the meeting, it is intended that any
shares voted by proxy will be voted in the discretion of the Board of Directors.

SHAREHOLDER PROPOSALS

In accordance with the rules of the Securities and Exchange Commission
("SEC"), any proposal of a shareholder intended to be presented at the Company's
1998 Annual Meeting of Shareholders must be received by the Company, to the
attention of the Secretary, at 2200 Powell Street, Suite 450, Emeryville,
California 94608 by September 1, 1998, in the form and subject to the other
requirements of the applicable rules of the SEC, in order for the proposal to be
considered for inclusion in the Company's notice of meeting, proxy statement and
proxy relating to the 1998 Annual Meeting. If the Company elects to move the
date of the 1998 Annual Meeting more

-22-
<PAGE>
than 30 days from the date of the 1997 Annual Meeting, such proposals must be
received by a reasonable time prior to such meeting.

ANNUAL REPORT - FINANCIAL STATEMENTS

A copy of the Company's 1997 Annual Report on Form 10-KSB/A, including
financial statements for the years ended June 30, 1997 and 1996, is being mailed
to all shareholders herewith. Except for any portion of the Form 10-KSB/A which
is specifically incorporated by reference into this Proxy Statement, neither the
Form 10- KSB/A nor the Chief Executive Officer's letter included in the 1997
Annual Report are to be regarded as proxy solicitation material or as a
communication by means of which any solicitation is being made. THE COMPANY WILL
PROVIDE ANY SHAREHOLDER WITH A COPY OF ANY EXHIBIT TO THE FORM 10-KSB/A PURSUANT
TO THE REQUEST PROCEDURE DESCRIBED IN THE FORM 10-KSB/A.

INCORPORATION BY REFERENCE

The following information is incorporated by reference into this Proxy
Statement from the Company's Annual report on Form 10-KSB/A for the Fiscal Year
ended June 30, 1997: Item 9, under the caption "Compliance with Section 16(a) of
the Exchange Act."

By Order of the Board of Directors

Robert E. Robichaud
Assistant Secretary

Dated: December ____, 1997

-23-
U.S. Wireless Data, Inc.

Appendices to Proxy Statement for the
1997 Annual Meeting of Shareholders

Appendix 1: Form of Proxy Card

Appendix 2: 1997 Annual Report on Form 10-KSB/A (Amendment No. 1)

<PAGE>
U.S. Wireless Data, Inc.

Exhibits to Proxy Statement for the
1997 Annual Meeting of Shareholders

A. Articles of Amendment to the Articles of Incorporation Re: Increase in
Authorized Common Stock to 40,000,000 Shares (Proposal 2) and
Authorization of 15,000,000 Shares of "Blank Check" Preferred Stock
(Proposal 3)

B. Articles of Amendment to the Articles of Incorporation Re: Designation
of up to 4,000,000 Shares of Series A Cumulative Convertible Preferred
Stock (Relating to Proposal 3)

C. 1992 Amended Stock Option Plan, as Proposed to be Further Amended
(Proposal 4)
<PAGE>

Appendix 1 to Proxy Statement
Form of Proxy

U.S. WIRELESS DATA, INC.

_____________, 1997

To Our Shareholders:

You are cordially invited to attend the Annual Meeting of Shareholders to be
held at ______ _.m. on _____________, January 30, 1998, at
_______________________, Emeryville, California. Detailed information about the
meeting is contained in the accompanying Notice of Annual Meeting and Proxy
Statement.

Regardless of whether you plan to attend the meeting, it is important that your
shares be voted. Accordingly, we ask that you sign and return your proxy as soon
as possible in the envelope provided.

Sincerely,

Evon A. Kelly
Chief Executive Officer

Please Detach Proxy Card
...............................................................................

SOLICITED BY THE BOARD OF DIRECTORS OF
U.S. WIRELESS DATA, INC.
P
R ANNUAL MEETING OF SHAREHOLDERS - JANUARY 30, 1998
0
X
Y

The undersigned hereby appoints Evon A. Kelly and Rod L. Stambaugh, or
either of them, attorneys and proxies for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to
represent and vote, as designated below, all the shares of stock of U.S.
Wireless Data, Inc., a Colorado corporation, held of record by the undersigned
on December 15, 1997, at the Annual Meeting of the Shareholders to be held at
___________________, Emeryville, California at ____ _.m., Pacific Standard Time
on January 30, 1998, or at any adjournment or postponement of such meeting, in
accordance with and as described in the Notice of Annual Meeting of Shareholders
and Proxy Statement. If no direction is given, this proxy will be voted FOR
Proposals 1, 2, 3, 4 and 5 and in the discretion of the proxy as to such other
matters as may properly come before the meeting.

(Important - To Be Signed and Dated on Reverse Side)

<PAGE>
[Reverse Side]

[X]

Please mark votes as in this example.

- ------------------------------------------------------------------
1. Election of Directors

Nominees: Evon A. Kelly, Rod L. Stambaugh, Richard S. Barton,
Caesar Berger, Alan B. Roberts and Chester N. Winter

FOR ___ WITHHELD ___
______________________________________________
FOR all nominees except as stated on line above

- ------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposal 1.
- ------------------------------------------------------------------

2. Approval of amendments to the Company's Articles of Incorporation
to increase the number of shares of authorized no par value
Common Stock to 40,000,000

FOR __ AGAINST __ ABSTAIN __

- ------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposal 2.
- ------------------------------------------------------------------

3. Approval of amendments to the Company's Articles of Incorporation to
authorize up to 15,000,000 shares of no par value Preferred Stock

FOR __ AGAINST __ ABSTAIN __

- ----------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposal 3.
- ----------------------------------------------------------------------
4. Approval of Amendment to 1992 Stock Option Plan

FOR __ AGAINST __ ABSTAIN __
---------------------------------------------------------------------
The Board of Directors Recommends a vote FOR Proposal 4.
- ----------------------------------------------------------------------
5. Ratification of Selection of Price Waterhouse LLP as Auditors

FOR __ AGAINST __ ABSTAIN __
- ----------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposal 5.
------------------------------------------------------------------

The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies all that the proxies,
their substitutes, or any of them, may lawfully do by virtue hereof.

Please sign exactly as your name appears on the address label afffixed hereto.
If acting as attorney, executor, trustee or in other representative capacity,
sign name and title.

Signature: Date:

Signature: Date: ______

<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB/A
Amendment No. 1

[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.
------------------------
(Name of small business issuer in its charter)

Colorado 84-1178691
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

2200 Powell Street, Suite 450, Emeryville, California 94608
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (510) 596-2025
--------------

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
---------------------------------
(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. [ ]

The issuer's revenues for the fiscal year ended June 30, 1997 were $1,315,542

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.

Transitional Small Business Disclosure Format (check one):

Yes ___ No _X_
<PAGE>

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,
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
13
<PAGE>
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 $812,687 in fiscal 1997. 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
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.
14
<PAGE>
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.

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
15

<PAGE>
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.

o Between October 14 and 20, 1997, the Company received a bridge loan
from Liviakis Financial Communications, Inc. for $200,000 pending completion of
more permanent financing. Following a significant funding (greater than $2
million) the Company will repay the bridge loan along with interest of nine
percent.

16
<PAGE>

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors and Executive Officers
<TABLE>
<CAPTION>
The following table sets forth information with respect to the
directors and executive officers of the Company.

Name Age Position
- ---- --- --------
<S> <C> <C>
Evon A. Kelly..................... 56 Chief Executive Officer and Director
Rod L. Stambaugh.................. 37 Chairman of the Board and President
Robert E. Robichaud............... 44 Chief Financial and Principal
Accounting Officer, Treasurer and
Assistant Secretary
Alan B. Roberts................... 51 Director
Chester N. Winter................. 66 Director
Caesar Berger..................... 50 Director
Clyde Casciato.................... 42 Vice President - Sales
Thomas Cote....................... 49 Vice President - Major Account Sales
</TABLE>
Information on each of the Company's Executive Officers and Directors
is set forth below:

Evon Kelly, Chief Executive Officer and Director since August 1997. Until
joining the Company in August of 1997, and since 1991, Mr. Kelly was president
of Kelly Learning Alliance, a consulting firm he founded, which addresses areas
in human resource development, organizational development and sales dynamics.
Kelly Learning Alliance clients have included Motorola, Xerox Corp. and NEC
Corp. From 1988 to 1991, Mr. Kelly was vice president of sales and operations at
Wilson Learning Corp., where he was responsible for developing and implementing
sales and marketing strategies. From 1986 to 1988, Mr. Kelly was a regional vice
president of store operations for Federated Department Stores Inc., where he
supervised over 1,500 employees and was responsible for profit and loss
performance. From 1973 to 1983, Mr. Kelly held several key positions with Xerox
Corp., including manager of supply business center where he was directed a
national sales force of 400. Mr. Kelly received his Bachelor of Arts degree from
Boston College. Mr. Kelly devotes full time to the affairs of the Company.

Rod L. Stambaugh, President since October 1996 and Chairman of the Board of
Directors since July 1995. Mr. Stambaugh served as Chief Executive Officer of
the Company from October 1996 until August 1997, when Mr. Kelly joined the
Company. He was a Vice President in charge of marketing and business development
for the Company from 1991 through October 1996. Mr. Stambaugh was also the
Corporate Secretary from September 1995 until October 1996. Mr. Stambaugh is one
of the founders of the Company and has devoted his full business time to the
Company since August 1991. He co-founded U.S. Wireless, Inc., a nonaffiliated
retail cellular phone center, at which he worked full time from January 1990
through July 1991. Mr. Stambaugh served on the Company's Board of Directors from
July 1991 through October 1994, rejoining the Board as Chairman in July 1995.
Mr. Stambaugh graduated from Baker University in 1982 with a B.S. degree in
psychology, and a minor in business administration.

Robert E. Robichaud, Chief Financial and Principal Accounting Officer since
September 1997. Since 1985 Mr. Robichaud has held several key financial
management positions at Triad Systems Corp. including Director of Financial
Planning and Analysis and most recently, Director of Finance. Triad Systems is a
provider of software, hardware and information management solutions which
recorded 1996 revenues in excess of $180 million. Triad Systems was a NASDAQ
listed company and was acquired by Cooperative Computing Inc. on Feb. 27, 1997,
for approximately $200 million. Mr. Robichaud received a bachelors degree in
economics from Fairfield University in 1976 and a MBA from Rutgers Graduate
School of Business in 1978.
32

<PAGE>
Alan B. Roberts, Director since October 1994. Mr. Roberts is the Director of
Product Development and Vice President of U.S. Operations for International
Verifact, Inc. He was President and Chief Executive Officer of USWD from October
1, 1994, until July 10, 1995, and Vice President of Operations for Direct Data,
Inc. (the Company's wholly-owned subsidiary that was dissolved in October 1995)
from February 1994 until September 1994. Prior to that time, Mr. Roberts was
Director of Product Marketing for Verifone, Inc., the industry leader in
point-of-sale terminal products. While at Verifone from 1986 to 1994, he also
held various other management positions, including Director of Product
Management. Mr. Roberts graduated from the University of Texas in 1967 with a
bachelors degree in Mathematics and in 1969 with a masters degree in Computer
Sciences.

Chester N. Winter, Director since February 1994. Mr. Winter is a general partner
of Colorado Incubator Fund, L.P., a venture capital fund, and also works as a
business consultant at Paradigm Partners, L.L.C. From 1989 to 1992, he was
Chairman and Chief Executive Officer of Clinical Diagnostics, Inc., a home
health care product distributor. Also from 1989 to 1992, he was Senior Vice
President of Sinco International Investments, Inc., a real estate investment and
development company. He received a Masters degree from the University of
Colorado.

Caesar Berger, Director since December 1995. Mr. Berger is a senior Vice
President of Cardservice International, Inc. where he is responsible for the
Technology Group. Mr. Berger joined Cardservice International in August of 1994.
Prior to that, Mr. Berger served for more than ten years as President, and was
the founder of, Computer Based Controls, Inc. a wholly-owned subsidiary of
Electronic Clearing House Inc. Mr. Berger was a principal on the American
Express Money Order project which resulted in the deployment of over 17,000 of
the Money Order dispensers operating today in over 10,000 retail locations
nationwide. Mr. Berger graduated in 1970 from Lvov Polytech Institute with the
equivalent of an M.S. degree in Electronics and Computer Science.

Clyde Casciato, Vice President of Sales since August 1997. Since 1989, Mr.
Casciato has held several management positions at AT&T Wireless Services, the
wireless business unit of AT&T Corp., including Director of Sales and Marketing,
District Manager - Major/National Accounts and most recently, Western U.S.
Regional Sales/Distribution manager - Wireless Data. Mr. Casciato played a key
role in helping to establish AT&T Wireless Services as the market leader in the
emerging wireless data (packet and circuit switched) business segment. From 1984
to 1989, he held key sales management positions at Xerox Corp. including Major
Account Manager and Program Sales Manager.

Tom Cote, Vice President of Corporate & Major Account Sales since August 1997.
Mr. Cote has over 20 years experience in the investment industry, working with
corporations, investment advisors, banks and trust departments throughout the
United States and Europe. From 1994-1996 Mr. Cote was Director of Bank
Securities Association where he managed all activities of this bank trade
association. From 1992 through 1994 he served as Corporate Vice President -
Institutional Services for Meridian Investment Management. Mr. Cote's experience
also includes Vice President - Global Custody Sales (Europe & Middle East) for
Security Pacific National Bank, Vice President - Institutional Sales for GT
Global Financial Services, Institutional Account Executive for Fidelity
Investments, Consultant Investment Services for Coopers & Lybrand, Assistant
Vice President - Corporate Trust Sales for Security Pacific National Bank,
Director of Marketing for Pacific Stock Exchange, and Marketing Service
Representative for Foster & Kleiser Outdoor Advertising. Mr. Cote received a BA
in Fine Arts from the University of California at Los Angeles in 1971.

Board of Directors and Committees

The Company has a standing audit committee which consists of Messrs.
Winter and Roberts. The audit committee recommends engagement of the Company's
independent accountants, approves services performed by such accountants, and
reviews and evaluates the Company's accounting system of internal controls. The
audit committee did not meet during fiscal year 1997; however, these issues were
discussed at the board meeting. The Company does not have standing nominating or
compensation committees. The functions which these committees would perform are
performed by the Board as a whole.

Directors who are not employees of the Company receive an annual stock
option to purchase 20,000 shares of the Company's Common Stock. The grant is
made pursuant to the Company's 1992 Stock Option Plan as of each director's
anniversary date, with an exercise price equal to the market value of the
underlying stock as of the date of grant. Options vest 25% on the date of grant
and 25% on each six-month anniversary thereafter. This is the only arrangement
for compensation of directors. A total of 20,000 stock options were granted to
non-employee directors during the fiscal year ended June 30, 1997, and an
additional 40,000 options are issuable under the Plan.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons owning more than ten percent of a
registered class of the Company's equity securities ("ten percent shareholders")
to file reports of ownership and changes of ownership with the Securities and
Exchange Commission ("SEC"). Officers, directors, and ten percent shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) reports they file with the SEC.

To the Company's knowledge, based solely on its review of the
copies of such reports and amendments thereto furnished to the Company, and
written representations that no other reports were required, the Company
believes that during the Company's fiscal year ended June 30,1997, all Section
16(a) filing requirements applicable to the Company's officers, directors, and
ten percent shareholders were complied with except as follows: Mr. Alan Roberts
did not timely file a Form 4 or Form 5 to report the acquisition of a 20,000
share stock option as of September 29, 1996; Mr. Caesar Berger did not file
Forms 4 or a Form 5 to report the exercise of a 10,000 share stock option on
June 12, 1997, or the sale of 10,000 shares of Common Stock on or about June 30,
1997.

ITEM 10. EXECUTIVE COMPENSATION

Executive Compensation

The following table shows all the compensation paid or to be paid by
the Company to its Chief Executive Officer (the "Named Executive Officer")
during the fiscal year ended June 30, 1997. Mr. Stambaugh did not serve as CEO
for the Company during the fiscal years ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
Summary Compensation Table

Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Underlying
Name, Principal Options All Other
Position and Period Salary ($) Bonus ($) Other ($) Granted (#) Compensation ($)
---------- --------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Rod L. Stambaugh (1), Chief 79,881 -0- (2) -0- -0-
Executive Officer
1997
===========================================================================================================
<FN>
(1) Mr. Stambaugh commenced service as CEO as of October 23, 1996. Mr. Stambaugh
succeeded Mr. Michael Brisnehan, who resigned as CEO at that time.

(2) No amounts are shown under "Other" as the aggregate incremental cost to the
Company of personal benefits provided to the executive officer did not exceed
10% of his annual salary and bonus during the year.
</FN>
</TABLE>
34
<PAGE>
Option Grants in Last Fiscal Year

No stock options were granted to the Named Executive Officer during the fiscal
year ended June 30, 1997.

<TABLE>
<CAPTION>
Aggregate Options Exercised in the Last Fiscal Year
and Fiscal Year End Option Values

Number Number of Unexercised Options Value of Unexercised,
of Shares Held at June 30, 1997 In-the-Money
Acquired Value -------------------------------
on Exercise Realized ($) Exercisable Unexercisable Options at June 30, 1997 (1)
-------- ------------ ----------------------------- ----------------------------
Name Exercisable Unexercisable
----------------------
<S> <C> <C> <C> <C> <C> <C>
Rod L. Stambaugh -0- -0- 133,400 21,600 $20,010 $3,240
<FN>
(1) Based on the average traded price of the underlying shares of Common Stock
of $.28 per share at June 30, 1997, less the per share exercise price of the
options.
</FN>
</TABLE>

Employment Agreements and Change In Control Provisions

The Company presently has an employment agreement with Evon A. Kelly,
its current CEO, pursuant to which Mr. Kelly receives $150,000 in cash
compensation per year, plus certain bonus compensation to be determined by the
Board of Directors. Mr. Kelly has also been granted a non-qualified stock option
to purchase up to 600,000 shares of the Company's Common Stock at $1.00 per
share, exercisable as to 10% as of the date of grant (August 4, 1997) and
vesting at the rate of 3% per month thereafter so long as Mr. Kelly remains in
the employ of the Company. All options must be exercised within 10 years of the
date of grant. All options immediately vest and become exercisable upon a change
in control.

The Company also has employment arrangements with Robert E. Robichaud,
Clyde Casciato and Tom Cote. Mr. Robichaud receives a salary of $125,000 per
year and may be entitled to a performance bonus of up to $25,000 for fiscal year
1998, as determined by the Board of Directors based on the performance of the
Company. Mr. Robichaud was also granted options to purchase up to 50,000 shares
of Common Stock at $3.95 per share under the Company's 1992 Stock Option Plan,
with a vesting schedule of 10% as of his date of hire and 3% per month
thereafter. Messrs. Casciato and Cote receive salaries of $80,000 and $70,000
per year, respectively, and may be entitled to bonuses of $30,000 each for
fiscal year 1998, as determined by the Board of Directors based on the
performance of the Company. These employees have also been granted stock options
under the Company's 1992 Stock Option Plan to purchase up to 50,000 shares of
Common Stock, exercisable at $4.24 per share, with the same vesting schedule as
Mr. Robichaud's options. All options immediately vest and become exercisable
upon a change in control.

Stock Option Plan

General. The Company's Amended 1992 Stock Option Plan (the "Plan") was
adopted for the purpose of granting employees, directors, and consultants of the
Company options to purchase common stock so that they may have the opportunity
to participate in the growth of the Company and to provide the participants an
increased incentive to promote the interests of the Company.

Administration of the Plan. The Plan is administered by at least two
disinterested members of the Board of Directors (the "Board") or the Board
itself. The Board may from time to time adopt rules and regulations as it deems
advisable for the administration of the Plan, and may alter, amend or rescind
any rules and regulations in its discretion. The Board has the power to
interpret, amend or discontinue the Plan.

Grant of Options. Options may be granted under the Plan for a total of
2,680,000 shares of Common Stock. The number of shares underlying options
available to the Plan was increased to 2,680,000 from 880,000 on August 6, 1997
by the Board of Directors, subject to shareholder approval at the next Annual
Meeting of Shareholders. As of September 30, 1997, there were a total of 526,399
options outstanding under the Plan, as amended, 341,599 of which were vested. An
35

<PAGE>
additional 40,000 options are issuable under the Plan to non-employee directors
for Fiscal year 1997. Additional grants of options may be made only to
employees, directors and consultants of the Company and any parent or
subsidiary. The Board determines the terms of options granted under the Plan,
including the type of option (which can be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or a non-qualified stock option), the exercise price, the number of
shares subject to the option, and the exercisability thereof. The Board also
determines, at the time of grant, the period during which the option will be
exercisable.

Terms and Conditions of Options. The Board may impose on an option any
additional terms and conditions which it deems advisable and which are not
inconsistent with the Plan. The exercise price of any stock option granted under
the Plan must not be less than 100% of the fair market value of a share of
Common Stock on the date of grant, except as to an optionee who at the time an
incentive stock option is granted owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, the exercise
price of such incentive stock option must be at least equal to 110% of the fair
market value of the shares as of the date prior to the date of the grant. In
addition, no incentive stock option can be granted to any employee where the
aggregate fair market value of the shares (determined at the date of such option
grant) for which such incentive stock options are exercisable for the first time
in any calendar year exceeds $100,000. In connection with a merger, sale of all
of the Company's assets, or other transaction which results in the replacement
of the Company's Common Stock with the stock of another corporation, all granted
options (including unvested options) become exercisable immediately prior to the
consummation of the transaction, unless other provisions are made with respect
to those options.

Exercise of Options. An optionee may exercise less than all of the
matured portion of an option, in which case such unexercised, matured portion
shall continue to remain exercisable, subject to the terms of the Plan, until
the option terminates. Vested options must be exercised within three months of
an optionee's termination with the Company.

Federal Income Tax Consequences.

Incentive Stock Options. The Company anticipates that all options
granted under the Plan and treated by the Company as "incentive stock options,"
that is, a stock option described in Section 422 of the Code, will have the
following anticipated (but not guaranteed) federal income tax consequences,
among others: the optionee will recognize no income at the time of grant; upon
exercise of the incentive stock option, no income will result to any party; if
there is no disposition of the shares until a date that is both (i) two years
from the grant of an incentive stock option and (ii) one year from its exercise,
no amount will be ordinary income and, upon disposition in a taxable
transaction, the employee will receive long-term capital gain or loss treatment
equal to the difference between his amount realized and the option price; any
gain realized upon a disposition other than as set forth above may result in
ordinary income tax treatment to the optionee; generally, the Company receives
no deduction in connection with the transaction; and, certain optionees may
incur alternative minimum tax treatment under the Code upon exercise of an
incentive stock option.

Non-qualified Stock Options. The Company anticipates that all
non-qualified stock options granted under the Plan will have the following
anticipated (but not guaranteed) federal income tax consequences, among others:
the optionee will recognize no income at the time of grant; upon exercise of the
non-qualified stock option, the individual to whom the option is granted should
be deemed to receive ordinary income at the time of exercise equal to the
excess, if any, of the fair market value of the acquired shares at such time
over the option price for such shares; if the shares acquired upon the exercise
of a non-qualified stock option are disposed of in a taxable transaction, the
individual disposing of such shares will have a realized and recognized capital
gain or loss equal to the difference, if any, between the amount realized and
the adjusted basis of such shares to him; such gain or loss will be long-term or
short-term depending on whether or not such shares are held for longer than six
months; and, the adjusted basis usually (but not always) will include the option
price plus any ordinary income described above with respect to such shares.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding beneficial ownership of the
Company's Common Stock as of September 30, 1997, for (i) each director and Named
Executive Officer of the Company, (ii) all directors and executive officers of
the Company as a group, and (iii) each person known by the Company to own
beneficially 5% or more of the outstanding shares of Common Stock. All
beneficial ownership is sole and direct unless otherwise indicated. As of
September 30, 1997, there were a total of 9,192,270 shares of Common Stock
outstanding.
36

<PAGE>

Except as otherwise indicated, the address of each of the following persons
is c/o U.S. Wireless Data, Inc., 2200 Powell Street, Suite 450, Emeryville,
CA 94608.
<TABLE>
<CAPTION>

Shares Beneficially Owned (1)
-----------------------------
Percent of
Name of Beneficial Owner Number Class
- ----------------------------------------------------------- --------- -----
<S> <C> <C>
Rod L. Stambaugh .......................................... 422,900(2) 4.5%
Evon A. Kelly ............................................. 96,000(3) 1.0%
Alan B. Roberts ........................................... 23,740(4) *
Chester N. Winter ......................................... 80,281(5) *
Caesar Berger ............................................. 202,704(6) 2.2%
John Liviakis ............................................ 2,748,750(7) 29.5%
2420 "K" Street, Suite 220
Sacramento, CA 95816
Robert B. Prag ........................................... 916,250(8) 9.9%
2420 "K" Street, Suite 220
Sacramento, CA 95816
entrenet Group, LLC ...................................... 700,000(9) 7.1%
5213 El Mercado Parkway, Suite D
Santa Rosa, CA 95403
All directors and executive officers as a group (8 persons) 852,625(10) 8.9%

<FN>
* Represents less than 1% of outstanding shares.

(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as otherwise
indicated in the other footnotes to this table. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options, warrants or rights held by that person that are
currently exercisable or exercisable or issuable within 60 days are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.

(2) Includes shares underlying a total of 145,500 options exercisable within 60
days of September 30, 1997.

(3) Represents shares underlying a total of 96,000 options exercisable within
60 days of September 30, 1997.

(4) Includes shares underlying a total of 15,000 options and 2,631 warrants
exercisable within 60 days of September 30, 1997.

(5) Includes shares underlying a total of 67,781 options exercisable within 60
days of September 30, 1997.

(6) Includes 192,704 shares owned of record by Cardservice International, Inc.
("CSI"), a company for which Mr. Berger serves as executive vice president
and which is a significant customer of the Company. See "Certain
Transactions." Mr. Berger disclaims any beneficial ownership of the shares
owned or record by CSI. Also includes 10,000 shares underlying options
exercisable within 60 days of September 30, 1997.

(7) Information based upon Schedule 13D dated August 6, 1997 and Schedule 13D
Amendment No. 1 dated September 16, 1997. The number of shares shown
includes a total of 123,750 shares of Common Stock issuable to Liviakis
Financial Communications, Inc. ("LFC") pursuant to a consulting agreement
between the Company and LFC, under which the Company is obligated to issue
the shares as of November 15, 1997. See "Certain Transactions."

37
<PAGE>
(8) Information based upon Schedule 13D dated August 6, 1997 and Schedule 13D
Amendment No. 1 dated September 16, 1997. The number of shares shown
includes a total of 41,250 shares of Common Stock issuable to LFC pursuant
to a consulting agreement between the Company and LFC, under which the
Company is obligated to issue the shares to Mr. Prag, a vice president of
LFC, as of November 15, 1997. See "Certain Transactions."

(9) Includes 700,000 shares underlying convertible debentures issuable as
consulting fees to entrenet Group, LLC.

(10) Includes all shares underlying options and warrants as described in
footnotes (2) - (6) of this table. Also includes a total of 27,000 shares
underlying options issued to three additional executive officers which are
exercisable within 60 days of September 30, 1997. See "Executive
Compensation."
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions between the Company and Cardservice International, Inc.
- --------------------------------------------------------------------

Mr. Caesar Berger, a director of the Company, is also an officer of
Cardservice International, Inc. The Company and CSI have been involved in what
is primarily a customer - vendor relationship, and CSI purchased approximately
$698,000 and $398,000 in product from the Company in the fiscal years ended June
30, 1997 and 1996, respectively. In fiscal 1996, CSI advanced the Company
$162,500 for the purchase of raw materials in exchange for warrants to purchase
a total of 142,544 shares of Common Stock, exercisable at 150% of the then
current market price, including registration rights on the underlying shares.
The Company is obligated to pay royalties to CSI on future sales of POS-50
product built with the inventory, although through June 30, 1997, no units had
been built using the inventory.

Transactions with Liviakis Financial Communications, Inc. ("LFC") and Affiliates
- --------------------------------------------------------------------------------
of LFC
- ------

In August of 1997, the Company entered into a Consulting Agreement with
Liviakis Financial Communications, Inc. ("LFC") pursuant to which the Company is
obligated to issue a total of 300,000 shares of its Common Stock as consulting
fees to LFC over the one year term of the Consulting Agreement. Pursuant to the
Consulting Agreement, the Company will also pay LFC cash equal to 2.5% of the
gross proceeds received as a finder's fee as a result of any direct financing
located for the Company by LFC.

The Company also sold a total of 3,500,000 shares of Common Stock and
warrants to purchase an additional 1,600,000 shares of Common Stock exercisable
at $.01 per share, to two affiliates of LFC, John Liviakis and Robert B. Prag.
Pursuant to this transaction, Messrs. Liviakis and Prag became significant
shareholders of the Company.

In October 1997, the Company received a bridge loan from Liviakis Financial
Communications, Inc. For $200,000 pending completion of more permanent
financing. Following a significant funding (greater than $2 million) the Company
will repay the bridge loan along with interest of nine percent

The above transactions are described in more detail under Item 6 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Subsequent Events."

Transactions with entrenet Group, LLC
- -------------------------------------

In June 1997, the Company entered into a consulting agreement with entrenet
Group, LLC, for consulting services. The transaction is described in the
Company's Annual Report on Form 10-KSB for the Fiscal Year Ended June 30, 1997
under Item 6 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Results of Operations." The Company has renegotiated the
consideration it will pay to entrenet under the Consulting Agreement. The
Company anticipates issuing a $150,000 convertible debenture to entrenet, with
interest payable at 10% per annum, due in full on or before June 2, 1998.
Principal and interest are to be convertible into Common Stock of the Company
over the year ending June 2, 1998, at the lesser of $.50 per share or the price
at which the Company offers its Common Stock for sale during such period, but in
no event lower than $.2143 per share. At $.50 per share, the Company would be
required to issue a total of 300,000 shares of Common Stock; at $.2413 per
38

<PAGE>

share, the Company would be required to issue 700,000 shares of Common Stock. In
addition, the Company expects to issue a second convertible debenture to
entrenet for $40,000 bearing interest at 7% per annum, payable in full on or
before July 24, 1998, which will be convertible on the same terms and for the
same security as any financing secured by the Company of at least $2,000,000.
This debenture is in payment of a finder's fee to entrenet for the financing
received from the affiliates of LFC, as described above. Entrenet has been
granted "piggyback registration rights" covering all shares of Common Stock
issuable to it under these debentures.

39
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS AND REPORTS ON FORM 8-K

(a) List of Exhibits Required by Item 601 of Regulation S-B
-------------------------------------------------------

Exhibit Description
------- -----------
<S> <C>
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
<FN>
(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)
</FN>
</TABLE>
(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.

40
<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 and October 14. 1997
- ------------------------ Director ----------------
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 and October 14, 1997
- ------------------------ Director ----------------
Evon A. Kelly

\s\ Rod L. Stambaugh President and Chairman of the October 14, 1997
- ------------------------ Board of Directors ----------------
Rod L. Stambaugh

\s\ Robert E. Robichaud Chief Financial Officer and October 14, 1997
- ------------------------ Principal Accounting Officer ----------------
Robert E. Robichaud

- ------------------------ Director ---------------
Alan B. Roberts

\s\ Chester N. Winter Director October 14, 1997
- ------------------------ ----------------
Chester N. Winter

\s\ Caesar Berger Director October 14, 1997
Caesar Berger ----------------
41
<PAGE>
Exhibit A

Proxy Statement
of
U.S. WIRELESS DATA, INC.

ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION

FIRST: That the name of the Corporation is U.S.
Wireless Data, Inc.
SECOND: That the text of the Amendment to the Articles of
Incorporation of the Corporation increasing the number of shares of authorized
no par value common stock to 40,000,000 and authorizing 15,000,000 shares of no
par value preferred stock is as set forth on Exhibit 1 attached hereto which is
incorporated herein by reference.
THIRD: That the Amendment was adopted on
_________________________, 1998.
FOURTH: That the Amendment was duly adopted by the
shareholders of the Corporation.
IN WITNESS WHEREOF, U.S. Wireless Data, Inc. has caused
these Articles of Amendment to be duly executed this _____ day of
__________________, 1998.

U.S. Wireless Data, Inc.

By:
Evon A. Kelly,
Chief Executive Officer
ATTEST:

Robert E. Robichaud,
Assistant Secretary

<PAGE>

Exhibit 1

Articles of Amendment to Articles of Incorporation

U.S. Wireless Data, Inc.

Article FOURTH of the Articles of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:

A. The aggregate number of shares which the Corporation shall
have authority to issue is fifty-five million (55,000,000) shares, consisting of
forty million (40,000,000) shares of common stock without par value per share
(the "Common Stock"), and fifteen million (15,000,000) shares of preferred stock
without par value per share (the "Preferred Stock").

B. The Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of this Article FOURTH, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Colorado to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.

The authority of the Board with respect to each series shall
include, but not be limited to, determination of the following:

1. The number of shares constituting that series
and the distinctive designation of that series;

2. The dividend rate on the shares of that
series, whether dividends shall be cumulative, and, if so, from which date or
dates, whether dividends shall be payable in cash or in kind, and the relative
rights of priority, if any, of payment of dividends on shares of that series;

3. Whether that series shall have voting rights,
in addition to the voting rights provided by law, and, if so, the
terms of such voting rights;

4. Whether that series shall have conversion
privileges, and, if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the Board of
Directors shall determine;

5. Whether or not the shares of that series
shall be redeemable, and, if so, the terms and conditions of such

<PAGE>
redemption, including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption dates;

6. Whether that series shall have a sinking fund
for the redemption or purchase of shares of that series, and, if
so, the terms and amount of such sinking fund;

7. The rights of the shares of that series in
the event of voluntary or involuntary liquidation, dissolution or winding up, or
merger, consolidation, distribution or sale of assets of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and

8. Any other relative rights, preferences and
limitations of that series. Shares of Preferred Stock may be authorized and
issued, in aggregate amounts not exceeding the total number of shares of
Preferred Stock authorized by the Articles of Incorporation, from time to time
as the Board of Directors of the Corporation shall determine and for such
consideration as shall be fixed by the Board of Directors.

[End of Articles of Amendment]

-2-

<PAGE>

Exhibit B

Proxy Statement
of
U.S. WIRELESS DATA, INC.

U.S. WIRELESS DATA, INC.
FORM OF PROPOSED
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION

FIRST: That the name of the Corporation is U.S. Wireless Data, Inc.

SECOND: That the text of the Amendment to the Articles of Incorporation of
the Corporation determining the designations, preferences, limitations and
relative rights of the Series A Preferred Stock is set forth on Exhibit A
attached hereto and is incorporated herein by reference.

THIRD: That the Amendment was adopted on ______________________, 1997.

FOURTH: That the Amendment was duly adopted by the Board of Directors of
the Corporation. IN WITNESS WHEREOF, U.S. Wireless Data, Inc. has caused these
Articles of Amendment to be duly executed this _____ day of __________________,
1997.

U.S. Wireless Data, Inc.

By:_________________________
Evon A. Kelly,
Chief Executive Officer
ATTEST:

__________________________
Robert E. Robichaud,
Assistant Secretary

<PAGE>
EXHIBIT A

DESIGNATION OF SERIES A CUMULATIVE
CONVERTIBLE REDEEMABLE PREFERRED STOCK

U.S. Wireless Data, Inc., a Colorado corporation (the "Corporation"),
hereby designates the preferences, limitations and relative rights of its Series
A Cumulative Convertible Redeemable Preferred Stock as follows:

1. DESIGNATION

Four Million (4,000,000) shares of the Corporation's
15,000,000 total authorized shares of no par value preferred stock are hereby
designated as Series A Cumulative Convertible Redeemable Preferred Stock
(hereinafter referred to as the "Series A Preferred").

2. STATED VALUE

The Series A Preferred shall have a stated value of one dollar
($1.00) per share (hereafter the "Stated Value").

3. DIVIDENDS

a. Right to Dividends and Initial Dividend Rate. The holders
of outstanding Series A Preferred shall be entitled to receive cumulative
dividends at the initial rate of eight percent (8%) per share, per annum, based
on the Stated Value of the Series A Preferred. Cumulative dividends shall accrue
and be paid quarterly to record holders of Series A Preferred as of March 31,
June 30, September 30 and December 31 of each year (the "Dividend Record
Dates"), in arrears, if, as and when declared by the Board of Directors, out of
assets at the time legally available for such dividends.

b. Adjustment of Dividend Rate. The dividend payable on the
Series A Preferred shall be reduced to four percent (4%) per annum upon initial
effectiveness of a registration statement with the United State Securities and
Exchange Commission (the "SEC") covering the shares of Common Stock into which
the Series A Preferred is convertible. Thereafter, interest shall continue at
such rate until all of the Series A Preferred has been converted to Common Stock
or all shares of the Series A Preferred have been redeemed by the Corporation.

<PAGE>
c. Payment Dates for Dividends. Dividends shall be paid on or
before the 15th of the month following each Interest Payment Record Date, or the
next Business Day thereafter if such day is not a Business Day.

d. Payment of Dividends. The Corporation shall pay all
dividends on the Series A Preferred in shares of its no par value common stock
(the "Common Stock") to the extent the Corporation has a sufficient number of
shares of Common Stock available to pay such dividends. Shares of Common Stock
used to pay dividends may be authorized and unissued shares or treasury shares
of the Corporation. The Corporation agrees to use its best efforts to maintain a
sufficient number of shares of Common Stock available at all times to allow for
the payment of dividends on the Series A Preferred in shares of Common Stock. If
the Corporation has an insufficient number of shares of Common Stock available
at any time to pay all dividends then owing in shares of Common Stock, the
Corporation may pay all or any part of such dividend in cash or other property
(including other securities of the Corporation) having a value equal to the
dividend then payable.

e. Number of Shares of Common Stock Issuable as Dividends. For
any dividend being paid in shares of Common Stock, the number of shares of
Common Stock issuable per share of Series A Preferred shall be calculated as
follows: The amount of the dividend owing on the Series A Preferred at the
Dividend Record Date (in dollars) shall be divided by the average closing bid
price of the Common Stock over the last five trading days prior to the Dividend
Record Date as quoted on the OTC Electronic Bulletin Board, or such other
quotation service as is quoting bid and asked prices for the Common Stock. If
the Common Stock is then listed on the NASDAQ Stock Market or any other national
exchange which has closing bid price reporting, the five day average of the
closing bid price for the Common Stock for such days as reported on NASDAQ or
such other national securities exchange shall be substituted for the five day
average closing bid price as reported by the OTC Electronic Bulletin Board or
other quotation service. In the event the Common Stock is not quoted on any
exchange or quotation service, then the Board of Directors, acting in good
faith, shall adopt a resolution valuing the Common Stock for purposes of
determining the number of shares of Common Stock issuable as a dividend at such
Dividend Record Date. The price of the Common Stock used for purposes of
determining the number of shares issuable as dividends on the Series A Preferred
or for purposes of conversion of Debentures into Common Stock pursuant to
Section 5 of this designation is hereafter referred to as the "Market Price."
When computed in connection with a conversion transaction, the average shall be
computed using the five trading days prior to the Conversion Date.

f. Payment of Dividends to Holders Based on Total Shares of
Series A Preferred Registered in the Name of Such Holder. Notwithstanding the
number of certificates held by an individual holder of Series A Preferred, the
Corporation shall be entitled to cumulate the number of shares represented by
all such certificates held in the name of the same holder, and the cumulative
total shall then be multiplied by the number of Common Shares issuable as a
dividend per share of Series A Preferred to determine the total number of shares
of Common Stock issuable to such holder at each Dividend Record Date.

-2-
<PAGE>
g. No Issuance of Fractional Shares. No fractional shares of
Common Stock will be issued as a dividend on the Series A Preferred; rather, a
holder of Series A Preferred otherwise entitled to a fractional share of Common
Stock as a dividend may receive, at the sole option of the Corporation, either
(i) cash in lieu of such fractional share, or (ii) the next higher whole number
of shares of Common Stock if the fractional share to which such holder is
otherwise entitled is equal to 0.5 or greater, or the next lower whole number of
shares of Common Stock if the fractional share to which such holder is otherwise
entitled is less than 0.5.

h. Dividend Statements. At the time of each dividend payment,
the Corporation shall provide each holder of Series A Preferred with a statement
showing the manner in which it calculated the dividend payable at such Dividend
Record Date, including the calculation used to determine the number of shares of
Common Stock issued as such dividend.

i. Place of Dividend Payment. Dividends shall be payable, and
transfer of the Series A Preferred will be registrable, at the Principal Office
of the Company. Upon request by a holder of Series A Preferred, payment of
dividends shall be made by delivery of a check or Common Stock certificates to
the registered holder mailed to such holder's address as it appears on the
Series A Preferred register.

j. Priority of Dividends. The Corporation shall make no
Distribution (as defined below) to the holders of Common Stock in any fiscal
year unless and until any and all unpaid dividends shall have been paid upon all
Series A Preferred. "Distribution" as used in this Section means the transfer of
cash or property without consideration, whether by way of dividend or otherwise
(except a dividend in shares of the Corporation), or the purchase or redemption
of shares of the Corporation for cash or property, but does not include (i) the
repurchase of shares from a terminated employee or consultant of the Corporation
within the terms of an agreement approved by the Corporation's Board of
Directors or (ii) a distribution which is part of a voluntary liquidation,
dissolution or winding up of the Corporation.

k. Dividends Cumulative. All dividends owing on the Series A
Preferred shall be cumulative. Dividends shall accrue or accumulate to the
extent they are unpaid. Unpaid dividends shall bear and accrue interest at the
same rate applicable to the Series A Preferred as of the time of the Dividend
Record Date for the unpaid dividend. The unpaid dividends, together with
interest thereon, shall be paid as soon as the Corporation is legally able to
pay any such dividends and interest. Interest on unpaid dividends shall also be
paid in shares of Common Stock, if possible, with the number of shares of Common
Stock issuable as interest being calculated in the same manner as for dividends.

4. LIQUIDATION PREFERENCE

a. Basic Preference Rights. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation (a "Liquidation"):

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<PAGE>
(1) Payments to Holders of Series A Preferred. Each holder of shares
of Series A Preferred then outstanding shall be entitled to receive an
amount equal to $1.00 for each share of Series A Preferred (the "Series A
Liquidation Preference"), plus all accrued and unpaid dividends thereon to
the date fixed for distribution, before any payment shall be made in
respect of the Corporation's Common Stock.

(2) Payments to Holders of Common Stock. After payment has been made
to the holders of Series A Preferred of the full amounts to which they are
entitled under Paragraph 4(a)(1) above, the holders of Common Stock shall
be entitled to receive all declared and unpaid dividends thereon to the
date fixed for distribution.

(3) Should Assets Exceed Payments. The remaining assets of the
Corporation available for distribution to shareholders after payments are
made under Paragraphs 4(a)(1) and 4(a)(2) above, shall be distributed pro
rata among all of the Corporation's shareholders. For purposes of this
Paragraph 4(a)(3), holders of Series A Preferred shall share in this
distribution in proportion to the number of shares of Common Stock they
would hold had full conversion of their Series A Preferred occurred on the
day prior to the Liquidation, according to the provisions of Sections 5 and
6, below.

(4) Should Assets Be Insufficient. If upon a Liquidation the assets of
the Corporation available for distribution to its shareholders shall be
insufficient to make full payments due under Paragraph 4(a)(1), then the
holders of the Series A Preferred then outstanding shall share ratably in
proportion to the total number of such shares owned by each such holder,
first in proportion to the respective Series A Liquidation Preference, and
next, in proportion to the amount of unpaid dividends.

(5) Source of Liquidation Payment. The holders of stock shall be paid
under this Subsection 4(a) out of the assets of the Corporation available
for distribution to shareholders, whether from capital, surplus or
earnings.

(6) Merger or Acquisition. The Corporation shall not effect a merger,
reorganization, or consolidation of the Corporation into or with another
corporation or the sale or transfer of all or substantially all of the
assets of the Corporation until the Corporation shall have provided notice
to all holders of Series A Preferred pursuant to Subsection 4(b), below.
Unless otherwise agreed to by the holders of a majority of the Series A
Preferred which is then outstanding, a merger, consolidation,
reorganization or sale of all or substantially all of the Corporation's
assets shall be deemed to be a Liquidation.

b. Notice. In the event of any Liquidation of the Corporation, or in the
event of any merger, reorganization, or consolidation of the Corporation into or
with another corporation, or the sale or transfer of all or substantially all of
the assets of the Corporation, the Corporation shall give each holder of Series
A Preferred initial written notice of the proposed action within fifteen (15)
days after the date the Board of Directors approves such

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<PAGE>
action, or twenty (20) days prior to any shareholders' meeting called to approve
such action, or twenty (20) days after the commencement of any involuntary
proceeding, whichever is earlier.

(1) Content of Notice. Such initial written notice (the "Initial
Notice") shall describe the material terms and conditions of the proposed
action, including a description of the stock, cash, and property to be
received by the holders of Series A Preferred upon consummation of the
proposed action. If any material change in the facts set forth in the
Initial Notice shall occur, the Corporation shall promptly give another
written notice (the "Subsequent Notice") to each holder of the Series A
Preferred of that material change.

(2) Notice Precedes Consummation. The Corporation shall not consummate
any Liquidation of the Corporation before the expiration of twenty (20)
days after the mailing of the Initial Notice or ten (10) days after the
mailing of any Subsequent Notice, whichever is later. But any such 20-day
or 10-day period may be shortened upon the written consent of the holders
of a majority of the Series A Preferred then outstanding.

c. Non-Cash Distributions on Liquidation. In the event of any
Liquidation of the Corporation which will involve the distribution of
assets other than cash, the Corporation shall promptly engage a competent
independent appraiser to determine the value of the assets to be
distributed. With respect to the valuation of securities, the Corporation
shall engage such appraiser as shall be approved by the holders of a
majority of the Series A Preferred then outstanding. The Corporation shall,
upon receipt of such appraiser's valuation, give prompt written notice to
each holder of shares of Series A Preferred of the appraiser's valuation.

5. CONVERSION

a. Conversion Rights.

(1) Optional Conversion. Each share of Series A Preferred shall be
convertible, at the option of the holder thereof, into fully paid and
non-assessable shares of Common Stock of the Corporation at any time after
the date of issuance and following (a) the authorization of an increase in
the Corporation's authorized Common Stock to no less than 40,000,000 shares
and (b) the first to occur of (i) effectiveness with the SEC of a
registration statement covering the shares of Common Stock issuable upon
conversion of the Series A Preferred or (ii) the lapse of 150 days from the
Initial Closing Date. The Series A Preferred shall be so convertible up to
and including the earlier of (i) the day prior to the closing of a
Qualified Public Offering (as defined below) or (ii) the day fixed for
redemption of any and all remaining outstanding shares of Series A
Preferred (the "Conversion Period").

(2) Automatic Conversion. All outstanding shares of Series A Preferred
shall automatically be converted into fully paid and non-assessable shares
of
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<PAGE>
Common Stock of the Corporation, at the then applicable Conversion Price
(as defined below), immediately prior to the closing of a firm commitment
underwritten public offering of the shares of Common Stock of the
Corporation pursuant to a registration statement filed under the Securities
Act of 1933, as amended, at a price per share of not less than ten dollars
($10.00) per share (prior to underwriter commissions and expenses and
adjusted for stock splits, stock dividends, reorganizations and the like)
and with aggregate gross offering proceeds to the Corporation of not less
than Five Million Dollars ($5,000,000) (a "Qualified Public Offering").

b. Conversion Formula. Each share of Series A Preferred shall be valued at
one dollar ($1.00) (the "Series A Purchase Price") for purposes of either
optional or automatic conversion, notwithstanding any accrued but unpaid
dividends owing on the Series A Preferred at the time of conversion. The number
of shares of Common Stock into which each share of the Series A Preferred shall
be converted shall be determined by dividing the Series A Purchase Price by the
Series A Conversion Price or the Minimum Series A Conversion Price (as
determined as provided below) which is in effect at the time of the conversion.
The Corporation shall make provision for all necessary payments as of the
Conversion Date or Automatic Conversion Date (as defined in Subsection 5(d),
below) on account of any dividends accrued and unpaid on the Series A Preferred
surrendered for conversion.

c. Conversion Price.

(1) The conversion price per share at which shares of Common Stock
shall be initially issuable upon conversion of any shares of Series A
Preferred (the "Series A Conversion Price") shall be equal to the lesser of
(i) $6.00 or (ii) 80% of the Market Price. Notwithstanding the foregoing,
for the first 270 days following the initial closing of the offering by
which the Debentures (which were converted into Series A Preferred) were
sold to investors (the "Initial Closing Date"), the Conversion Price shall
be not less than $4.00 per share, which $4.00 price shall be appropriately
adjusted in the event of any stock splits or other transactions affecting
the Common Stock (the "Minimum Series A Conversion Price"). After such 270
day period, the Minimum Series A Conversion Price shall be eliminated. The
Minimum Series A Conversion price shall be further subject to adjustment as
provided in Section 6 below.

(2) The Corporation has agreed under terms contained in a separate
agreement entered between the Corporation and the holders of Series A
Preferred to register the shares of Common Stock issuable by the
Corporation as dividends on, and upon conversion of, Series A Preferred,
with the SEC. In the event such registration is not declared effective by
the SEC within 150 days of the Initial Closing Date, the Conversion Price
or the Minimum Conversion Price, as then applicable, shall thereafter be
reduced by two percent (2%) from the Conversion Price or Minimum Conversion
Price otherwise in effect at the time of conversion. The Conversion Price
or Minimum Conversion Price shall be reduced an additional two percent (2%)
off the then applicable Conversion Price or

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<PAGE>
Minimum Conversion Price for each additional 30 days (or any fractional
part of such 30-day period) during which such registration is not
effective. Such reduced Conversion Price or Minimum Conversion Price shall
thereafter be effective until all Series A Preferred has been converted or
redeemed.

d. Mechanics of Conversion.

(1) Optional Conversion. Before any holder of Series A Preferred will
be entitled to convert the same into shares of Common Stock pursuant to
Paragraph 5(a)(1) hereof, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or
of any transfer agent for the Series A Preferred, and shall give written
notice to the Corporation at such office that such holder elects to convert
the same and will state therein the name or names in which the certificate
or certificates for shares of Common Stock should be issued (the
"Conversion Notice"). The Conversion Notice shall be in the form printed on
the certificate(s) representing the Series A Preferred being converted. The
Holder may submit an irrevocable Conversion Notice to the Corporation in
advance of physical delivery of a specific Series A Preferred share
certificate(s) by transmitting a copy of the completed Conversion Notice
relating to the specific certificate(s) of Series A Preferred to be
tendered to the Corporation for conversion by facsimile (the "Advance
Conversion Notice"), followed by delivery to the Corporation of the
certificate(s) representing the shares of Series A Preferred that are the
subject of the Advance Conversion Notice within three (3) business days
thereafter. The Series A Preferred certificate(s) so tendered for
conversion shall be deemed to have been converted on the date the
Corporation receives the Advance Conversion Notice for such Series A
Preferred (the "Conversion Date"), provided the Advance Conversion Notice
is received by 6:00 p.m. (Eastern Time) on a Business Day, and provided
further, that the certificate representing the shares of Series A Preferred
then being converted is actually delivered to the Corporation within such
three (3) business day period. If the Advance Conversion Notice is not
received on a Business Day or by 6:00 p.m. (Eastern Time) on a Business
Day, then the Conversion Date for the Series A Preferred to which the
Advance Conversion Notice relates shall be deemed to have occurred on the
next day which is a Business Day. The Company will cause its transfer agent
to issue certificates for the shares of Common Stock issuable upon
conversion and will transmit the certificates representing such shares
(together with certificates representing the balance of any shares of
Series A Preferred not being so converted) to the Holder via express
courier, by electronic transfer, or otherwise, within three (3) business
days after receipt by the Company of the original Conversion Notice and the
Series A Preferred certificates being converted (the "Delivery Date"). If
the Holder in whose name the Series A Preferred being surrendered for
conversion requests that the Corporation issue shares of Common Stock (or
shares of Series A Preferred in replacement for shares of Series A
Preferred not being converted at the time) in a name other than such
holder's, then such holder shall be required to demonstrate, at such
holder's expense and to the Corporation's satisfaction, that an exemption
from registration under federal and state securities laws is available for
the requested issuance of shares. The Corporation may require the delivery
of an opinion of counsel to the effect that such an exemption is available

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<PAGE>
for the transaction. Conversion shall be deemed to have occurred
immediately prior to the close of business on the date of surrender of the
certificate(s) for shares of Series A Preferred being converted or in the
case of an Advance Conversion Notice, the date such Advance Conversion
Notice is deemed received by the Corporation as provided above. The person
or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holder of such shares of Common Stock on such Conversion Date.

(2) Penalty for Late Delivery of Share Certificates Issuable upon
Conversion. The Company understands that a delay in the issuance of the
shares of Common Stock beyond the Delivery Date could result in economic
loss to the Holder. As compensation to the converting Holder for such loss,
the Company agrees to pay a late payment penalty to the converting Holder
for late delivery of such shares of Common Stock in accordance with the
following schedule (where "No. Business Days Late" is defined as the number
of business days beyond five (5) business days from the Delivery Date):
<TABLE>
<CAPTION>
Late Payment for Each $10,000
of Debenture Principal Amount
No. Business Days Late Being Converted to Common Stock
---------------------- -------------------------------

<S> <C>
1 $100

2 $200

3 $300

4 $400

5 $500

6 $600

7 $700

8 $800

9 $900

10 $1,000

10 1,000 + $200 for each Business
Day Late beyond 10 days
</TABLE>

The Company shall pay any penalties incurred under this Paragraph in immediately
available funds upon demand. Nothing herein shall limit the converting Holder's
right to pursue actual damages for the Company's failure to issue and deliver
the Common Stock to the converting Holder. Furthermore, in addition to any other
remedies which may be available to the converting Holder, in the event the
Company fails for any reason to effect delivery of such shares of Common Stock
within five (5) business days after the Delivery Date (other than as

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<PAGE>
a result of an event in the nature of a force majeure which is totally beyond
the control of the Company), the converting Holder shall be entitled to revoke
the relevant Conversion Notice by delivering a notice to that effect to the
Company, whereupon the Company and the Holder shall be restored to their
respective positions immediately prior to delivery of the Conversion Notice. Any
shares of Common Stock delivered to Holder after such revocation shall be
forthwith returned to the Company and a replacement certificate for the shares
of Series A Preferred shall be forthwith issued in replacement for the shares
for which conversion has been so revoked.

(3) Automatic Conversion. Conversion of all the outstanding shares of
Series A Preferred into shares of Common Stock pursuant to Paragraph
5(a)(2) hereof shall be deemed to have been made automatically and
immediately prior to the closing of a Qualified Public Offering, as set
forth in Paragraph 5(a)(2) hereof (an "Automatic Conversion Date"). Upon
such automatic conversion, the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion will be treated for
all purposes as the record holder or holders of such Common Stock on the
Automatic Conversion Date whether or not such holder or holders shall have
surrendered certificates for such holder's shares of Series A Preferred to
the Corporation. Upon the Automatic Conversion Date, the certificates
representing all the shares of Series A Preferred shall be deemed void; as
soon as practicable after the surrender by any holder of a Series A
Preferred certificate, accompanied by a statement from the holder as to the
name or names in which the certificate or certificates for shares of Common
Stock should be issued (subject to the right of the Corporation to require
proof satisfactory to it, including an opinion of counsel, demonstrating
that a registration exemption is available under federal and state
securities laws for any transfer of shares into a name other than that of
the original holder), the Corporation shall issue and deliver to such
holder or such holder's nominee or nominees, a certificate or certificates
for the number of shares of Common Stock to which the holder is entitled.

(4) New Certificates. Upon conversion of only a portion of the number
of shares of Series A Preferred represented by a certificate surrendered
for conversion, the Corporation shall issue and deliver upon the written
order of the holder at the expense of the Corporation, a new certificate
covering the number of shares of Series A Preferred representing the
unconverted portion of the certificate so surrendered. The Corporation may
charge a reasonable fee for any transfer of a Series A Preferred
Certificate into the name of any person who is not the original Holder.

(5) Payment of Accrued but Unpaid Dividends on Conversion. If there
remain any accrued and unpaid dividends on Series A Preferred being
converted, the Corporation shall pay such dividends to the converting
holder at the time of conversion in the form of additional shares of Common
Stock, determined by dividing the amount of the unpaid dividends to be
applied for such purpose by the Series A Conversion Price (or, if
applicable, the Minimum Series A Conversion Price) then in effect.

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<PAGE>
(6) No Fractional Shares. The Corporation shall issue no fractional
shares of Common Stock or scrip upon conversion of shares of Series A
Preferred. If more than one share of Series A Preferred shall be
surrendered for conversion at any one time by the same holder, the number
of full shares of Common Stock issuable upon their conversion shall be
computed on the basis of the aggregate number of shares of Series A
Preferred surrendered for conversion by such holder. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of any shares of Series A Preferred, the Corporation may, at its
sole option, pay a cash adjustment in respect of such fractional share in
an amount equal to the same fraction of the Series A Conversion Price or
Minimum Series A Conversion Price in effect as of the day of conversion,
or, in lieu of cash, issue to such holder the next higher whole number of
shares of Common Stock if the fractional share to which the holder is
otherwise entitled is equal to 0.5 or greater, or the next lower number of
whole shares of Common Stock if the fractional share to which the holder is
otherwise entitled is less than 0.5.

e. Taxes Incident to Conversion. The Corporation shall pay any and all
issue taxes and other taxes (excluding income taxes) that may be payable in
respect to any issue or delivery of shares of Common Stock on conversion of
Series A Preferred. The Corporation shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the Series A Preferred
so converted was registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Corporation the
amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been, or will be, paid.

f. Sufficient Reserves of Stock. The Corporation shall at all times use it
s best efforts to reserve and keep available, out of its authorized but unissued
Common Stock or treasury shares, solely for the purpose of effecting the
conversion of the Series A Preferred, the full number of shares of Common Stock
deliverable upon the conversion of all Series A Preferred from time to time
outstanding.

g. Valid Issue for Conversion. All shares of Common Stock which may be
issued upon conversion of the shares of Series A Preferred shall, upon issuance
by the Corporation, be validly issued, fully paid, non-assessable and free from
all taxes, liens and charges with respect to their issuance.

h. Listing of Common Stock; Registration under Exchange Act. The
Corporation shall use its best efforts to maintain the listing of the Common
Stock on the OTC Electronic Bulletin Board or such other quotation service or
exchange on which the Common Stock may be listed, and shall not take any action
at any time while Series A Preferred is outstanding which would result in the
delisting of the Common Stock from any quotation service or exchange upon which
the Common Stock may be listed. The Corporation shall file all reports required
to be filed by it with the SEC pursuant to the Securities Exchange Act of 1934
(the "1934 Act") and/or the Securities Exchange Act of 1933 (the "1933 Act"),
and

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<PAGE>
shall not take any action which would result in the deregistration of the Common
Stock under Section 12(g) of the 1934 Act.

6. ADJUSTMENT OF CONVERSION PRICE

a. Adjustment. The Series A Conversion Price or Minimum Series
Conversion Price in effect at any time shall be adjusted from time to time as
provided in this Section 6.

b. No Adjustment for Certain Grants, Sales, or Issuances. Anything in
these Articles of Incorporation to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Series A Conversion Price or
Minimum Series A Conversion Price, as the case may be, in the case of the grant
of options or other rights to purchase, or the sale of, or the issuance of,
shares of Common Stock or obligations or securities convertible into Common
Stock of the Corporation:

(1) to its officers, employees, directors, and consultants
pursuant to the Corporation's 1992 Stock Option Plan or otherwise, so long as
any such grants, sales or issuances do not exceed in the aggregate 3,500,000
shares of Common Stock or obligations or securities convertible into Common
Stock;

(2) upon the exercise of warrants to purchase Common Stock
which are outstanding as of the initial date of the Corporation's Private
Offering Memorandum by which the Debentures convertible into Series A Preferred
were offered to investors; and

(3) upon the issuance of any shares of Common Stock as a
dividend on, or in conversion of, any shares of the Series A Preferred.

c. Stock Splits, Stock Dividends, Stock Combinations. In case the
Corporation shall at any time subdivide the outstanding shares of Common Stock,
issue a stock dividend on the outstanding Common Stock, combine the outstanding
shares of Common Stock or reclassify the outstanding shares of Common Stock into
securities of a different class, the Series A Conversion Price and/or the number
of shares of Common Stock and/or the type of securities issuable upon conversion
of the Series A Preferred in effect immediately prior to such subdivision,
dividend or combination shall be equitably adjusted to account for any such
transaction. The Board of Directors of the Corporation shall determine in good
faith any such adjustments and its good faith determination, absent a showing of
fraud, shall be binding and conclusive. Notice shall be provided to all holders
of Series A Preferred advising of any adjustments to the conversion terms
applicable to the Series A Preferred as soon as practicable following the date
of any such adjustment.

d. Adjustment Formulas for Certain Issuances. Should the Corporation,
at some point after the first issuance of the Series A Preferred and before the
lapse of the Minimum Series A Conversion price, issue or sell Common Stock, a
right or option to purchase Common Stock, or shares of stock or an obligation
convertible into Common Stock for a

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<PAGE>
certain consideration receivable by the Corporation per share ("Consideration
Receivable") (with the product of the number of such shares times such
Consideration Receivable being the "Aggregate Consideration Receivable") which
is less than the Minimum Series A Conversion Price in effect at the time of such
issuance, then the Minimum Series A Conversion Price shall immediately and
automatically be adjusted as determined to the nearest cent by the following
formula:

Where z = new Minimum Series A Conversion Price;

x = current Minimum Series A Conversion Price;

y = the Aggregate Consideration Receivable on such
issuance, sale, etc.;

a = number of shares of Common Stock outstanding just
prior to such issuance, sale, etc.;

b = number of shares of Common Stock
to which all holders of Options (as
defined in 6(d)(1) below) are
entitled to subscribe for, or
purchase immediately prior to, such
issuance, sale, etc.;

c = number of shares of Common Stock
issuable to all holders of
Convertible Securities (as defined
in 6(d)(2) below), immediately prior
to such issuance, sale, etc. (using
the Series A Conversion Price then
in effect); and

d = number of shares of Common Stock
to be issued, or deemed to be issued
under 6(d)(1) and (2) below, upon
and immediately after such issuance,
sale, etc.;

then z = (x x (a + b + c)) + y
a + b + c + d

<PAGE>
provided, however, that the Minimum Series A Conversion Price shall not be
adjusted in the case of an equity financing of the Corporation made to holders
of Series A Preferred at a price per share which is less than the Minimum Series
A Conversion Price to the extent any such holder (together with its affiliates,
if any) does not purchase securities of the Corporation in such financing
sufficient to retain its or their total pro rata ownership of the Corporation,
with such ownership being calculated immediately after the closing of such
financing as if all securities of the Corporation other than its outstanding
Common Stock were converted or exercised, as appropriate, into shares of the
Corporation's Common Stock.

For purposes of this Subsection 6(d) only, the following
provisions shall apply:

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<PAGE>
(1) Options or Warrants. In case of the issuance or sale by the
Corporation in any manner of any options for the purchase of shares of Common
Stock or of any rights to subscribe for or to purchase shares of Common Stock
("Options"), all shares of Common Stock which the holders of such Options shall
be entitled to subscribe for or purchase pursuant to such Options shall be
deemed to be issued or sold as of the date of the offering of such rights or the
granting of such Options.

(2) Convertible Securities. In the case of the issuance or sale
by the Corporation in any manner of any obligations or of any shares of stock of
the Corporation that shall be convertible into or exchangeable for Common Stock
("Convertible Securities"), all shares of Common Stock issuable upon the
conversion or exchange of such obligations or shares shall be deemed issued as
of the date such obligations or shares are issued.

(3) Cash Consideration for Common Stock. In the case of an
issue or sale for cash of shares of Common Stock, the Consideration Receivable
by the Corporation therefor shall be the amount of cash received, before
deducting any commissions or expenses paid by the Corporation.

(4) Non-Cash Consideration for Common Stock. In the case of the
issuance or sale (otherwise than upon conversion or exchange of obligations or
shares of stock of the Corporation) of shares of Common Stock for a
consideration other than cash or a consideration partly other than cash, the
amount of the consideration other than cash receivable by the Corporation for
such shares shall be deemed to be the value of such consideration as determined
in good faith by the Board of Directors.

(5)Consideration Receivable for Options or Convertible Securities.

(a) The amount of the Aggregate Consideration Receivable by the
Corporation upon the issuance of any Options referred to in Subsection (1)
above shall be the minimum aggregate consideration named in such Options
for the shares of Common Stock covered thereby, plus the consideration, if
any, received by the Corporation for such Options.

(b) The amount of Consideration Receivable by the Corporation upon the
issuance of any obligations or shares which are convertible or exchangeable
as described in Subsection (2) above as Convertible Securities, shall be
the amount of consideration received by the Corporation upon the issuance
of such obligations or shares, plus the minimum aggregate consideration, if
any, other than such obligations or shares, receivable by the Corporation
upon such conversion or exchange, except in adjustment of dividends.

(c) The amount of Aggregate Consideration Receivable under
Subparagraphs 6(d)(5)a and 6(d)(5)b and the amount of Aggregate
Consideration Receivable upon the exercise of Options or upon the
conversion or exchange of convertible securities

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<PAGE>
under this Paragraph 6(d)(5), shall be determined in the same manner
provided in Paragraphs 6(d)(3) and 6(d)(4) above with respect to the
Aggregate Consideration Receivable by the Corporation as in the case of the
issuance of additional shares of Common Stock. But if such obligations or
shares of stock so convertible or exchangeable are issued in satisfaction
of any dividend upon any stock of the Corporation other than Common Stock,
the amount of the consideration received upon the original issuance of such
obligations or shares of stock shall be the value of such obligations or
shares of stock, as of the date of the adoption of the resolution declaring
the dividend, as determined in good faith by the Board of Directors at or
as of that date.

(6) Other Particulars Concerning Options and Convertible
Securities. In the event that the Minimum Series A Conversion Price shall be
adjusted with respect to the issuance of Options or Convertible Securities (as
defined in Paragraphs 6(d)(1) and 6(d)(2)), the following provisions apply:

(a) No further adjustment in the Minimum Series A Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares
of Common Stock when those Options are exercised or those Convertible
Securities are converted.

(b) Such Options or Convertible Securities may by their terms provide,
with the passage of time or otherwise, for any decrease in the
consideration payable to the Corporation, or increase in the number of
shares of Common Stock issuable, upon their exercise, conversion or
exchange. In such a case, the Minimum Series A Conversion Price computed
upon the original issue thereof, and any subsequent adjustments shall, upon
any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects those Options or the rights
of conversion or exchange under those Convertible Securities.

(c) Upon the expiration of any such Options or any rights of
conversion under such Convertible Securities which shall not have been
exercised, the Minimum Series A Conversion Price computed upon the original
issue thereof, and any subsequent adjustments shall, upon such expiration,
be recomputed as if:

i) in the case of Convertible Securities or
Options for Common Stock, the only additional shares
of Common Stock issued were the shares of Common Stock
actually issued upon the exercise of such Options or
the conversion of such Convertible Securities; and the
Aggregate Consideration Receivable was the
consideration actually received by the Corporation for
the issue of such Convertible Securities which were
actually converted, and

ii) in the case of Options for Convertible
Securities, only the Convertible Securities actually
issued upon the exercise thereof were

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<PAGE>
issued at the time of issue of such Options; and the
Aggregate Consideration Receivable for the additional
shares or Common Stock deemed to have been then issued
was the consideration actually received by the
Corporation for the issue of all such Options for
Convertible Securities, whether or not exercised, plus
the consideration deemed to have been received by the
Corporation (determined pursuant to Paragraph 6(d)(5))
upon the issue of the Convertible Securities when such
Options were actually exercised.

(d) No readjustment pursuant to Subparagraph 6(d)(6)b or
Subparagraph 6(d)(6)c shall have the effect of increasing the Minimum Series A
Conversion Price by an amount greater than the amount of the adjustment
originally made when the Options or Convertible Securities were issued.

(e) In the case of any Options which expire by their terms not
more than thirty (30) days after the date of issue or sooner, no adjustment of
the Minimum Series A Conversion Price shall be made until the expiration or
exercise of all such Options.

(f) Waiver of Adjustment.

i) In the event that holders of a majority of the then currently
outstanding shares of the Series A Preferred shall consent to limit,
or waive in its entirety, any anti-dilution adjustment to which the
holders of such series would otherwise be entitled under Subsection
6(d) hereof, the Corporation shall not be required to make any
adjustment whatsoever with respect to any shares of Series A
Preferred, or to make any adjustment with respect to any shares of
Series A Preferred in excess of any limit set by such consent.

ii) Moreover, any holder of Series A Preferred shall be permitted
to waive in whole or in part, currently or prospectively, by contract
or any other writing, any anti-dilution adjustment to which he or it
would otherwise be entitled pursuant to the provisions of this Section
6.

e. No Adjustment of Series A Conversion Price Under Certain
Circumstances. Following the lapse of the Minimum Series A Conversion Price, no
adjustment to the Series A Conversion Price shall be made for transactions
described in Subsection 6(d).

7. REORGANIZATION, RECLASSIFICATION, AND SALE OF ASSETS.

If any capital reorganization or reclassification of the capital stock
of the Corporation, including any such reorganization or reclassification in
connection with any merger, consolidation, or transfer of substantially all of
the assets of the Corporation, shall not be deemed to be a Liquidation pursuant
to Section 4 hereof, and if it shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities, or assets

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<PAGE>
with respect to or in exchange for Common Stock, then the following shall be an
express condition of such reorganization or reclassification.

a. Lawful and adequate provisions in a form satisfactory to the holders
of a majority of the Series A Preferred shall be made whereby each holder of
shares of Series A Preferred shall thereafter have the right to receive, upon
the terms and conditions specified herein and in lieu of the shares of Common
Stock of the Corporation immediately theretofore receivable upon the conversion
of such shares of the Series A Preferred, such shares of stock, securities, or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore so receivable had such reorganization or
reclassification not taken place.

b. Moreover, in any such case, appropriate provision shall be made with
respect to the rights and interests of each such holder of Series A Preferred to
the end that the provisions hereof (including without limitation provisions for
adjustments of the Minimum Series A Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities,
or assets thereafter deliverable upon the exercise of such conversion rights. In
the event of a merger or consolidation of the Corporation as a result of which a
greater or lesser number of shares of Common Stock of the surviving Corporation
are issuable to holders of the Common Stock of the Corporation outstanding
immediately prior to such merger or consolidation, the Minimum Series A
Conversion Price and terms of conversion in effect immediately prior to such
merger or consolidation shall be adjusted in the same manner as though there
were a subdivision or combination of the outstanding shares of Common Stock of
the Corporation.

c. The Corporation shall not effect any such reorganization,
reclassification, consolidation, merger, or sale unless, prior to the
consummation thereof: (i) the Corporation shall have obtained the consent of the
holders of a majority of the Series A Preferred then outstanding, and (ii) the
successor corporation (if other than the Corporation) resulting from such
consolidation or merger, or the corporation purchasing such assets, shall assume
by written instrument, in a form satisfactory to the holders of a majority of
the Series A Preferred then outstanding the obligation to deliver to such holder
such shares of stock, securities, or assets as, in accordance with the foregoing
provisions, such holder may be entitled to receive. Such written instrument
shall be promptly mailed or delivered to each holder of shares of Series A
Preferred at the last address of such holder appearing on the books of the
Corporation.

8. REDEMPTION

a. Early Redemption by the Corporation.

(1) The Series A Preferred may be redeemed in whole or in part
at the election of the Corporation upon not less than 30 nor more than 60 days
prior written notice

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<PAGE>
by mail, at any time up to 270 days following the Initial Closing Date, if,
during such 270 day period, the closing bid price for the Common Stock for any
20 trading days within any 30 consecutive trading day period as quoted on the
OTC Electronic Bulletin Board (or such other quotation service as is quoting bid
and asked prices for the Common Stock), or the closing bid price for the Common
Stock as reported by the NASDAQ Stock Market or any other national exchange upon
which the Common Stock is listed for trading which has closing bid price
reporting, is less than the Minimum Conversion Price. Notwithstanding the
foregoing, if the 20 day period during which the price of the Common Stock is
less than the Minimum Conversion Price falls totally with the last 60 days of
the 270 days following the Initial Closing Date, the Corporation shall have a
full 60 days from the end of such 270 day period to exercise its right of early
redemption.

(2) To redeem the Series A Preferred pursuant to this
Subsection 8(a), the Corporation shall pay the holders of Series A being
redeemed 118% of the Stated Value of the Series A Preferred being redeemed,
together with accrued but unpaid interest owing to the date of redemption, in
cash. Any Series A Preferred which is redeemed in part only shall be redeemed in
principal amounts of $1,000 or whole multiples of $1,000.

b. Other Redemption Rights of the Corporation. The Corporation shall be
entitled to redeem any shares of Series A Preferred remaining outstanding 36
months after the Initial Closing Date by paying to the holders thereof the
Stated Value of the shares of Series A Preferred being redeemed, plus any
accrued and unpaid dividends on such shares of Series A Preferred to the date of
redemption, upon no less than 30 and not more than 60 days advance written
notice of the date fixed for such redemption. The Corporation shall pay cash for
all amounts due on such redemption.

c. Redemption Notices. The notice of redemption to be sent to all
holder of Series A Preferred (the "Redemption Notice") shall state the date
fixed for redemption (the "Redemption Date"), the paying agent with whom funds
sufficient to make the redemption have been deposited, and the number of shares
to be redeemed from each such holder, together with the amount of any accrued
and unpaid dividends to be paid as of the Redemption Date. Any partial
redemption shall be pro rata as between the holders of all Series A Preferred.

d. Right to Convert Series A Preferred Pending Redemption.
Notwithstanding the above, any holder of Series A Preferred may convert the
shares of Series A Preferred so called for redemption, plus all dividends
accrued and unpaid on such shares to the Redemption Date, into shares of Common
Stock, at any time following the giving of the Notice of Redemption and prior to
the Redemption Date.

9. NO IMPAIRMENT

The Corporation shall not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or

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<PAGE>
sale of securities or any other voluntary action, avoid or seek to avoid the
observance of performance of any of the terms in this Article to be observed or
performed by the Corporation. The Corporation shall at all times in good faith
assist in the carrying out of all the provisions of Sections 5, 6 and 7 hereof.

10. CERTIFICATE AS TO ADJUSTMENTS

a. Upon the occurrence of each adjustment of the Series A Conversion
Price pursuant to Section 6, or any transaction requiring a change in the
conversion terms applicable to the Series A Preferred as required by any other
provision of this Article, the Corporation, at its expense, shall promptly
compute any such adjustment and prepare and furnish to each holder of Series A
Preferred a certificate setting forth such adjustment and/or any other change in
the conversion terms applicable to the Series A Preferred, showing in detail the
facts upon which such adjustment and/or change is based; and

b. Upon the written request at any time from any holder of Series A
Preferred the Corporation shall furnish to such holder a like certificate
setting forth (i) such adjustment, (ii) the Series A Conversion Price at the
time in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon conversion of
Series A Preferred.

11. NOTICE OF RECORD DATES

In the event:

a. that the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to vote upon any matter
to be submitted to shareholders of Common Stock or other votable
securities of the Corporation;

b. that the Corporation shall take a record of the holders of its
Common Stock entitling them to receive a dividend, or any other
distribution, payable in cash or other property of the Corporation;

c. that the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or
purchase any shares of stock of any class or to receive any other
rights;

d. of any capital reorganization of the Corporation, reclassification
of the capital stock of the Corporation (other than a subdivision or
combination of its outstanding shares of Common Stock), consolidation,
or merger of the Corporation with or into another corporation or
conveyance of all or substantially all of the assets of the Corporation
to another corporation; or

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<PAGE>
e. of the voluntary or involuntary dissolution, liquidation, or winding
up of the Corporation;

then, the Corporation shall cause to be mailed to the holders of record of
outstanding Series A Preferred, at least twenty (20) days prior to the date
specified therein, a notice stating the date on which that record is to be taken
or that event is to take place. The notice shall also specify the date, if any
is to be fixed, as of which holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation, or winding up.

12. FORM OF NOTICES

Any notice required by the provisions of this Article to be given either to
the holders of shares of Series A Preferred or the Corporation shall be in
writing and shall be deemed given if hand delivered, delivered by courier, or
deposited in the United States mail, postage prepaid, addressed to each holder
of record of Series A Preferred at such holder's address appearing on the books
of the Corporation or, in the case of notice to the Corporation, to its
Principal Office, sent to the attention: "Chief Financial Officer."

13. VOTING

The shares of Series A Preferred shall not be entitled to vote on
matters submitted to shareholders of the Corporation except for matters upon
which a vote of Series A Preferred is specifically required under this Article
or the law of the State of Colorado.

14. AMENDMENTS AND CHANGES

As long as any of the Series A Preferred shall be issued and
outstanding, the Corporation shall not take any action without first obtaining
the approval (by vote or written consent, as provided by law) of the holders of
a majority of the Series A Preferred then outstanding, if such action would
materially and adversely affect such Series A Preferred by way of:

a. Any amendment, or repeal of any provision of, the Corporation's
Articles of Incorporation or Bylaws;

b. Any action that increases the number of authorized shares of
preferred stock or which would materially and adversely alter or change the
preferences, rights, privileges, or powers of, or the restrictions provided
for the benefit of, the Series A Preferred;

c. Authorize, create, or issue shares of any class of stock, bonds,
debentures, notes, or other obligations convertible into or exchangeable
for or having option rights to purchase, any shares of stock of the
Corporation having any preference or priority, as to

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<PAGE>
dividends, assets or otherwise on a parity with or superior to any
preferences or priority of the Series A Preferred; or

d. Reclassify any outstanding shares into shares having any preference
or priority as to dividends, assets or otherwise on a parity with or superior to
any such preference or priority of Series A Preferred.

15. DEFINITIONS

Unless the context otherwise clearly requires, or unless specifically
defined elsewhere in this Designation, definitions of capitalized terms used in
this Designation are as follows:

a. "1933 Act" means the Securities Act of 1933, as amended and in effect at
any particular time.

b. "1934 Act" means the Securities Exchange Act of 1934, as amended and in
effect at any particular time.

c. "Advance Conversion Notice" has the meaning ascribed to it in Paragraph
5(d)(1) of this Designation.

d. "Aggregate Consideration Receivable" has the meaning ascribed to it in
Subsection 6(d) of this Designation.

e. "Automatic Conversion Date" has the meaning ascribed to it in Paragraph
5(d)(3) of this Designation.

f. "Common Stock" means the no par value common stock of the Corporation of
the class authorized at the date of issuance of the Series A Preferred and stock
of any other class into which such presently authorized common stock may be
changed, and any other shares of stock of the Corporation which do not have any
priority in the payment of dividends or upon liquidation over any other class of
stock.

g. "Consideration Receivable" has the meaning ascribed to it in Subsection
6(d) of this Designation.

h. "Conversion Date" has the meaning ascribed to it in Paragraph 5(d)(1) of
this Designation.

i. "Conversion Period" has the meaning ascribed to it in Paragraph 5(a)(1)
of this Designation.

j. "Convertible Securities" has the meaning ascribed to it in Paragraph
6(d)(2) of this Designation.

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<PAGE>
k. "Corporation" means the person named as the "Corporation" in the first
paragraph of this Designation until a successor corporation shall have become
such pursuant to the applicable provisions hereof, and thereafter "Corporation"
shall mean such successor corporation.

l. "Debentures" means the Corporation's 8% Adjustable Rate Convertible
Subordinated Debentures Due December 31, 1999, which are convertible into shares
of Series A Preferred.

m. "Delivery Date" means three (3) business days after receipt by the
Corporation of the original Conversion Notice and the Series A Preferred
certificates being converted, as described in paragraph 5(d)(1).

n. "Distribution" has the meaning ascribed to it in Subsection 3(j) of this
Designation.

o. "Dividend Record Dates" means March 31, June 30, September 30 and
December 31 of each year, as described in Subsection 3(a) of this Designation.

p. "Initial Closing Date" has the meaning ascribed to it in Paragraph
5(c)(1) of this Designation.

q. "Initial Notice" has the meaning ascribed to it in Paragraph 4(b)(1) of
this Designation.

r. "Liquidation" has the meaning ascribed to it in Subsection 4(a) of this
Designation.

s. "Market Price" has the meaning ascribed to it in Subsection 3(e) of this
Designation.

t. "Minimum Series A Conversion Price" has the meaning ascribed to it in
Subsection 5(c) of this Designation.

u. "Options" has the meaning ascribed to it in Paragraph 6(d)(1) of this
Designation.

v. "Qualified Public Offering" has the meaning ascribed to it in
Subparagraph 5(a)(2)a of this Designation.

w. "Private Offering Memorandum" means the Corporation's offering document
by which the Debentures were offered to investors.

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<PAGE>
x. "Redemption Date" has the meaning ascribed to it in Subsection 8(c) of
this Designation.

y. "Redemption Notice" has the meaning ascribed to it in Subsection 8(c) of
this Designation.

z. "SEC" means the United States Securities and Exchange Commission or any
successor agency of the United States.

aa. "Series A Conversion Price" has the meaning ascribed to it in
Subsection 5(c) of this Designation.

bb. "Series A Liquidation Preference" has the meaning ascribed to it in
Paragraph 4(a)(1) of this Designation.

cc. "Series A Preferred" means the Corporation's no par value Series A
Cumulative Convertible Redeemable Preferred Stock, stated value $1.00 per share,
with the rights, preferences and designation set forth in this Designation.

dd. "Series A Purchase Price" has the meaning ascribed to it in Subsection
5(b) of this Designation.

ee. "Stated Value" means $1.00 per share, as described in Section 2 of this
Designation.

ff. "Subsequent Notice" has the meaning ascribed to it in Paragraph 4(b)(1)
of this Designation.

16. HEADINGS

The headings of the Sections, Subsections, Paragraphs and Subparagraphs
of this Article are inserted for convenience only and shall not be deemed to
constitute a part of this Article.

[END OF CERTIFICATE OF DESIGNATION]

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<PAGE>
Exhibit C

Proxy Statement
of
U.S. WIRELESS DATA, INC.

AMENDED AND RESTATED 1992 STOCK OPTION PLAN

1. Purpose of Plan. The purpose of this 1992 Stock Option Plan ("Plan")
is to secure and retain key employees and directors responsible for the success
of U.S. Wireless Data, Inc. ("Company") and to reward those associated as
consultants with the Company. This Plan is intended to motivate such persons to
exert their best efforts on behalf of the Company, to encourage stock ownership
and to provide such persons with proprietary interests in, and a greater concern
for, the welfare of, and an incentive to continue service with, the Company.
Options issued pursuant to this Plan will constitute incentive stock options
within the meaning of ss. 422 of the Internal Revenue Code of 1986 ("Code"), as
amended ("Incentive Stock Options") or other options ("Nonstatutory Stock
Options"). Incentive Stock Options and Nonstatutory Stock Options (collectively
referred to as "Options") may both be granted hereunder and any Option granted
which for any reason does not qualify as an Incentive Stock Option, including
any Option granted to a director of the Company who is not also an employee of
the Company, shall be a Nonstatutory Stock Option.

2. Stock Subject to the Plan. The number of shares of the Company's no
par value common stock ("Common Stock") which may be optioned under the Plan is
2,680,000 shares. Such shares may consist, in whole or in part, of unissued
shares or treasury shares. The maximum number of shares issuable pursuant to the
Plan, including shares subject to outstanding Options, shall be subject to
adjustment as provided in Section 7 of the Plan. No Option shall be granted
under the Plan after September 1, 2002. No Incentive Stock Options shall be
granted under the Plan to any employee where the aggregate fair market value
(determined at the time the Option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first time by such
employee during any calendar year (under all such plans of the Company and its
parent and subsidiary corporations) shall exceed $100,000; provided that
Nonstatutory Stock Options granted under the Plan may exceed these limits; and
further provided, that if any Incentive Stock Option granted hereunder exceeds
such limits, the number of shares by which such limit is exceeded shall be
automatically, with no further action by the Board, be deemed to be a
Nonstatutory Stock Option. For purposes of this Plan, the fair market value of
Common Stock ("Fair Market Value") subject to an Option shall be either equal to
(i) the average of the bid and ask prices reported in the over-the-counter
market at the close of business on the date the Option is granted or (ii) the
average of the closing bid and ask price per share of Common Stock of the
Company on the date the Option is granted, as reported on the National or
Small-Cap Market of the National Association of Securities Dealers Automated
Quotation System. If no market exists, the

OPTION\57500.6\7964.0200

<PAGE>

Committee (as defined in Section 3 below) shall determine the Fair Market Value
for purposes of this Plan. If any outstanding Option under the Plan for any
reason expires or is terminated, the shares of Common Stock allocable to the
unexercised portion of such Option may again be available for grant under the
Plan subject to the limitations, terms and conditions of the Plan. The Board of
Directors, and the proper officers of the Company shall from time to time take
appropriate action required for delivery of Common Stock, in accordance with the
Options and any exercises thereof.

3. Administration.

a. The Plan shall be administered by a committee of not less
than two own employee members of the Board of Directors of the Company (the
"Board"), as appointed by the Board and serving at the Board's pleasure (the
"Committee"). With respect to Insiders (as defined in Section 6(d), below),
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. As used herein,
the term Board shall also mean the Committee of the Board, and vice versa, and
all actions described herein as being undertaken by, or the responsibility of
the Committee, may be taken by the full Board; provided that all actions of the
Committee must be ratified by the Board of Directors. With respect to Insiders,
all Options granted under this Plan shall be either (i) made by the full Board,
(ii) made by the Committee, or (iii) approved in advance by the Company's
shareholders or ratified by such shareholders on a date which is no later than
the date of the next annual meeting of shareholders. Insider's who are granted
an Option under this Plan which does not comply with the provisions of the
previous sentence shall not be permitted to sell the shares of Common Stock
acquired upon exercise of such Option or any other shares of Common Stock held
by them for a period of at least six (6) months following the date of grant of
such Option.

The Committee is authorized and empowered to administer the
Plan and, consistent with the terms of the Plan, to (a) select the employees to
whom Options are to be granted and to fix the number of shares and other terms
and conditions of the Options to be granted; (b) determine the date upon which
Options shall be granted and the terms and conditions of the granted Options in
a manner consistent with the Plan, which terms need not be identical as between
Options or Optionees; and (c) interpret the Plan and the Options granted under
the Plan.

b. The Board may from time to time adopt such rules and
regulations as it may deem advisable for the administration of the Plan, and may
alter, amend, or rescind any such rules and regulations in its discretion. The
Board shall have the power to interpret or amend or discontinue the Plan, except
that certain amendments shall be subject to the provisions of Section 10 of the
Plan. All decisions made by the Board in the administration and interpretation
of the Plan shall be binding and conclusive for all purposes.

OPTION\57500.6\7964.0200

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<PAGE>

c. Once appointed, the Committee shall continue to serve until
otherwise directed by the Board. Subject to the foregoing and Section 3(a), from
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies however caused, or remove
all members of the Committee and thereafter directly administer the Plan.

4. Eligibility.

a. Employees, directors and consultants of the Company, or of
any parent or subsidiary of the Company, shall be eligible to be granted Options
under the Plan. Only employees of the Company (or a parent or subsidiary of the
Company) may be granted Incentive Stock Options. A director of the Company may
not be granted an Incentive Stock Option unless he or she is also an employee of
the Company or any parent or subsidiary of the Company. "Parent" and
"subsidiary" shall have the meanings defined in Section 424 of the Code.

b. The type of Option, the number of shares which may be
purchased under such Option, the exercisability of such Option, the Option's
expiration date and the purchase price per share, shall be designated by the
Committee at the time the Option is granted, provided, that if the Committee
does not specify the type of Option, and if all qualifications for the grant of
an Incentive Stock Option are met, such Option shall be an Incentive Stock
Option; and provided further, that unless the Committee specifically provides
for an exercise schedule which is different from the standard schedule provided
for in Section 6(f) hereof, the standard exercise schedule shall be applied to
such Option. Subject to the exception under Section 6(b), no person may be
granted an Incentive Stock Option if such person, at the time the Option is
granted, owns shares of Common Stock possessing more than 10% of the total
voting power or value of all classes of stock of the Company or any parent or
subsidiary corporation. For purposes of calculating such stock ownership, the
attribution rules of stock ownership set forth in Section 424(d) of the Code, as
amended, shall apply. Accordingly, an optionee, with respect to whom such 10%
limitation is being determined, shall be considered as owning Common Stock owned
directly or indirectly by or for the optionee's brothers and sisters (whether by
the whole or half-blood), spouse, ancestors and lineal descendants; and any
Common Stock owned directly or indirectly by or for a corporation, partnership,
estate or trust, shall be considered as being owned proportionately by or for
its shareholders, partners or beneficiaries.

5. Grants to Non-Employee Directors. For services rendered as members
of the Board of Directors and in order to attract and retain qualified
non-employee directors, each non-employee director shall be granted Nonstatutory
Stock Options as follows (subject to adjustment pursuant to Section 7 hereof):

OPTION\57500.6\7964.0200

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<PAGE>

a. On December 5, 1995, to the non-employee directors who
served on the Board of Directors prior to such date, (i) for each full fiscal
year of service on the Board of Directors prior to fiscal year 1996,
Nonstatutory Stock Options to purchase 20,000 shares of the Company's Common
Stock and (ii) for each partial fiscal year of service on the Board of Directors
prior to fiscal year 1996, Nonstatutory Stock Options to purchase the number of
shares (rounded to the nearest whole number) determined by multiplying (x)
20,000 by (y) a ratio, the numerator of which is the number of days the director
served as such during such fiscal year and the denominator of which is 365; all
such Nonstatutory Stock Options shall be treated (for purposes of vesting only)
as if granted on the date such director was first appointed or elected to the
Board (for subpart (i), above) or the anniversary date of such election or
appointment (for subpart (ii), above), in each case in the applicable fiscal
year of service to which such grant applies, and shall vest over the one year
period subsequent to the date of grant at the rate of 25% every three months;

b. On December 5, 1995, in addition to the Nonstatutory Stock
Options granted pursuant to Section 5(a) above, to each non-employee director
serving on such date (even if first elected as a member of the Board of
Directors on such date), a Nonstatutory Stock Option to purchase 20,000 shares
of the Company's Common Stock, which Options shall vest over the two year period
subsequent to the date of grant at the rate of 25% every six months;

c. After December 5, 1995, to each newly-elected or appointed
non-employee director on the first day of service on the Board of Directors, a
Nonstatutory Stock Option to purchase 20,000 shares of the Company's Common
Stock, which Options shall vest over the two year period subsequent to the date
of grant at the rate of 25% every six months; and

d. After December 5, 1995, in addition to the Nonstatutory
Stock Options granted pursuant to Sections 5(a), 5(b) and 5(c), above, to each
non-employee director for so long as such non-employee director is serving on
the Board of Directors, on each anniversary of the date on which such person
became a director of the Company, a Nonstatutory Stock Option to purchase 20,000
shares of the Company's Common Stock, which Options shall vest over the two year
period subsequent to the date of grant at the rate of 25% every six months.

Subject to the qualifications set forth in Section 6(h), (j)
and (k), Options granted under this Section 5 shall expire to the extent not
exercised, ten (10) years from the date of grant.

6. Terms and Conditions. All Options granted under this Plan shall be
subject to the terms and conditions of this Plan, except to the extent
specifically provided otherwise, including all of the following:

OPTION\57500.6\7964.0200

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<PAGE>

a. Option Price. Subject to the provisions of Section 6(b),
the option price per share for all Options shall be determined by the Committee
but shall not be less than 100% of the Fair Market Value of such shares at the
time the Option is granted.

b. More than 10% Shareholder. If an employee owns more than
10% of the voting power or value of all classes of stock of the Company or any
parent or subsidiary corporation, at the time an Incentive Stock Option is
granted under the Plan, the Committee may issue an Incentive Stock Option to
such person at not less than 110% of the Fair Market Value of Common Stock. Any
Incentive Stock Option granted to any employee who owns more than 10% of the
voting power or value of all classes of stock of the Company or any parent or
subsidiary corporation, shall not be exercisable after the expiration of five
years from the date such Option is granted.

c. Limitations on Grant of Options. Subject to the limitations
under Section 6(b) of this Plan, no Option shall be granted which may be
exercised more than ten years after the date it was granted.

d. Limitation on Exercise of Option. Persons who beneficially
own more than ten percent of a class of the Company's equity securities,
executive officers and directors of the Company (collectively, "Insiders") who
are granted an Option under the Plan shall not sell the Common Stock acquired
through the exercise of such Option sooner than six months following the date of
grant of such Option.

e. Payment for Shares. Payment in full shall be made for all
shares pursuant to the exercise of an Option. The purchase price may, at the
Company's discretion, be paid by assignment to the Company of outstanding shares
of Common Stock of the Company owned by the optionee for a period of at least
six (6) months prior to the date of exercise and having a Fair Market Value (as
determined pursuant to Section 2 above) equal to the purchase price or that
portion thereof being paid in outstanding stock. The Company may issue a
certificate which reflects the net number of shares issuable after payment of
the exercise price in already owned Common Stock, so that the previously owned
certificate need not actually be tendered. No optionee shall have the right to
dividends or other rights of a stockholder with respect to shares subject to an
Option until the optionee has given written notice of exercise of the optionee's
Option and paid in full for such shares.

f. Manner of Exercise. Any Option granted pursuant to this
Plan may be exercised at such time or times as set forth in the Option, by the
delivery of written notice to the Chief Financial Officer of the Company,
provided that if such optionee is the Chief Financial Officer of the Company
such notice shall be delivered to another executive officer of the Company,
together with payment in full for the number of shares to be purchased pursuant
to such exercise. Such notice (i) shall state the election to exercise the
Option, (ii) shall state the number of shares in respect of which the Option is
being exercised, (iii) shall state the optionee's address, (iv) shall state the
optionee's social security number, (v) shall

OPTION\57500.6\7964.0200

-5-

<PAGE>

contain such representations and agreements concerning optionee's investment
intent with respect to such shares of Common Stock, if reasonably requested by
the Company, and (vi) shall be signed by optionee.

Except as to Nonstatutory Stock Options granted pursuant to
Section 5 hereof or unless otherwise determined by the Board and set forth in
the optionee's Incentive Stock Option Certificate or Nonstatutory Stock Option
Certificate, as applicable, options granted under the Plan shall mature and
become exercisable as to 24% of the total shares covered by the Option on the
first anniversary from the date of grant, and 2% per month thereafter, until
fully vested, so long as the optionee remains an employee of the Company.

g. Other Representations or Warranties. As a further condition
to exercise of any Option granted under the Plan, the Company may require each
optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.

h. Death of Optionee. If an optionee dies, any Option
previously granted to the optionee shall be exercisable by the personal
representative or administrator of the deceased optionee's estate, or by any
trustee, heir, legatee or beneficiary who shall have acquired the Option
directly from the optionee by will or by the laws of descent and distribution at
any time within one year after his death, but not more than ten years (five
years if Section 6(b) is applicable) after the date of granting of the Option,
provided the deceased optionee was entitled to exercise such Option at the time
of his death.

i. Retirement. If an optionee's employment with the Company
terminates by reason of retirement, any Option previously granted to him shall
be exercisable within three months after the date of such termination, but not
more than ten years (five years if Section 6(b) is applicable) after the date of
granting of the Option, and then only to the extent to which it was exercisable
at the time of such termination by retirement; provided, however, that if the
optionee dies within three months after termination by retirement, any
unexercised Option, to the extent to which it was exercisable at the time of his
death, shall thereafter be exercisable for one year after the date of his death,
but not more than ten years after the date of granting of the Option.

j. Disability. If an optionee becomes disabled within the
meaning of Section 105(d)(4) of the Code, and at the time of such disability the
optionee is entitled to exercise such Option, the optionee shall have the right
to exercise such Option within one year after such disability provided that the
optionee exercises within ten years after the date of grant thereof (or five
years if Section 6(b) is applicable), and then only to the extent to which it
was exercisable at the time of such disability.

k. Optionee's Termination. Optionees granted an Option under
the Plan must exercise such Option (i) within three months of the date such
optionee ceased to be

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employed by the Company or a corporation or subsidiary thereof issuing or
assuming the Option in a transaction set forth under Section 7 of this Plan (as
to Options granted to employees) or (ii) within three months of the date when
the optionee ceased to serve as a director of the Company (as to Nonstatutory
Stock Options granted to or held by non-employee directors). Such options shall
only be exercisable to the extent to which they were exercisable at the time of
such termination of employment or service on the Board of Directors.

l. Leave of Absence. For the purposes of this Plan (i) a leave
of absence, duly authorized in writing by the Company for family or medical
leave, military service or sickness, or for any other purpose approved by the
Company, if the period of such leave does not exceed 90 days and (ii) a leave of
absence in excess of 90 days, duly authorized in writing by the Company provided
the optionee's right to re-employment is guaranteed either by statute or by
contract, shall not be deemed a termination of employment.

m. Non-transferability of Options. No Option granted under
this Plan will be transferable by the optionee other than by will or the laws of
descent and distribution. During the lifetime of the optionee, the Option will
be exercisable only by optionee.

7. Recapitalization or Merger.

a. If the outstanding shares of Common Stock which are
eligible for the granting of Options hereunder, or subject to Options
theretofore granted, shall at any time be changed or exchanged by declaration of
a stock dividend, split-up, subdivision or combination of shares,
recapitalization, merger, consolidation or other corporate reorganization in
which the Company is the surviving corporation, the number and kind of shares
subject to this Plan or subject to any Options previously granted, and the
Option prices, shall be appropriately and equitably adjusted, so as to maintain
the proportionate number of shares without changing the aggregate Option price.

b. In the event of a dissolution or liquidation of the
Company, or a merger, consolidation, sale of all or substantially all of its
assets, or other corporate reorganization in which the Company is not the
surviving corporation and the holders of Common Stock receive securities of
another corporation, any outstanding Options hereunder shall terminate as of the
effective date of such event, provided that immediately prior to such event each
optionee shall have the right to exercise any unexpired Options in whole or in
part, including those Options which are not yet vested pursuant to the
applicable vesting schedule. The Board may, in its sole discretion, negotiate
for the assumption or replacement of any Options not exercised by an optionee
with comparable options to purchase the stock of such other corporation.

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The existence of this Plan, or of any Options hereunder, shall not in any way
prevent any transaction described in this section, nor shall anything contained
in this Plan prevent the issuance of a replacement option by a surviving
corporation.

8. Use of Proceeds. Proceeds from the sale of stock pursuant to Options
granted under this Plan shall constitute general funds of the Company.

9. Reservation of Issuance of Shares. The Company shall at all times
during the duration of this Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of all
Options granted pursuant to this Plan, and shall pay all original issue and
transfer taxes with respect to the issuance of shares pursuant to the exercise
of such Options, and shall pay all of the fees and expenses necessarily incurred
in connection with the exercise of such Options and the issuance of such shares.

10. Amendments. The Board of Directors may amend, alter, or discontinue
this Plan, but no amendment, alteration or discontinuation shall be made which
would impair the rights of any optionee under any Options previously granted,
without the optionee's consent, subject to any provisions otherwise in the Plan,
or which, without the approval of the shareholders, would:

i) Except as is provided in Section 7 of this Plan,
increase the total number of shares reserved for the purposes of the
Plan;

ii) Change the persons (or class of persons) eligible to
receive Options under the Plan; or

iii) Materially increase the benefits accruing to Insiders
under the Plan.

Subject to the foregoing, the provisions of Section 5 of the Plan which set
forth terms and conditions of Option grants to non-employee directors, shall not
be amended more than once every six (6) months other than to comport with
changes in the Internal Revenue Code, Title I of the Employee Retirement Income
Security Act or the rules promulgated thereunder.

11. Indemnification. In addition to such other rights of
indemnification as they may have as directors, the members of the Committee and
the Board of Directors shall be indemnified by the Company against reasonable
expenses, including attorneys' fees actually incurred in connection with the
defenses of any action, suit or proceeding, or in connection with any appeal
therefrom, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of judgment in any action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding, that such member

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<PAGE>

of the Board of Directors is liable for gross negligence, fraud or willful
misconduct in the performance of the director's duties so long as within 60 days
after institution of any such action, suit or proceeding, the director shall in
writing offer the Company the opportunity, at its own expense, to handle and
defend such action, suit or proceeding.

12. Approval of Shareholders. The Plan shall take effect upon approval
by the holders of a majority of the shares of the Company's Common Stock present
at a meeting attended by a quorum of shareholders, which approval must occur
within 12 months after the date the Plan is adopted by the Board of Directors.

13. Miscellaneous. Unless the context requires otherwise, words
denoting the singular may be construed as denoting the plural, and words of the
plural may be construed as denoting the singular, and words of one gender may be
construed as denoting such other gender as is appropriate. Paragraph headings
are not to be considered part of this Plan and are included solely for
convenience and are not intended to be full or accurate descriptions of the
contents thereof.

Adopted: September 16, 1992
Amended: August 12, 1994 (approved by shareholders on October 28, 1994)
Amended: September 14, 1995 (approved by shareholders on
December 5, 1995)
Amended: August 6, 1997 (approved by shareholders on ________, 1998)
Amended: December 15, 1997 (did not require approval of shareholders)

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