U S WIRELESS DATA INC, PRE 14A, 2000-01-18

U S WIRELESS DATA INC
PRE 14A, 2000-01-18
CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS)

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SCHEDULE 14A
Information Required in Proxy Statement

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 ss. 240.14a-11(c) or ss. 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 (Set 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:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed: ........................................................

<PAGE>

U.S. WIRELESS DATA, INC.
2200 Powell Street, Suite 800
Emeryville, California 94608

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To the Shareholders of U.S. Wireless Data, Inc.:

The Annual Meeting of Shareholders of U.S. Wireless Data, Inc. (the
"Company") will be held at 2200 Powell Street, Suite 800, Emeryville,
California, at 2:00 p.m., Pacific Time, on March 6, 2000, for the following
purposes:

1. To elect a Board of Directors for the ensuing year;

2. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to increase the total number of
authorized shares of capital stock from 55,000,000 to
225,000,000, of which 200,000,000 shall be Common Stock, no par
value per share ("Common Stock") and 25,000,000 shall be
Preferred Stock, no par value per share ("Preferred Stock");

3. To consider and act upon a proposal to adopt the Company's 2000
Stock Option Plan;

4. To ratify the appointment of M.R. Weiser & Co. LLP as the
independent auditors and public accountants for the Company for
the fiscal year ending June 30, 2000; and

5. To transact such other business as may properly come before the
meeting.

All shareholders are invited to attend the meeting. Shareholders of record
at the close of business on February 3, 2000, the record date fixed by the Board
of Directors, are entitled to notice of and to vote at the meeting. A complete
list of shareholders entitled to notice of and to vote at the meeting will be
open to examination by shareholders beginning 10 days prior to the meeting for
any purpose germane to the meeting during normal business hours at the Company's
principal office at 2200 Powell Street, Suite 800, Emeryville, California 94608.

Whether or not you intend to be present at the meeting, please sign and
date the enclosed proxy and return it in the enclosed envelope.

By Order of the Board of Directors

Robert E. Robichaud
Secretary

Emeryville, California
____ __, 2000

<PAGE>

U.S. WIRELESS DATA, INC.
2200 Powell Street, Suite 800
Emeryville, California 94608

(510) 596-2025

PROXY STATEMENT

Solicitation and Revocability of Proxy

This proxy statement ("Proxy Statement") and the accompanying proxy
("Proxy") is furnished in connection with the solicitation by the Board of
Directors (the "Board") of U.S. Wireless Data, Inc., a Colorado corporation (the
"Company"), for use at the Annual Meeting of Shareholders (the "Annual Meeting")
to be held at the principal executive office of the Company, 2200 Powell Street,
Suite 800, Emeryville, California 94608 on March 6, 2000 at 2:00 p.m., Pacific
Time, and for any postponement or adjournment thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders.

The Company will bear the cost of solicitation of proxies. In addition to
the solicitation of proxies by mail, certain officers, agents and employees of
the Company, without extra remuneration, may also solicit proxies personally by
telephone, telefax or other means of communication. In addition to mailing
copies of this material to shareholders, the Company may request persons, and
reimburse them for their expenses in connection therewith, who hold stock in
their names or custody or in the names of nominees for others to forward such
material to those persons for whom they hold stock of the Company and to request
their authority for execution of the proxies.

A shareholder who has given a Proxy may revoke it at any time prior to its
exercise by giving written notice of such revocation to the Secretary of the
Company, executing and delivering to the Company a later dated Proxy reflecting
contrary instructions or appearing at the Annual Meeting and taking appropriate
steps to vote in person.

The mailing address of the Company's principal executive office is 2200
Powell Street, Suite 800, Emeryville, California 94680, and its telephone number
at this office is (510) 596-2025.

Shares Outstanding, Voting Rights and Proxies

Only holders of shares of the Company's common stock, no par value per
share (the "Common Stock") of record at the close of business on February 3,
2000 (the "Record Date") are entitled to vote at the Annual Meeting or any
postponement or adjournment thereof. On the Record Date there were issued and
outstanding ____ [To be provided] shares of Common Stock and 1,954,705 shares of
Series B Preferred Stock, no par value per share (the "Series B Preferred
Stock"). Each outstanding share of Common Stock is entitled to one vote. The
Series B Preferred Stock does not generally have voting rights except as
specifically provided under Colorado law.

The holders of a majority of the outstanding shares of the Company entitled
to vote on the matters discussed herein, present in person or by Proxy, shall
constitute a quorum at the Annual Meeting. The approval of a plurality of the
shares present in person or represented by Proxy, assuming a quorum at the
Annual Meeting, is required for election of the nominees as directors. The
approval of a majority of outstanding shares of the Company entitled to vote on
the matter is required to amend the Articles of Incorporation. In all other
matters, the approval of a majority of the shares present in person or
represented by Proxy, assuming a quorum at the Annual Meeting, is required for
the adoption of such matters.

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<PAGE>

The form of Proxy solicited by the Board affords shareholders the ability
to specify a choice among approval of, disapproval of, or abstention with
respect to each matter to be acted upon at the Annual Meeting. Shares of Common
Stock represented by the Proxy will be voted, except as to matters with respect
to which authority to vote is specifically withheld. Where the solicited
shareholder indicates a choice on the form of Proxy with respect to any matter
to be acted upon, the shares will be voted as specified. Abstentions and broker
non-votes will not have the effect of votes in opposition to a director or
"against" any other proposal to be considered at the Annual Meeting.

The persons named as proxies are Dean M. Leavitt and Robert E. Robichaud.
All shares of Common Stock represented by properly executed proxies which are
returned and not revoked will be voted in accordance with the instructions, if
any, given therein. If no instructions are provided in a Proxy, the shares of
Common Stock represented by such Proxy will be voted FOR the Board's nominees
for director and FOR the approval of Proposals 2, 3 and 4 and in accordance with
the Proxy-holder's best judgment as to any other matters raised at the Annual
Meeting.

No Dissenter's Rights

Under Colorado law, shareholders are not entitled to dissenter's rights
of appraisal with respect to any matter to be acted upon.

The approximate date on which this Proxy Statement and the accompanying
form of Proxy are first being mailed to shareholders is February 4, 2000.

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<PAGE>

INFORMATION RELATING TO VARIOUS PROPOSALS

Information Concerning Directors

At the time of the Annual Meeting, the Board will consist of three
incumbent members who are seeking to be elected at the meeting to hold office
until the next annual or special meeting of shareholders at which a new Board is
elected and until their successors shall have been elected and qualified. The
Company's Articles of Incorporation and Bylaws presently provide for a Board of
no less than three (3) and no more than nine (9) directors. It is intended that
the accompanying Proxy will be voted in favor of the following persons to serve
as directors, unless the shareholder indicates to the contrary on the Proxy.
Each of the nominees is currently a director of the Company.

Dean M. Leavitt, Chester N. Winter and Alvin C. Rice, all of whom are
incumbent directors, and have been nominated by the Board 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. The persons named in the
accompanying Proxy intend to vote for the election as director of the nominees
listed herein. Information regarding directors is set forth below.

The following table sets forth certain information with respect to each
person who is currently a director and/or executive officer of the Company and
the individuals nominated and recommended to be elected by the Board and is
based on the records of the Company and information furnished to it by such
persons. Reference is made to "Security Ownership of Certain Beneficial Owners
and Management" for information pertaining to stock ownership by each director
and executive officer of the Company and the nominees.

Directors and Executive Officers

The following table contains certain information with respect to the directors
and executive officers of the Company.

Name Age Principal Occupation Director Since
- --------------- --- -------------------- --------------
Dean M. Leavitt 40 Chief Executive Officer & Chairman May 1999
of the Board of the Company

Chester N. Winter 68 General Partner of Colorado February 1994
Incubator Fund, L.P.

Alvin C. Rice 76 Vice Chairman of Merchant's Group June 1998
International, Inc.

Dean M. Leavitt. Mr. Leavitt became the Chief Executive Officer and
Chairman of the Board of the Company on May 3, 1999. Prior to joining the
Company, Mr. Leavitt was President of US Data Capture, Inc., which is
headquartered in Greenwich, Connecticut. US Data Capture is a "boutique" credit
card processing company which Mr. Leavitt founded in 1991. US Data Capture
specializes in formulating and implementing sophisticated credit card acceptance
applications for clients such as hospitals, universities, municipalities,
publishing houses, professional sports teams and sporting events, transportation
companies and other card-accepting organizations. Prior to founding US Data
Capture, Mr. Leavitt served as Senior Vice President and Director of Finance at
Rosenschein Properties, a real estate development company, Senior Vice President
of Finance at Kellogg Properties, a real estate acquisitions and development
firm and as an associate in the Private Placements Department at Sybedon
Corporation, an investment banking firm that served the real estate community.
Mr. Leavitt holds a Bachelor of Arts degree in economics and psychology from
Emory University in Atlanta, Georgia.

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<PAGE>

Chester N. Winter. Mr. Winter is a general partner of Colorado Incubator
Fund, L.P., a venture capital fund which invests in early stage high technology
enterprises including software, materials, medical and bio- technology; a
position he has held since 1991. Since March 1993 he has also been Vice
President of Paradigm Partners, LLC, a consulting company. Mr. Winter became a
director of the Company in February 1994. From February 1994 until September
1995 he served as Chairman of Highland Energy, Inc., a subsidiary of Eastern
Utility Associates. He holds B.A. and M.S. degrees in Economics from the
University of Colorado and has completed the Owner/President Management Program
at Harvard University Graduate School of Business.

Alvin C. Rice. Mr. Rice is a Vice Chairman of Merchant's Group
International, Inc., a private merchant bank located in San Francisco,
California, that he joined on June 1, 1999. Prior to June 1, 1999, and since
June 1, 1998, Mr. Rice was affiliated with entrenet Group, LLC, a management and
consulting limited liability company, as a senior associate. He became a
director of the Company on June 1, 1998. His career in banking, investment
banking and commercial business management has spanned over 40 years. He served
as Chairman of California Bancorp Systems, Inc. from January 1994 until December
1997 and as Chairman of the First National Bank of Marin from 1989 until
December 1993. Mr. Rice has also served as a Director of Memorex Corporation,
Fairchild Camera & Instrument Co., and the Montreal Trust Company. He is a cum
laude and Phi Beta Kappa graduate of Stanford University from which he received
a B.A. degree. He attended the Graduate School of Banking at the University of
Wisconsin and Harvard's Advanced Management Program.

In connection with the current Bridge Financing, as defined below, the
Company agreed to appoint a designee of the bank affiliate lender to the Board
and to have an observer present at all meetings of the Board. The bank affiliate
lender has not yet named such persons. The Board will increase the number of
directors to four when the bank affiliate lender names its designee. See
"Certain Relationships and Related Transactions Transactions with an Investment
Banking Firm and Dean M. Leavitt."

Committees of the Board - Board Meetings

The Company does not currently have a separate standing audit committee.
The audit committee functions are performed by the full Board. 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 1999; however the functions of the audit committee were
exercised by the full Board. The Board plans to appoint an audit committee in
the near term. The Company does not have standing nominating or compensation
committees. The Board as a whole performs the functions that these committees
would perform.

During fiscal year 1999, the Board held 12 meetings and acted once by
consent without a meeting. All directors attended more than 75% of the aggregate
number of meetings of the Board.

Other Executive Officer

The other executive officer of the Company who is not also a director is:

Name Age Position with the Company Officer Since
- ------------------- --- ------------------------- -------------
Robert E. Robichaud 46 Chief Financial and Accounting September 1997
Officer, Treasurer and
Secretary

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<PAGE>

Business Experience of the Other Executive Officer

Robert E. Robichaud. Mr. Robichaud has served as the Company's Chief
Financial and Accounting Officer, Treasurer and Secretary since September 1997.
From 1985 to 1997, Mr. Robichaud 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 National Association of Securities
Dealers Automated Quotation ("NASDAQ") System 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 Sciences. Mr. Robichaud
received a B.S. in Economics from Fairfield University in 1976 and an M.B.A.
from Rutgers Graduate School of Business in 1978.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with an Investment Banking Firm and Dean M. Leavitt

On December 23, 1999, the Company entered into an agreement with an
investment banking firm in connection with a proposed equity private placement.
The securities contemplated to be issued in the proposed equity private
placement will not be, and the securities issued in the bridge financing
described below have not been, registered under the Securities Act of 1933, as
amended, (the "Securities Act") and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.

In connection with the engagement of the bank, the Company entered into an
agreement on December 30, 1999, with an entity affiliated with the bank under
which it agreed to lend the Company up to $1,000,000, subject to certain
conditions (the "Bridge Financing"), including that (a) Dean M. Leavitt, the
Company's Chief Executive Officer, make and honor a similar commitment to lend
the Company up to $100,000, (b) Mr. Leavitt remain the Company's Chief Executive
Officer and a director and (c) the Company is able to enter into an agreement to
convert, modify or purchase the outstanding Series B Preferred Stock and 6%
Convertible Debentures on terms acceptable to the lender. The loans are secured
by substantially all of the Company's assets pursuant to General Security
Agreements and each loan is evidenced by a note, bearing interest at a rate of
8% per annum and due on the earlier of (x) the date a change of control (as
defined in the note) occurs, (y) the date the Company concludes a debt or equity
financing in which the Company receives at least $5,000,000 of gross proceeds,
or (z) December 30, 2000. The notes include certain negative covenants,
including prohibitions on the payment of certain dividends, redemptions and
asset sales and limitations on the incurrence of indebtedness, liens and the
issuance, prior to March 31, 2000, of securities. The lenders may, at their
option, convert the outstanding principal amount of the notes into securities
issued in connection with any private placement transaction on the same terms as
investors in such placement. In addition, the Company has agreed to appoint a
designee of the bank affiliate lender to the Board and to have an observer
present at all meetings of the Board. The bank affiliate lender has not yet
named such persons. These rights expire after the note and any subsequent notes
have been satisfied.

In connection with the commitments to lend up to $1,100,000, the Company
also issued the bank affiliate lender a warrant to purchase 13,636,363 shares of
Common Stock at an exercise price of $0.01 per share and the Company issued to
Mr. Leavitt a similar warrant to purchase 1,363,637 shares of our common stock.
The warrants may be exercised at any time, subject to certain conditions,
including the approval by the Company's shareholders of an amendment to the
Company's Articles of Incorporation to increase the number of authorized shares
of Common Stock. See Proposal 2: "Approval of Amendment of Articles of
Incorporation to Increase the Authorized Share Capital." The warrants expire on
December 30, 2006. If the bank is unable or unwilling to complete the private

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<PAGE>

placement contemplated by the December 23rd agreement, then, subject to certain
exceptions described below, the lenders will pay the Company a break-up fee of
$5,000,000, payable at the lenders' option either in cash or by cancellation of
50% of the warrants. Such break-up fee would not be payable if certain events
occur, including (a) certain breaches by the Company, (b) Mr. Leavitt's no
longer being an officer and director, (c) the Company being unable to increase
the authorized Preferred Stock and Common Stock by April 28, 2000 and (d) the
Company being unable to enter into agreements to redeem, convert, amend or
retire the Series B Preferred Stock or 6% Convertible Debentures by March 1,
2000 on terms satisfactory to the bank. The lender and Mr. Leavitt have certain
demand and "piggyback" registration rights, commencing in June 2000, as to the
shares of Common Stock underlying the warrants.

Currently, the Company does not have enough authorized Common Stock for the
warrants to be exercised. As a result, the Company entered into Economic
Participation Agreements with the lenders which are intended to provide the
lenders with the economic equivalent of ownership of the shares of Common Stock
underlying the warrant in the event that the Company is unable to amend its
Articles of Incorporation to increase the number of authorized shares of Common
Stock. The Economic Participation Agreements terminate at such time as a
sufficient number of shares of our Common Stock is authorized and reserved for
issuance upon the exercise of the warrants, unless the Company has failed to
amend its Articles of Incorporation by April 28, 2000, in which case the lenders
is entitled to liquidated damages which are calculated in accordance with the
agreement. See Proposal 2: "Approval of Amendment of Articles of Incorporation
to Increase the Authorized Share Capital."

As of January 10, 2000, the Company had received an aggregate of $500,000
pursuant to the Bridge Financing, of which $466,298.33 was received from the
lender and $33,701.66 was received from Mr. Leavitt.

As a condition to the completion of the proposed equity private placement,
the Company has agreed to reprice a warrant to purchase 2,687,500 shares of
Common Stock from their current exercise price of $3.00 per share to the market
price of the Common Stock on December 23, 1999. See "Executive Compensation
- --Current Employment Agreement and Change In Control Provisions Applicable to
Executive Officers and Directors." In addition, the Company has agreed to issue
Mr. Leavitt options to purchase 2,500,000 shares of Common Stock to be granted
under the Company's proposed 2000 Stock Option Plan (the "Option Plan"). See
Proposal 3: "Adoption of the Company's 2000 Stock Option Plan."

Transactions with Cardservice International, Inc.

From August 1994 through the present, Caesar Berger, a director of the
Company until May 1999, was also an officer of the Company's largest customer,
Cardservice International, Inc. ("CSI"). Roger Peirce, another former officer
and director of the Company was a "nonvoting" director of CSI. Sales to CSI
approximated $564,000 and $178,000 in fiscal years 1999 and 1998, respectively.

On October 28, 1998, the Company borrowed the principal amount of $500,000
from the Chief Executive Officer and 50% owner of CSI, Charles Burtzloff. The
note bore interest at 8% per annum and was payable in full on the earlier of the
receipt by the Company of proceeds from the sale of Common Stock to Mr.
Burtzloff or January 1, 1999. In consideration for the loan, the Company also
agreed to issue to Mr. Burtzloff a warrant exercisable to purchase 25,000 shares
of Common Stock at $3.038 per share. The warrant expires on October 27, 2001. On
March 19, 1999, the Company and Mr. Burtzloff agreed to convert the principal
and accrued interest on the note into 589,213 shares of Common Stock. The shares
were issued on June 24, 1999.

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<PAGE>

During fiscal 1996, CSI purchased $162,500 of raw materials (point-of-sale
terminal components) on behalf of the Company in exchange for 142,544 shares of
Common Stock issued subsequent to June 30, 1996 at 150% of the then current fair
market value plus registration rights after one year on all stock owned by CSI.
This transaction increased CSI's ownership in the Company from 2% to 5%. At June
30, 1998, CSI had completely divested its stock interest in the Company.

Additionally, the Company provides sales rebates to CSI on POS-50(R) units
sold by CSI to end users of product built with the raw materials purchased using
the amounts advanced from CSI. Through June 30, 1999, a total of $93,000 had
been paid under the agreement.

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

In July 1997, the Company entered into a Consulting Agreement with Liviakis
Financial Communications, Inc. and its affiliates, Messrs. John Liviakis and
Robert B. Prag, pursuant to which LFC agreed to provide the Company with
financial and business consulting and public and investor relations services
(the "LFC Consulting Agreement"). The Company was obligated to pay LFC
consulting fees of $10,000 in cash and 300,000 shares of its Common Stock over
the one-year term of the LFC Consulting Agreement. Of the shares, 75% were
issued to LFC and 25% to Mr. Prag. Pursuant to the LFC Consulting Agreement, the
Company was also obligated to pay LFC cash equal to 2.5% of the gross proceeds
received in 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 up to an additional 1,600,000 shares of Common Stock
exercisable at $.01 per share to Mr. Liviakis (2,625,000 shares and 1,200,000
warrants) and Mr. Prag (825,000 shares and 400,000 warrants) in August 1997 for
$500,000 in cash. The warrants were exercised during fiscal 1998 and 1999.
Pursuant to this transaction, LFC and these affiliates became significant
shareholders of the Company. The Common Stock issued for cash, under the LFC
Consulting Agreement and upon exercise of the warrants to LFC and its
affiliates, has certain 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 a right to include shares), including one-time
demand rights and unlimited piggyback rights.

Pursuant to the LFC Consulting Agreement, Messrs. Liviakis and Prag were
granted the right to approve the appointment of certain officers and directors
of the Company. Messrs. Liviakis and Prag approved the appointment of Messrs.
Peirce and Russel to the Board during the first half of fiscal year 1999.
Messrs. Liviakis and Prag no longer have the right to approve the appointment of
officers and directors of the Company.

Since the LFC related financing transaction and the LFC Consulting
Agreement were entered into by the Company at approximately the same time, the
Company has treated these transactions as one transaction for accounting
purposes. Based on the fair market value of the Common Stock as determined by an
independent valuation, the initial 3,500,000 shares of Common Stock and warrants
to purchase 1,600,000 shares of Common Stock issued in the transactions, net of
cash proceeds received, were valued at approximately $1,285,000 and recorded as
prepaid consulting services. The consulting services were amortized on a
straight-line basis over the term of the LFC Consulting Agreement commencing
with the July 25, 1997 effective date of the agreement. The 300,000 shares which
were issuable over the term of the LFC Consulting Agreement were valued as such
shares vested, and resulted in an additional $1,085,000 in consulting expenses
during fiscal year 1998. All of these shares were included in the registration
statement that became effective August 7, 1998. None of the shares were sold
under the registration statement prior to the shares being removed from
registration by a post-effective amendment filed as of June 24, 1999.

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<PAGE>

In December 1997, the Company paid LFC $76,500 in connection with the
closing of the sale of $3,060,000 of 8% Convertible Debentures which were due on
December 31, 1999 but converted to Series A Preferred Stock in February 1998.
The Company paid LFC $50,000 in conjunction with the July 1998 closing of the
sale of $2,000,000 of 6% Convertible Subordinated Debentures due July 21, 2000.

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% Convertible Debentures sold in
December 1997.

On June 30, 1998, the Company and LFC extended LFC's consulting
relationship with the Company through a new consulting agreement covering the
period from August 1, 1998 through March 15, 1999 (the "New LFC Agreement"). The
terms of the New LFC Agreement are substantially the same as the original LFC
Consulting Agreement. For services to be rendered under the New LFC Agreement,
LFC received 290,000 shares of Common Stock, at $4.375 per share issuable as a
signing bonus upon execution of the New LFC Agreement. LFC received 75% of the
shares and 25% were issued to Mr. Prag. The Common Stock issued to LFC under the
New LFC Agreement has certain registration rights. In conjunction with the New
LFC Agreement, LFC agreed to a further lock-up of all shares owned by LFC and
its affiliates, pursuant to which they agreed not to sell such shares prior to
February 1, 1999, even though certain of those shares were included in the
registration statement which became effective August 7, 1998. Under the New LFC
Agreement, the Company also agreed to expand its Board of Directors to include
two additional outside directors acceptable to LFC. During the first half of
fiscal 1999, the appointment of Messrs. Peirce and Russell to the Board was
approved by LFC. Messrs. Peirce and Russell have since resigned from the Board.

On September 22, 1998, the Company borrowed $1,300,000 from LFC under a
note, which was due April 1, 1999, and bore interest at 8% per year. The Company
used $1 million of the proceeds to redeem $833,000 of its Series A Preferred
Stock. Substantially all available intangible assets of the Company were pledged
to secure the note. During the period from November 1998 through February 1999,
the Company received bridge loans from LFC totaling $690,000 in the form of 8%
notes payable due April 1, 1999. On March 19, 1999, the Company and LFC agreed
to the conversion of $1,990,000 of principal plus accrued interest on the note
to 2,344,458 shares of Common Stock at a price of $1.09375 per share. The shares
were issued on June 24, 1999.

On March 12, 1999, LFC guaranteed a $250,000 promissory note due June 12,
1999 and bearing interest at 10% issued by the Company, in favor of RBB Bank
Aktiengesellschaft ("RBB") in connection with a loan of $250,000 by RBB to the
Company. See "- Transactions with RBB."

In conjunction with the May 6, 1999 Series B Preferred Stock financing, Mr.
Liviakis agreed to transfer a total of 443,077 shares of Common Stock owned by
him to the finder who located the cash purchaser of the Series B Preferred
Stock. The shares were transferred as "restricted securities" as defined in Rule
144 under the Securities Act and do not have any registration rights. In
December 1999, the Company issued 443,077 replacement shares of restricted
Common Stock to Mr. Liviakis.

On July 1, 1999, the Company entered into an agreement with LFC to provide
the Company with public relations and investor relations services through March
15, 2000. The Company issued 690,000 shares of Common Stock at $.60 per share to
LFC for its services under this agreement. LFC is entitled to receive a 2.5%
cash finder's fee for financing located by LFC and a 2% finder's fee based on
the "total consideration provided" through any acquisition located by LFC.

- 8 -
<PAGE>

LFC and its present and former affiliates have agreed not to sell any of
the Common Stock acquired in these various transactions prior to March 15, 2000,
which is the end of the current consulting agreement term.

In order to induce the lender to enter into the Bridge Financing, Mr.
Liviakis, owner of 7,443,458 shares of Common Stock, has agreed to vote in favor
of Proposal 2. See Proposal 2: "Approval of Amendment of Articles of
Incorporation to Increase the Authorized Share Capital."

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
promissory note to entrenet, with interest payable at 10% per annum, due in full
on or before June 2, 1998. At entrenet's election, the principal and interest
converted into 328,750 shares of Common Stock during the fiscal year ended June
30, 1998, at $.50 per share. In addition, the Company was obligated to pay
entrenet a finder's fee of 8% for any direct financing it located for the
Company, payable in Company securities identical to the new financing. During
fiscal 1998, the Company and entrenet were in discussions over the
interpretation of the provisions specifying the consideration payable to
entrenet as its finder's fee for locating LFC. The matter was resolved in
November 1997, whereby the Company agreed to issue entrenet a total of 280,000
shares of Common Stock issuable to it under the note and as payment of the
finder's fee. Those shares were issued in April 1998 and included in the
registration statement, which became effective August 7, 1998, although none of
the shares were sold under the registration statement prior to the shares being
removed from registration by a post-effective amendment filed as of June 24,
1999.

As of March 12, 1998, the Company entered into an agreement with entrenet
to provide business and financial consulting services to the Company and to
assist the Company in locating additional financing. The term of the agreement
was for six months from March 12, 1998 and the agreement automatically renews
for additional six-month terms unless at least 60 days notice is given to
terminate the agreement prior to the end of a term. For its advisory services
under the agreement, entrenet was paid a fee of $60,000 plus interest at 10% per
annum in July 1998. In addition, entrenet received a warrant to purchase 10,435
shares of Common Stock at $5.75 per share, exercisable until March 11, 2003.
This consulting agreement was terminated in September 1998. The Company agreed
to pay the remaining fees to entrenet of $20,000 and issued a warrant to
purchase 8,333 shares of Common Stock at $2.40 per share until September 11,
2003. The shares issuable on exercise of this warrant carry certain registration
rights. No warrants have been exercised as of June 30, 1999. entrenet is
entitled to receive certain finder's fees on future financings and other
transactions between the Company and certain specified parties within two years
of September 12, 1998.

Transactions with RBB Bank

RBB Bank is the record owner, as agent for various of its clients, of
270,000 shares of the Series A Preferred Stock, which it purchased in December
1997. RBB Bank originally purchased as agent for its clients, $1,600,000 of 8%
Convertible Subordinated Debentures Due December 31, 1999 (all of which
converted to 1,600,000 shares of Series A Preferred Stock as of February 9,
1998) in an "arms-length" transaction, thereby making RBB Bank, as agent for its
clients, a significant shareholder of the Company.

- 9 -
<PAGE>

As of March 12, 1998, the Company and Richard P. Draper and his assignee,
Tillicombe International, LDC ("Tillicombe"), entered into an agreement by which
Mr. Draper and Tillicombe agreed to allow the Company to assign to third parties
the Company's rights in a call option which the Company had on 367,684 shares of
Common Stock owned by Tillicombe (the "Call Option") in return for payment to
Tillicombe of $25,000 and the release of the Company's voting and option rights
as to 30,000 shares which were also subject to the Call Option. The Company
originally acquired the Call Option in October 1995, in conjunction with the
dissolution of a subsidiary, Direct Data, Inc., which the Company acquired in
1994, in which Mr. Draper was a principal shareholder. Between March 15 and June
15, 1998, the Company sold and assigned the Call Option on 250,000 shares to RBB
Bank. RBB Bank purchased the Call Option in five increments of 50,000 share
options each, and paid the Company 85% of the average last sale price of the
underlying shares over the five days prior to the date of acquiring each Call
Option, less the Call Option exercise price of $.25 per share. In each
transaction, RBB Bank paid the acquisition price for the Call Option, as well as
the exercise price to Tillicombe prior to taking delivery of the shares. The
Company realized a total of approximately $997,000 from the sale of these Call
Options to RBB Bank.

Effective July 1, 1998, the Company borrowed $250,000 from RBB Bank and
issued a promissory note which was payable in full on or before September 9,
1998. The loan was intended as a short-term bridge loan and was repaid from the
proceeds of the Company's 6% Debentures issued on July 22, 1998. In conjunction
with this loan, the Company also issued a warrant to RBB Bank to purchase 20,000
shares of Common Stock at $4.375 per share, exercisable through September 9,
2001.

On July 22, 1998, RBB Bank purchased $1,000,000 of the Company's 6%
Convertible Subordinated Debentures due July 21, 2000, together with a warrant
to purchase 50,000 shares of Common Stock at $4.50 per share, exercisable
through July 21, 2001. The shares underlying the 6% Debentures and the warrants
are included in the registration statement filed by the Company with the
Securities and Exchange Commission ("SEC") as of June 30, 1999 (SEC File No.
333-81897) which is not yet effective as of the date of this Proxy Statement.

Effective September 17, 1998, the Company and RBB Bank agreed that the
Company would redeem 440,583 shares of Series A Preferred Stock held by RBB Bank
for $528,700. RBB Bank agreed to refrain from converting any additional shares
of Series A Preferred Stock until at least October 15, 1998 after which time
one-third of the shares of Series A Preferred Stock could be converted to Common
Stock on each of October 15, November 15, and December 15, 1998, respectively.
In conjunction with this transaction, the Company agreed to issue Common Stock
purchase warrants exercisable to purchase that number of shares of Common Stock
equal to five percent (5%) of the number of shares of Series A Preferred Stock
held by the participating investor at the end of each one month period,
exercisable at the current market price of the Common Stock at each issuance
date (the "Series A Redemption Warrants"). The Company issued RBB Bank Series A
Redemption Warrants to purchase: 46,485 shares exercisable at $2.40 per share
through October 15, 2001; 35,471 shares exercisable at $3.36 per share through
November 15, 2001; and 35,471 shares exercisable at $3.69 per share through
December 15, 2001. The Company also agreed to increase the dividend rate from 4%
to 8% on the balance of the unconverted Series A Preferred Stock and to file a
new registration statement with the SEC by October 31, 1998, to register the
shares underlying the Series A Redemption Warrants as well as additional shares
issuable upon conversion of the Series A Preferred Stock beyond those included
in the SB-2 Registration Statement declared effective August 7, 1998. That
registration had included an insufficient number of shares to cover all
conversions of Series A Preferred Stock because of a decline in the market price
of the Common Stock subsequent to effectiveness of that registration statement.
The Company failed to file the required registration statement but has included
the shares underlying the Series A Redemption Warrants in the registration
statement filed with the SEC as of June 30, 1999 (SEC File No. 333-81897) which
was not yet effective as of the date of filing of this Proxy Statement.

- 10 -
<PAGE>

On March 12, 1999, the Company borrowed $250,000 from RBB Bank, entering
into a note and Common Stock purchase agreement. As part of the agreement,
50,000 shares of Common Stock and a $250,000 promissory note bearing interest at
10% and due June 12, 1999 were issued to RBB Bank. LFC agreed to guarantee the
note. In connection with the issuance of the note, the Company also granted RBB
Bank a right of first refusal to fund any additional bridge financing needed by
the Company, to be exercised within one day of RBB Bank being notified of the
terms of any such additional bridge financing. The shares issued under this
agreement are restricted securities, and the Company agreed to include the
shares in the registration statement filed for the 6% Convertible Debentures and
other share issuances. The shares are included in the registration statement
filed with the SEC as of June 30, 1999 (SEC File No. 333-81897), which was not
yet effective as of the date of filing of this Proxy Statement.

The March 12, 1999 loan from RBB Bank was intended as a short-term bridge
loan and was originally required to be repaid from the proceeds of any aggregate
equity placements done by the Company that amounted to at least $1,000,000 in
equity financing. In April 1999, in conjunction with the closing of the Series B
Preferred Stock placement, the gross proceeds of which amounted to $1,500,000,
RBB Bank agreed to waive the right to immediate repayment of the $250,000 owed
to it. RBB Bank agreed to forbear from initiating an action against the Company
to collect the amount due until the earlier of receipt by the Company of funding
in the aggregate of at least $2,500,000 or December 1, 1999. The Company is
currently in discussions with RBB Bank regarding the disposition of the current
principal balance of $225,000.

In May 1999, RBB Bank agreed to accept a total of 227,353 shares of the
Company's Series B Preferred Stock in lieu of penalties and interest owing
through June 30, 1999 on $1,000,000 of the Company's 6% Debentures held by RBB
Bank's clients, and to waive certain prior defaults on the 6% Debentures and the
related registration rights agreement. RBB Bank also agreed not to declare the
6% Debentures in default for failure to pay interest or register the underlying
shares of Common Stock unless and until the holders of the Series B Preferred
Stock have the right to require the Company to redeem the Series B Preferred
Stock as of October 10, 1999.

On June 30, 1999, the Company filed a registration statement on Form SB-2
(SEC File No. 333-81897) in which RBB Bank is named as selling security holder
for shares of Common Stock underlying $1,000,000 of 6% Debentures, various
Common Stock purchase warrants (described above), 227,353 shares of Series B
Preferred Stock and 50,000 shares of Common Stock, all held by RBB Bank's
clients. A total of 4,127,639 shares of Common Stock are included in that
registration statement for sale by RBB Bank's clients. As of the date of this
Proxy Statement, the registration statement has not yet been declared effective.
RBB Bank has requested that upon filing an amendment to that registration
statement the Company include all shares of Common Stock underlying RBB Bank's
clients Series A Preferred Stock.

The Company is currently negotiating with the holders of the Serires B
Preferred Stock and the 6% Convertible Debentures to convert, modify or purchase
such securities. See "-- Transactions with an Investment Banking Firm and Dean
M. Leavitt."

Transactions with ADATOM, Inc.

During fiscal 1998, the Company purchased furniture and equipment in the
approximate amount of $200,000 through a company owned by Richard Barton, a
director of the Company at the time of the purchases.

- 11 -
<PAGE>

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

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), 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 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 30,1999, all Section 16(a) filing
requirements applicable to the Company's officers, directors, and ten percent
shareholders were met, except as follows: the timely filing of Form 3 by Mr.
Leavitt, the Company's current Chief Executive Officer and Chairman of the
Board.

- 12 -
<PAGE>

EXECUTIVE COMPENSATION

The following table shows all the compensation paid by the Company to its
Chief Executive Officer (the "Named Executive Officer") and certain other
officers during the fiscal years ended June 30, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
Summary Compensation Table

Annual Compensation Long Term Compensation
--------------------------------- -------------------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Principal Fiscal Salary Bonus Compen- Awards Options and Compensa-
Position Year ($) ($) sation ($) ($) Warrants(#)(7) tion ($)
------------------ ------ -------- ------ --------- ---------- ------------- ----------

<S> <C> <C> <C> <C> <C> <C> <C>
Rod L. Stambaugh, 1999 $ 130,000 - (6) - 700,000 -

President (1) (5) 1998 $ 113,333 $34,750 (6) - - -

1997 $ 79,881 - (6) - - -

Evon A. Kelly, 1999 $ 150,000 - (6) - - -

Chief Executive Officer (2) 1998 $ 131,250 - (6) - 600,000 (8) -

1997 - - - - - -

Roger L. Peirce 1999 $ 43,750 - (6) - 1,300,000 (9) -

Chief Executive Officer (3) 1998 - - - - - -

1997 - - - - - -

Dean M. Leavitt 1999 $ 21,667 - (6) - 5,375,000 -

Chief Executive Officer (4) 1998 - - - - - -

1997 - - - - - -

Robert E. Robichaud, 1999 $ 125,000 - (6) - 300,000 -

Chief Financial and 1998 $ 101,756 $10,417 (6) - 50,000 -

Accounting Officer (5) 1997 - - - - - -
</TABLE>
- -------------------

(1) Mr. Stambaugh served as President from October 1996 until August 1997
when Mr. Kelly commenced service as President.
(2) Mr. Kelly commenced service to the Company as of August 1997 and
resigned as CEO and Chairman in August 1998. He served as an employee
of the Company under an employment agreement with the Company until
August 20, 1999.
(3) Mr. Peirce served as the Company's CEO and Chairman from August 17,
1998 through March 19, 1999.
(4) Mr. Leavitt joined the Company in May 3, 1999 as CEO and Chairman of
the Board and presently serves in that capacity.

- 13 -
<PAGE>

(5) Mr. Robichaud commenced service as of September 1997. The bonus
amounts include $25,000 for Mr. Stambaugh and $10,000 for Mr.
Robichaud, which were accrued but not paid as of yet.
(6) 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 the lesser of $50,000 or 10% of his annual salary and
bonus during the year.
(7) All options were granted outside the 1992 Stock Option Plan, except
certain options issued to Mr. Stambaugh (100,000 option shares) and
Mr. Robichaud (100,000 option shares).
(8) Reflects options granted to Mr. Kelly during 1998; of that number
492,000 options had vested as of the date Mr. Kelly left the Company.
(9) Reflects options granted to Mr. Peirce during 1999; of that number
189,583 options had vested as of the date Mr. Peirce left the Company.

Option Grants in Fiscal Year Ending June 30, 1999

The following table reports information with respect to individual grants
of options to the Named Executive Officer and the other executive officers named
in the Summary Compensation Table above.

Option Grants in Last Fiscal Year
(Individual Grants)

Number of Percent of Total
Securities Options/Warrants
Underlying Granted to Exercise Or
Options/Warrants Employees in Base Price Expiration
Name Granted (#) Fiscal Year (1) ($/Share) Date
---- ----------------- --------------- ---------- -----------
<S> <C> <C> <C> <C>
Rod L. Stambaugh 100,000(4) 1.1 2.563 11/23/08

600,000(5) 6.5 0.844 5/13/09

Evon A. Kelly -- -- -- --

Roger L. Peirce (2) 1,300,000 14.1 2.563 9/1/02

Dean M. Leavitt (3) 2,687,500 29.2 0.875 5/06/09

2,687,500 29.2 3.000 5/06/09

Robert E. Robichaud 50,000(6) 0.5 2.563 11/23/08

250,000(7) 2.7 0.844 05/13/09
</TABLE>

- -------------------

(1) A total of 9,215,000 options and warrants were granted to employees,
including executive officers, during fiscal year 1999.

- 14 -
<PAGE>

(2) On August 21, 1998, the Company granted options to Mr. Peirce to
purchase 1,000,000 shares of the Common Stock at $3.438 per share the
estimated fair market value at date of grant. In November 1998, the
Company and Mr. Peirce agreed to cancel the original 1,000,000 share
option and the Company granted Mr. Peirce an option to purchase
1,300,000 shares of Common Stock, exercisable at $2.563 per share. As
of March 19, 1999, the date Mr. Peirce left the Company, a total of
189,583 of the options were fully vested. All options granted to Mr.
Peirce were outside the Company's Amended 1992 Stock Option Plan (the
"Plan").
(3) All warrants granted to Mr. Leavitt were outside the Plan.
(4) 100,000 options were granted to Mr. Stambaugh under the Plan.
(5) 600,000 option were granted to Mr. Stambaugh outside the Plan.
(6) 50,000 options were granted to Mr. Robichaud under the Plan.
(7) 250,000 options were granted to Mr. Robichaud outside of the Plan.

As reflected in the following table, 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 Common Stock.

<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

Number of Securities Value of
Underlying Unexercised Unexercised In-the-
Shares Value Options and Warrants at Money Options and
Acquired on Realized ($) FY-End (#) Warrants at FY-End ($)
Name Exercise (#) (1) Exercisable/Unexercisable Exercisable/Unexercisable(2)
---- ------------ ------------ ------------------------- ----------------------------

<S> <C> <C> <C> <C>
Rod L. Stambaugh -- -- 479,990/375,010 $22,352/$0

Evon A. Kelly -- -- 456,000/36,000(3) 0/0

Roger L. Peirce -- -- 189,583/0 0/0

Dean M. Leavitt -- -- 470,313/4,904,687 0/0

Robert E. Robichaud -- -- 171,913/178,088 0/0
</TABLE>
- ------------------

(1) Calculated by subtracting the average traded price of the underlying
shares of the Common Stock on the date of exercise less the exercise
price of the option.
(2) Represents the difference between $0.66, the average traded price of
the Common Stock at fiscal year end, and the exercise price of the
option.
(3) In accordance with Mr. Kelly's employment agreement, a maximum of
492,000 of the 600,000 shares granted may become exercisable through
the end of his one-year employment term.

- 15 -
<PAGE>

Other Executive Compensation Paid During Fiscal 1999

Roger L. Peirce served as the Company's Chief Executive Officer from August
17, 1998 through March 19, 1999 pursuant to an employment agreement with the
Company. He was paid salary at the rate of $75,000 per year. He received a total
of $43,750 in compensation during his tenure with the Company. On August 21,
1998, the Company granted options to Mr. Peirce to purchase 1,000,000 shares of
Common Stock at $3.438 per share the estimated fair market value at date of
grant. In November 1998, the Company and Mr. Peirce agreed to cancel the
original 1,000,000 share option and the Company granted Mr. Peirce an option to
purchase 1,300,000 shares of the Common Stock, exercisable at $2.563 per share,
the estimated fair market value of the grant, for ten years from November 23,
1998. Options to purchase 39,016 shares were granted as incentive stock options
under the Company's Amended 1992 Stock Option Plan (the "Plan") and those
options are subject to all of the terms and conditions of incentive stock
options issued under the Plan. The balance of the options were issued outside
the Plan as "non-qualified options." They have the same exercise terms as the
incentive options issued under the Plan but expire on the earlier of September
1, 2002 or one year from the date Mr. Peirce ceases to serve the Company in any
capacity, including as an employee, officer, director or consultant. All of the
options vested immediately upon issuance but are subject to the Company's right
to repurchase the shares at the price Mr. Peirce paid for them. The Company's
right to repurchase the shares expires over a 48 month period at the rate of
2.08% of the shares per month. The repurchase rights of the Company terminate
completely (thereby vesting Mr. Peirce's right in and to 100% of the shares) in
the event of a change in control of the Company. As of March 19, 1999, the date
Mr. Peirce left the Company, a total of 189,583 of the options were vested and
thus beyond the Company's right of repurchase.

Current Employment Agreements and Change In Control
Provisions Applicable To Executive Officers and Directors

Dean M. Leavitt. The Company has an employment agreement with Dean M.
Leavitt to act as the Company's Chief Executive Officer and Chairman of the
Board. The agreement became effective as of May 3, 1999 and has a term of two
years, subject to automatic renewal for one-year terms if not terminated by
either party at least one month prior to the end of each term. Mr. Leavitt is to
receive salary at the rate of $130,000 per year during the first 90 days of the
agreement and $200,000 per year thereafter, plus reimbursement of certain
customary business expenses. If Mr. Leavitt is terminated without "cause" or
determines to leave for "good reason" (as these terms are defined in the
agreement), Mr. Leavitt is entitled to severance pay for one year, payable at
regular pay intervals, at a rate of his base salary at the time of termination
for any part of the severance period falling within the initial two-year term or
any extension term, and at a negotiated rate for any payments due after such
term, but no less than 50% of his base salary at the time of termination. The
Company also issued warrants to Mr. Leavitt to purchase up to 5,375,000 shares
of the Common Stock. Half of the warrants, or 2,687,500, are exercisable at
$.875 per share, the exercise price being the estimated fair market value of the
underlying stock on May 3, 1999, the date of grant, and vest 10% upon grant with
the balance vesting over the following 12 months. The second half of the
warrants, or 2,687,500, have an original exercise price of $3.00 per share and
vest 50% one year following the grant date with the remaining balance vesting
over the following six months. As a condition to the completion of the proposed
equity private placement, the Company has agreed to reprice the 2,687,500
warrants to the market price of the Common Stock on December 23, 1999. See
"Certain Relationships and Related Transactions--Transactions with an Investment

- 16 -
<PAGE>

Banking Firm and Dean M. Leavitt." All warrants held by Mr. Leavitt immediately
prior to termination of employment within six months of a "change of control" or
upon a termination by the Company without "cause" or by Mr. Leavitt for "good
reason" become immediately vested and exercisable. A "change of control" is
defined as (a) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
the Company's capital stock are converted into cash, securities or other
property other than a consolidation or merger of the Company in which the
holders of the Company's voting stock immediately prior to the consolidation or
merger shall, upon consummation of the consolidation or merger, own at least 50%
of the voting stock of the surviving corporation, or any sale, lease, exchange
or other transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all of the
assets of the Company; or (b) more than 75% of the Board (including Mr. Leavitt)
is replaced with new directors, except that this shall not apply to any new
Directors sponsored by Mr. Leavitt or voted in favor of by him in constituting a
slate of directors otherwise. In case the Company offers any shares of its
Common Stock, or any rights, options, or warrants to subscribe for or purchase
Common Stock (or securities convertible into or exchangeable for Common Stock),
as part of a financing of the Company (and not pursuant to an acquisition,
merger, incentive or compensatory arrangement approved by the Board), the Holder
shall be entitled to subscribe for such Common Stock, or any rights, options, or
warrants to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable for Common Stock), at such price as shall be so offered in
proportion to the holdings the Holder would have had this Warrant been exercised
immediately prior to the offerings in relationship to all of the issued and
outstanding equity securities of the Company. Mr. Leavitt has also entered into
an indemnification agreement with the Company pursuant to which the Company has
agreed to provide the broadest possible indemnification that is available under
Colorado law.

Rod L. Stambaugh. The Company had an employment agreement under which it
paid Rod L. Stambaugh, its former President, $130,000 per year. Mr. Stambaugh
may also be granted bonus compensation and/or stock options as approved by the
Board from time to time. It is anticipated that Mr. Stambaugh will be entitled
to participate in any performance-based bonus plan approved by the Board. In
November 1998, Mr. Stambaugh was granted options to purchase 100,000 shares of
Common Stock at $2.563 per share, with a four-year vesting schedule of 25% per
year. Mr. Stambaugh was granted non-qualified options to purchase an additional
600,000 shares of Common Stock exercisable at $0.813 per share on May 13, 1999,
which vest at the rate of 50% upon grant with the balance vesting over the
following 12 months. Mr. Stambaugh's employment with the Company was terminated
on December 6, 1999.

Evon A. Kelly. The Company had an employment agreement with Evon A. Kelly,
its former Chief Executive Officer, pursuant to which Mr. Kelly received
$150,000 in cash compensation per year. The agreement expired on August 20,
1999. Mr. Kelly was also granted a non-qualified stock option to purchase up to
600,000 shares of the 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.
As of August 20, 1999, a total of 492,000 options had vested. 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
balance of Mr. Kelly's options expired 90 days after the end of his term of
employment with the Company.

- 17 -
<PAGE>

Robert E. Robichaud. The Company has an employment agreement with Robert E.
Robichaud, its Chief Financial and Accounting Officer. Mr. Robichaud receives a
salary of $125,000 per year and received a bonus of $10,417 for fiscal year 1998
which was accrued, but not paid. Mr. Robichaud did not receive a bonus for
fiscal year 1999. Mr. Robichaud may also be entitled to an annual bonus of up to
$25,000. Mr. Robichaud is entitled to severance of one year's salary if he is
terminated without cause. As of September 5, 1997, Mr. Robichaud was granted
options to purchase up to 50,000 shares of Common Stock at $3.95 per share under
the Plan, with a vesting schedule of 10% as of his date of hire (September 5,
1997) and 3% per month thereafter. In November 1998, Mr. Robichaud was granted
additional options to purchase 50,000 shares of Common Stock at $2.563 per
share, with a four-year vesting schedule of 25% per year. Pursuant to the Plan,
all options granted to employees immediately vest and become exercisable upon a
merger, acquisition, sale of all assets or other change in control of the
Company. Mr. Robichaud was granted non-qualified options to purchase an
additional 250,000 shares of Common Stock exercisable at $0.813 per share on May
13, 1999, which vest at the rate of 50% upon grant with the balance vesting over
the following 12 months.

Proposed Executive Bonus Plan

Management of the Company is in the process of formulating a
performance-based bonus plan for the Company's executive officers and key
personnel, which may include provisions for cash bonus compensation as well as
stock based compensation under the Plan or otherwise. Other than certain
contingent bonus compensation that has been offered to certain executive
officers of the Company as described above, and which is subject to adoption of
criteria by the Board of Directors, the Board has not yet approved the
parameters of such a bonus plan.

Amended 1992 Stock Option Plan

General. 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 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.

Grant of Options. Options may be granted under the Plan for a total of
2,680,000 shares of Common Stock. The Board increased the number of shares
underlying options available to the Plan to 2,680,000 from 880,000 on August 6,
1997. This amendment was approved by shareholders at the Annual Meeting of
Shareholders held February 6, 1998. 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 25% one year from date of grant
and 25% on each yearly anniversary thereafter. An option to purchase 20,000
shares at fair market value is automatically issued under the Plan to each

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<PAGE>

non-employee director as of the director's anniversary date. Options granted to
non-employee directors' vest 25% at each six-month anniversary thereafter.
Information regarding options presently outstanding under the Plan is set forth
below.

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 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 the entire 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 Applicable to Options Granted Under the Plan

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 the 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 the holder; 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.

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<PAGE>

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

The Company registered 880,000 shares of Common Stock underlying options
issuable under the Plan with the SEC under a Form S-8 Registration Statement
that was effective as of September 1995. The Company intends to file another
registration statement on Form S-8 in the near future to register the additional
shares issuable pursuant to the exercise of options that have been or may be
issued under the Plan.

In addition, the Company intends to register on Form S-8 the shares
underlying option grants issued outside the Plan covering 189,583 shares of
Common Stock for Roger L. Peirce, 600,000 shares for Rod L. Stambaugh and
250,000 shares for Robert E. Robichaud, to the extent the options remain
outstanding and exercisable at the time the Company files the registration
statement.

Options Presently Outstanding Under the Plan

As of January ___, 2000 there were a total of ______ [to be provided]
options outstanding under the Plan, ______ [to be provided] of which were vested
at that date. Of the total options outstanding at January __, 2000, ______ [to
be provided] were held by directors (two of whom are also officers of the
Company), ______ [to be provided] of which were vested; ______ [to be provided]
were held by other executive officers, ______ [to be provided] of which were
vested; and ______ [to be provided] were held by employees or consultants of the
Company, ______ [to be provided] of which were vested. The weighted average per
share exercise price of all options outstanding under the Plan as of January __,
2000, was $2.25.

Director's Compensation

Directors who are not employees of the Company receive an annual stock
option to purchase 20,000 shares of Common Stock. The grant is made pursuant to
the 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
regular arrangement for compensation of directors. A total of 80,000 stock
options were granted to four non-employee directors during the fiscal year ended
June 30, 1999.

On November 23, 1998, the Company's outside directors were each granted
50,000 non-qualified stock options exercisable at $2.563 per share for services
rendered to the Company. The options vest monthly over a period of 36 months,
assuming the director remains a director of the Company through the vesting
period.

On August 5, 1999, the Company's outside directors were each granted 45,000
non-qualified stock options exercisable at $1.188 per share for services
rendered to the Company. The options vested 100% upon grant.

Report On Repricing Of Stock Options

On November 23, 1998, the Board terminated options to purchase 1,000,000
shares of Common Stock at an exercise price of $3.438 per share granted on
August 21, 1998 to Roger L. Peirce, the Company's Chief Executive Officer at the
time, and replaced them with options to purchase 1,300,000 shares of Common
Stock, exercisable at $2.563 per share. The market price on November 23, 1998
was $2.563 per share. The original options were intended to promote continuity
of employment of Mr. Peirce as a key member of Company management, and to
increase incentive and personal interest in the welfare of the Company. The
repriced options were intended to accomplish the foregoing objectives.

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<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth certain information regarding the beneficial
ownership of the Company's Common Stock and Series B Preferred Stock as of
December 31, 1999, by (i) each Director, (ii) the current Chief Executive
Officer and each person who served in that capacity during the fiscal year,
(iii) the Chief Financial Officer, (iv) 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 (v) 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 December 31,
1999 upon the exercise of warrants, options or other rights exercisable for, or
convertible into, common stock. As of December 31, 1999, there were a total of
22,142,977 shares of common stock and 1,954,705 shares of Series B Preferred
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 800, Emeryville, CA
94608.

Certain Holders of Common Stock
<TABLE>
<CAPTION>

Shares of Common Stock
Beneficially Owned (1)
---------------------
Number
of Percent of
Name of Beneficial Owner Shares Class
- ------------------------ ------ ----------
<S> <C> <C>
Dean M. Leavitt 2,082,813 (2) 8.6%
Chester N. Winter 199,281 (3) *
Alvin C. Rice 89,000 (4) *
Robert E. Robichaud 304,167 (5) 1.4%
John M. Liviakis 7,443,458 (6) 30.4%
495 Miller Avenue, 3rd Floor
Mill Valley, CA 94941
Robert B. Prag 1,422,500 (7) 6.4%
2455 El Amigo Road
Del Mar, CA 92014
RBB Bank Aktiengesellschaft 1,444,961 (8) 6.1%
Burgring 16,
8010 Graz, Austria
Bold Street, LLC 1,836,885 (9) 7.7%
c/o Thomson Kernaghan & Co.
365 Bay Street, Suite 1000, 10th Floor.
Toronto, Ontario M5H2V2
All directors and executive officers as a group (4 persons) 2,675,260 (10) 10.8%
</TABLE>

- ------------------

* Represents less than 1% of outstanding shares.

(1) Except as specifically indicated in the footnotes to this table, 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. Beneficial ownership

- 21 -
<PAGE>

is determined in accordance with the rules of the SEC. 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 December 31, 1999,
are deemed outstanding. Such shares, however, are not deemed outstanding
for the purpose of computing the percentage ownership of any other person.
The Company is currently in negotiation with the holders of the Series B
Preferred Stock and the 6% Convertible Debentures to convert, modify or
purchase such securities. See "Certain Relationships and Related
Transactions -- Transactions with an Investment Banking Firm and Dean M.
Leavitt."
(2) Includes 2,082,813 shares which Mr. Leavitt has the right to acquire within
60 days of December 31, 1999, through the exercise of warrants to purchase
Common Stock. Does not include warrants to purchase 3,292,188 shares of
Common Stock which are not exercisable prior to March 1, 2000 and a warrant
granted in connection with the Bridge Financing to purchase 1,363,637
shares of Common Stock which is not exercisable until the approval by the
shareholders of an Amendment to increase the number of authorized shares of
Common Stock.
(3) Includes 186,781 shares which Mr. Winter has the right to acquire within 60
days of December 31, 1999, through the exercise of stock options.
(4) Represents 89,500 shares which Mr. Rice has the right to acquire within 60
days of December 31, 1999, through the exercise of stock options.
(5) Represents 304,167 shares which Mr. Robichaud has the right to acquire
within 60 days of December 31, 1999, through the exercise of stock options.
(6) The information shown is based upon Schedule 13D (Amendment No. 6) dated
May 24, 1999, filed on behalf of LFC, John M. Liviakis and Renee A.
Liviakis and information known to the Company based on its consulting
agreements with LFC and the number of shares issued for the conversion of
debt (in the form of notes payable due LFC) to equity. John M. and Renee A.
Liviakis are the owners of LFC. The number of shares shown includes a total
of 3,523,423 shares of common stock owned by Mr. Liviakis as an individual,
plus 1,132,500 shares of common stock issued to LFC pursuant to three
consulting agreements between the Company and LFC effective as of July 25,
1997, August 1,1998 and July 1, 1999. The Company issued 225,000 shares,
217,500 shares and 690,000 shares to LFC under the three agreements,
respectively. Also included are 2,344,458 shares issued to LFC upon
conversion of $1,990,000 principal amount of debt (in the form of notes
payable due LFC) to common stock pursuant to an agreement entered into as
of March 19, 1999, and 443,077 shares issued to John M. Liviakis to replace
shares transferred to the finder in conjunction with the Series B
financing. See "- Certain Relationships and Related Transactions -
Transactions with Liviakis Financial Communications, Inc. ("LFC") and
Certain LFC Affiliates"
(7) Mr. Prag is a former executive officer of LFC. The shares of common stock
are owned by Mr. Prag as an individual. See "- Certain Relationships and
Related Transactions - Transactions with Liviakis Financial Communications,
Inc. ("LFC") and Certain LFC Affiliates"
(8) RBB Bank is the record owner, as agent for various of its clients, of the
securities included in the table. Includes 1,024,590 shares of common stock
issuable upon the conversion of $1,000,000 of the Company's 6% Convertible
Debentures due July 21, 2000, and 232,944 shares issuable upon conversion
of 227,353 shares of Series B Preferred Stock, based on the Market Price
and the applicable discount to Market Price as of December 31, 1999. The
number shown also includes: 50,000 shares of common stock underlying a
common stock purchase warrant issued to RBB Bank in conjunction with the
purchase of the 6% Convertible Debentures; 20,000 shares of common stock
underlying a common stock purchase warrant issued as interest on a bridge
loan; and 117,427 shares of common stock underlying common stock purchase
warrants issued in conjunction with a partial redemption of Series A
Preferred Stock, all of which are presently exercisable. See "- Certain
Relationships and Related Transactions - Transactions with RBB."

- 22 -
<PAGE>

(9) Represents 1,536,885 shares issuable upon conversion of the Company's
Series B Preferred Stock, based on the Market Price and the applicable
discount to Market Price as of December 31, 1999, and 300,000 shares of
common stock underlying common stock purchase warrants issued to Bold
Street in conjunction with the purchase of Series B Preferred Stock.
(10) Includes all shares underlying options and warrants as described in
footnotes (2) - (5) of this table.

Certain Holders of Series B Preferred Stock (1)

Stock Beneficially Owned
----------------------------
Name of Beneficial Owner Number of
- ------------------------ Shares
Series B Percent of
Preferred Class
---------- ----------
Dean M. Leavitt -- --
Robert E. Robichaud -- --
Chester N. Winter -- --
Alvin C. Rice -- --
All directors and executive
officers as a group (4 persons) -- --

RBB Bank Aktiengesellschaft (2) 227,353 11.6%
Burgring 16
8010 Graz Austria

Cuttyhunk Fund Limited (3) 90,941 4.7%
73 Front Street
Hamilton Hm 12 Bermuda

Tonga Partners LP (3) 136,411 7.0%
c/o Cannell Capital Management
600 California Street 14th, Floor.
San Francisco, CA 94108

Bold Street, LLC 1,500,000 76.7%
c/o Thomson Kernaghan & Co.
365 Bay Street, Suite 1000, 10th Floor.
Toronto, Ontario M5H 2V2
- ------------------

(1) To the Company's knowledge, except as otherwise indicated in the footnotes
to this table, all persons named in this table have sole voting and
investment power with respect to all shares of Series B Preferred Stock
shown as beneficially owned by them, subject to community property laws
where applicable. Beneficial ownership is determined in accordance with the
rules of the SEC. There are no shares of Series B Preferred Stock, which
are subject to options, warrants or rights held by any person. The Series B
Preferred Stock is not publicly traded or registered under the Exchange
Act. The Series B Preferred Stock does not generally have voting rights
except as specifically provided under Colorado law.
(2) RBB Bank Aktiengesellschaft is the record owner of the shares. RBB holds
the shares as agent for various individuals who share voting and investment
power over the shares. The Company has been advised that no single
individual in the RBB Bank client group owns 5% or more of the shares of
Series B Preferred Stock.
(3) The Company has been advised that voting and investment power over the
shares is exercisable by Cannell Capital Management, located at 600
California Street, 14th Floor, San Francisco, CA, 94108.

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<PAGE>

PROPOSALS FOR VOTING

PROPOSAL 1: ELECTION OF DIRECTORS

The Board of Directors has nominated Dean M. Leavitt, Chester N. Winter and
Alvin C. Rice for election as directors of the Company to serve until the next
annual or special meeting of shareholders at which a new Board will be elected
and their successors shall have been elected and qualified.

Vote Required

The approval of a plurality of the shares present in person or represented
by Proxy, assuming a quorum at the Annual Meeting, is required for election of
the nominees as directors. Cumulative voting in the election of directors is not
allowed. See "Shares Outstanding, Voting Rights and Proxies," above.

The Board of Directors Recommends a Vote for Election to the Board of
Directors of the Company for Each of the Nominees.

PROPOSAL 2: APPROVAL OF AMENDMENT OF ARTICLES OF INCORPORATION TO
INCREASE THE AUTHORIZED SHARE CAPITAL

The Board has determined that it would be advisable to amend Section A of
Article FOURTH of the Company's Articles of Incorporation to increase the
authorized share capital of the Company such that the aggregate number of shares
which the Company shall have the authority to issue shall be increased from
55,000,000 to 225,000,000, of which 200,000,000 shares shall be designated
"Common Stock" and 25,000,000 shares shall be designated "Preferred Stock" (the
"Amendment").

The Board has unanimously adopted and declared it advisable and unanimously
recommends to the Company's shareholders that Section A of Article FOURTH of the
Company's Articles of Incorporation be amended as described. A copy of Section A
of Article FOURTH of the Company's Articles of Incorporation, as proposed to be
amended by the resolution adopted by the Board is attached as Annex A.

INCREASE IN NUMBER OF AUTHORIZED SHARES OF SHARE CAPITAL

General

The Board has approved, subject to shareholder approval at the Annual
Meeting, an increase in the number of authorized shares of Common Stock from
40,000,000 to 200,000,000 and an increase in the number of authorized shares of
Preferred Stock from 15,000,000 to 25,000,000, which may be issued in one or
more series and as to which the Board is authorized to determine the voting
powers, designations, preferences, and rights and the qualifications,
limitations, and restrictions thereof, of each such series, including dividend
rates, conversion prices, redemption prices, liquidation preferences and voting
and other rights. As of February 3, 2000, the record date for the Annual
Meeting, [To be provided] __________ shares of Common Stock were outstanding,
[To be provided] _________ shares were reserved for issuance under the Plan,
15,000,000 shares will be reserved for issuance under the Option Plan (if such
plan is approved by shareholders at the Annual Meeting), ________ shares are
issuable upon conversion of the ________ shares of Series B Preferred Stock
outstanding, ________ shares are issuable upon conversion of the 6% Convertible
Debentures and _______ shares are reserved for issuance in relation to
outstanding options and warrants. Accordingly, there are only [To be provided]
________ authorized shares of Common Stock unissued and not reserved for future
issuance.

- 24 -
<PAGE>

The primary purpose of the Amendment is to provide the Company with enough
Common Stock to satisfy its obligations under certain warrants issued in
connection with the Bridge Financing to the lender and Dean M. Leavitt and to
provide the flexibility to raise additional capital from the sale of shares of
Common Stock and Preferred Stock (in a public offering, private placement or
otherwise) and to take advantage of possible future opportunities for which the
issuance of additional shares of Common Stock or Preferred Stock may be deemed
advisable without the delay and expense incident to calling a special meeting.
The Board considers the proposed Amendment desirable because it would provide
the Company with the ability to take advantage of future opportunities for the
issuance of equity in connection with financings, possible future acquisitions,
other programs to facilitate expansion and growth and for other general
corporate purposes, including stock dividends, stock splits and employee benefit
plans, without the delay and expense incident to the holding of a special
meeting of shareholders to consider any specific issuance. Authorized but
unissued shares may be issued at such time or times, to such person or persons
and for such consideration as the Board of Directors determines to be in the
best interests of the Company, without further authorization from the
shareholders except as may be required by the rules of the NASDAQ or any stock
exchange on which the Common Stock is then listed.

The authorization of additional shares of Common Stock will not, by itself,
have any effect on the rights of holders of existing shares. Any new shares of
Common Stock, when issued, would have the same rights and privileges as the
shares of Common Stock presently outstanding, and would be available for
issuance at such time and on such terms as the Board of Directors may consider
appropriate. Depending on the circumstances, issuance of additional shares of
Common Stock could affect the existing holders of shares by diluting the voting
power of the outstanding shares. The shareholders do not have pre-emptive rights
to purchase additional shares of Common Stock nor will they as a result of this
proposal.

To the extent that any shares of Preferred Stock may be issued, such
Preferred Stock may (a) have priority over the Common Stock with respect to
dividends and the assets of the Company upon liquidation; (b) have significant
voting power; (c) provide for representation of the holders of the Preferred
Stock on the Company's Board upon the occurrence of certain events; and (d)
require the approval of the Preferred Stock for the taking of certain corporate
actions, such as mergers.

Except for (a) the contemplated private placement of equity and the
13,636,363 shares underlying the warrant issued to the lender and the 1,363,637
shares underlying the warrant issued to Mr. Leavitt in the Bridge Financing
described under "Certain Relationships and Related Transactions -- Transactions
with an Investment Banking Firm and Dean M. Leavitt," (b) the 15,000,000 shares
to be reserved for issuance if Proposal 3 "Adoption of the Company's 2000 Stock
Option Plan" is adopted and (c) the Company's negotiations with the holders of
the Series B Preferred Stock and the 6% Convertible Debentures, see "Certain
Relationships and Related Transactions -- Transactions with an Investment
Banking Firm and Dean M. Leavitt," there are no other current negotiations,
plans, commitments, agreements or understandings relating to the issuance of any
additional shares of Common Stock or Preferred Stock. The timing of the actual
issuance of additional shares will depend upon market conditions, the specific
purpose for which the stock is to be issued and other similar factors.

Possible Anti-Takeover Effects of Amendment

The issuance of additional shares of Common Stock or Preferred Stock may be
deemed to have an anti-takeover effect since such shares may be used, under
certain circumstances, to create voting impediments to frustrate persons seeking
to effect a takeover or otherwise gain control of the Company. The increase in
authorized Common Stock or Preferred Stock may also be viewed as having the
effect of discouraging an attempt by another person or entity, through the
acquisition of a substantial number of shares of the Common Stock, to acquire

- 25 -
<PAGE>

control of the Company, since the issuance of additional shares may be used to
dilute such person's ownership of shares of the Company's voting stock.
Moreover, "blank check" preferred stock may be used for adoption of a
shareholder rights plan or "poison pill."

To the extent that any shares of Preferred Stock (including Preferred Stock
convertible into Common Stock) may be issued on other than a pro rata basis to
current shareholders, the present ownership position of current shareholders may
be diluted. Such shares also could be used to dilute the stock ownership of
persons seeking to obtain control of the Company, and thereby defeat a possible
takeover attempt which (if shareholders were offered a premium over the market
value of their shares) might be viewed as being beneficial to shareholders of
the Company. Management of the Company is not aware of any possible takeover
attempts at this time.

The Amendment has not been proposed as an anti-takeover measure nor is the
Board aware of any offers to acquire control of the Company. It should be noted
that any action taken by the Company to discourage an attempt to acquire control
of the Company may result in shareholders not being able to participate in any
possible premiums which may be obtained in the absence of anti-takeover
provisions. Any transaction which may be so discouraged or avoided could be a
transaction that the Company's shareholders might consider to be in their best
interests. However, the Board has a fiduciary duty to act in the best interests
of the Company's shareholders at all times.

Board of Directors Reservation of Rights

If the Amendment is approved by the shareholders, the Amendment will become
effective upon the filing of Articles of Amendment to the Articles of
Incorporation of the Company with the Colorado Secretary of State. The Board
reserves the right, notwithstanding shareholder approval and without further
action by the shareholders, to elect not to proceed with the Amendment, if at
any time prior to filing Articles of Amendment to the Articles of Incorporation
with the Secretary of State of the State of Colorado the Board in its sole
discretion, determines that the Amendment is no longer in the best interests of
the Company and its shareholders. In addition, the Board reserves the right to
delay filing the Articles of Amendment to the Articles of Incorporation for up
to 12 months following shareholder approval of the Amendment at the Annual
Meeting. However, at the present time, the Board intends to proceed with the
Amendment as presented herein without delay.

Vote Required

The approval of a majority of the outstanding shares of the Company
entitled to vote on the matter is required to amend the Articles of
Incorporation. Proxies solicited by the Board will be voted in favor of the
adoption of Proposal 2 to amend Paragraph A of Article FOURTH of the Articles of
Incorporation unless otherwise indicated thereon.

John M. Liviakis, owner of 7,443,458 shares of Common Stock has agreed to
vote in favor of such proposal. In the event that prior to the Annual Meeting
Mr. Leavitt acquires the 2,082,813 shares of Common Stock underlying the
warrants granted to him, he has agreed to vote such shares in favor of this
proposal.

The Board Recommends a Vote for the Approval of the Amendment to the Articles of
Incorporation, Which is Designated as Proposal 2 on the Enclosed Proxy Card.

- 26 -
<PAGE>

PROPOSAL 3: ADOPTION OF THE COMPANY'S 2000 STOCK OPTION PLAN

The Board has recommended, and at the Annual Meeting the shareholders will
be asked to approve, the adoption of the Option Plan. A description of the
Option Plan, which Option Plan is attached hereto as Annex B, appears below.

Purpose of the Option Plan

The purpose of the Option Plan is to provide a means whereby selected
employees, officers, directors, agents, consultants and independent contractors
of the Company or of any parent or subsidiary (as defined in subsection 5.7 of
the Option Plan and referred to hereinafter as "related corporations") thereof,
may be granted incentive stock options and/or non-qualified stock options to
purchase Common Stock (as defined in Section 3 of the Option Plan), in order to
attract and retain the services or advice of such employees, officers,
directors, agents, consultants and independent contractors and to provide added
incentive to them by encouraging stock ownership in the Company.

The Option Plan

The Option Plan provides for the grant of options to purchase up to
15,000,000 shares of Common Stock to selected employees, officers, directors,
agents, consultants and independent contractors of the Company. Options may be
either "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code (the "Code"), or non-qualified options. Incentive stock
options may be granted only to any individual who, at the time the option is
granted, is an employee of the Company or any related corporation, while
non-qualified options may be granted to any director, employee, officer, agent,
consultant or independent contractor of the Company or any related corporation,
whether an individual or an entity.

The Option Plan will be administered by the Board, except to the extent the
Board delegates its authority to a committee of the Board to administer the
Option Plan. The administrator of the Option Plan shall hereinafter be referred
to as the "Plan Administrator." Any party to whom an option is granted under the
Option Plan shall be referred to hereinafter as an "Optionee."

The maximum number of shares that may be purchased pursuant to the exercise
of each option and the price per share at which such option is exercisable (the
"Exercise Price") shall be established by the Plan Administrator, provided that
the Plan Administrator shall act in good faith to establish the exercise price
which shall be not less than the fair market value per share of the Common Stock
at the time the option is granted with respect to incentive stock options and
not less than par value per share of the Common Stock at the time the option is
granted with respect to nonqualified stock options and also provided that, with
respect to incentive stock options granted to greater than 10% shareholders, the
exercise price shall be as required by Section 6 of the Option Plan. In
addition, no individual may be granted options under the Option Plan to purchase
more than 5,000,000 shares of Common Stock during any one year, subject to
adjustment as set forth in Section 7 of the Option Plan.

Options granted under the Option Plan and the rights and privileges
conferred hereby may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than (i) by will or
by the applicable laws of descent and distribution, (ii) pursuant to a qualified
domestic relations order as defined in Section 414(p) of the Code, or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder or (iii) as otherwise determined by the Plan Administrator and set
forth in the applicable option agreement. Any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any option under this Option Plan or
of any right or privilege conferred hereby, contrary to the Code or to the

- 27 -
<PAGE>

provisions of this Option Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby shall be null and void.
The designation by an Optionee of a beneficiary does not, in and of itself,
constitute an impermissible transfer.

If the Optionee's relationship with the Company or any related corporation
ceases for any reason other than termination for cause, death or total
disability, and unless by its terms the option sooner terminates or expires,
then the Optionee may exercise, for a three-month period, that portion of the
Optionee's option which is exercisable at the time of such cessation, but the
Optionee's option shall terminate at the end of the three-month period following
such cessation as to all shares for which it has not theretofore been exercised,
unless, in the case of a nonqualified stock option, such provision is waived in
the agreement evidencing the option or by resolution adopted by the Plan
Administrator within 90 days of such cessation. If, in the case of an incentive
stock option, an Optionee's relationship with the Company or related corporation
changes (i.e., from employee to non-employee, such as a consultant), such change
shall constitute a termination of an Optionee's employment with the Company or
related corporation and the Optionee's incentive stock option shall become a
non-qualified stock option.

Options under the Option Plan must be issued within 10 years from the
effective date of the Option Plan which will be March 7, 2000 if the
shareholders of the Company approve the adoption of the Option Plan. Stock
options granted under the Option Plan cannot be exercised more than 10 years
from the date of grant. Stock options issued to a 10% Shareholder are limited to
five-year terms. Payment of the option price shall be made in full at the time
the notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check or personal check (unless at the time of
exercise the Plan Administrator in a particular case determines not to accept a
personal check).

The Plan Administrator can determine at the time the option is granted for
incentive stock options, or at any time before exercise for nonqualified stock
options, that additional forms of payment will be permitted. To the extent
permitted by the Plan Administrator and applicable laws and regulations
(including, but not limited to, federal tax and securities laws and regulations
and state corporate law), an option may be exercised by delivery of shares of
stock of the Company held by an Optionee having a fair market value equal to the
exercise price, such fair market value to be determined in good faith by the
Plan Administrator; delivery of a properly executed exercise notice, together
with irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the Company the
amount of sale or loan proceeds necessary to pay the exercise price and any
federal, state or local withholding tax obligations that may arise in connection
with the exercise; or delivery of a properly executed exercise notice together
with instructions to the Company to withhold from the shares that would
otherwise be issued upon exercise that number of shares having a fair market
value equal to the option exercise price.

Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the Option Plan.

Unless sooner terminated by the Board, this Option Plan shall terminate ten
years from the earlier of (a) the date on which this Option Plan is adopted by
the Board or (b) the date on which this Option Plan is approved by the
shareholders of the Company. No option may be granted after such termination or
during any suspension of this Option Plan. The amendment or termination of this
Option Plan shall not, without the consent of the option holder, alter or impair
any rights or obligations under any option theretofore granted under this Option
Plan.

- 28 -
<PAGE>

The Board may at any time suspend, amend or terminate this Option Plan,
provided that except as set forth in Section 7 of the Option Plan, the approval
of the holders of a majority of the Company's outstanding shares of voting
capital stock present and entitled to vote at any meeting is necessary for the
adoption by the Board of any amendment which will: (a) increase the number of
shares which are to be reserved for the issuance of options under the Option
Plan; (b) permit the granting of stock options to a class of persons other than
those presently permitted to receive stock options under the Option Plan; or (c)
require shareholder approval under applicable law, including Section 16(b) of
the Exchange Act.

It is estimated that approximately 26 individuals (21 employees, three
officers and two outside directors) are currently eligible to participate in the
Option Plan.

Registration of Shares Issued Under Option Plan

The Company intends that the 15,000,000 shares to be reserved for and
issued under the Option Plan, for which approval is now sought, may be
registered under the Securities Act. Such registration, if completed, would in
most cases permit the unrestricted resale in the public market of shares issued
pursuant to the Option Plan.

New Plan Benefits - The Option Plan

NEW PLAN BENEFITS

U.S. Wireless Data, Inc. 2000 Stock Option Plan

Name and Position Dollar Value ($) Number of Units
- ----------------- --------------- ---------------

Dean M. Leavitt - Chief Executive 2,500,000
Officer and Chairman of the Board

Subject to shareholder approval of the Option Plan, the Company has issued
options to purchase ______ shares of Common Stock under the Option Plan,
including options to purchase _________ shares of Common Stock to the Company's
Chief Executive Officer and Chairman of the Board, _________ and _________.
Except as disclosed above, the Company has not yet issued any options under the
Option Plan to any current executive officer or any current director who is not
an executive officer. Except as disclosed above, the Company does not currently
know nor is it determinable the number of additional options that the Company
will grant under the Option Plan to any of the aforementioned persons.

Certain Federal Income Tax Consequences of the Option Plan Under Current Law

An optionee will recognize no taxable income at the time an option is
granted.

An optionee will recognize no taxable income at the time of exercise of an
incentive stock option. If the optionee makes no disposition of the acquired
shares within two years after the date of grant of the incentive stock option,
or within one year after the exercise of such option, the employee will
recognize no taxable income and any gain or loss that is realized on a
subsequent disposition of such shares will be treated as long-term capital gain
or loss. As to options exercised, the excess, if any, of the fair market value
of the shares on the date of exercise over the option price will be an item of
tax preference for purposes of computing the alternative minimum tax.

- 29 -
<PAGE>

If the foregoing holding period requirements are not satisfied, the
optionee will realize (i) ordinary income for federal income tax purposes in the
year of disposition in an amount equal to the lesser of (a) the excess, if any,
of the fair market value of the shares on the date of exercise over the option
price thereof, or (b) the excess, if any, of the selling price over the
optionee's adjusted basis of such shares (provided that the disposition is a
sale or exchange with respect to which a loss (if sustained) would be recognized
by such individual) and (ii) capital gain equal to the excess, if any, of the
amount realized upon the disposition of shares over the fair market value of
such shares on the date of exercise.

Employees, directors, officers, consultants, agents and independent
contractors of the Company will be required to include in their gross income in
the year of exercise of a non-qualified stock option the difference between the
fair market value on the exercise date of the shares transferred and the option
price.

The Company will be entitled (provided it complies with certain reporting
requirements with respect to the income received by the employee) to a deduction
for federal income tax purposes at the same time and in the same amount as the
optionee is considered to be in receipt of compensation income in connection
with the exercise of non-qualified stock options or, in the case of an incentive
stock option, a disqualifying disposition of shares received upon exercise
thereof. If the holding period requirements outlined above are met, no deduction
will be available to the Company in connection with an incentive stock option.
Under the Revenue Reconciliation Act of 1993, the Company may not be able to
deduct compensation to certain employees to the extent compensation exceeds one
million dollars per tax year. Covered employees include the chief executive
officer and the four other highest compensated officers of the Company for that
tax year. Certain performance-based compensation including stock options are
exempt provided that, among other things, the stock options are granted by a
compensation committee of the Board of Directors which is comprised solely of
two or more outside directors and the plan under which the options are granted
is approved by shareholders. The Option Plan will not qualify as
performance-based compensation.

Vote Required

The approval of a majority of the shares present in person or represented
by Proxy, assuming a quorum at the Annual Meeting, is required for the adoption
of the Option Plan.

The Board of Directors Recommends a Vote for the Adoption of the Company's 2000
Stock Option Plan, Which is Designated as Proposal 3 on the Enclosed Proxy Card.

PROPOSAL 4: RATIFICATION OF INDEPENDENT ACCOUNTANTS

M.R. Weiser & Co. LLP has served as the Company's independent accountants
since August 5, 1999.

The Board of Directors of the Company has appointed M.R. Weiser & Co. LLP
("M.R. Weiser") as independent accountants for the fiscal year ended June 30,
2000 and to render other professional services as required.

The appointment of M.R. Weiser is being submitted to shareholders for
ratification.

Representatives of M.R. Weiser will be present at the Annual Meeting, where
they will have the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.

- 30 -
<PAGE>

Change in Certifying Accountant

On August 5, 1999, the Company dismissed PricewaterhouseCoopers LLP ("PWC")
as its independent accountants. The reports of PWC on the Company's financial
statements for the two fiscal years ending June 30, 1998 and 1997 did not
contain any adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles, except that
the reports of PWC included a reference to a substantial doubt about the
Company's ability to continue as a going concern. In connection with its audits
for the two most recent fiscal years and through August 5, 1999, there were no
disagreements with PWC on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PWC would have caused them
to make reference thereto in their report on the financial statements for such
years.

The Company requested that PWC furnish it with a letter addressed to the
SEC stating whether or not it agrees with the above statements. PWC furnished
the Company with such a letter, dated August 20, 1999, a copy of which was filed
by the Company as Exhibit 16 to a Current Report on Form 8-K/A filed by the
Company as of August 20, 1999.

The Company engaged M.R. Weiser, as its new independent accountants as of
August 5, 1999. In connection with its audits for the fiscal year ended June 30,
1999, there have not been any disagreements with M.R. Weiser on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
M.R. Weiser would have caused them to make reference thereto in their report on
the financial statements for such years.

The Board recommended and approved the decision to change independent
accountants.

Vote Required

The approval of a majority of the shares present in person or represented
by Proxy, assuming a quorum at the Annual Meeting, is required for ratification
of the appointment of independent auditors and public accountants.

The Board of Directors recommends a vote FOR the ratification of M. R. Weiser &
Co. LLP as independent auditors and public accountants of the Company, which is
designated as Proposal 4 on the enclosed Proxy card.

- 31 -
<PAGE>

DEADLINE FOR SHAREHOLDER PROPOSALS FOR 2000

Shareholder proposals intended to be considered for inclusion in the Proxy
statement for presentation at the Company's 2000 Annual Meeting of Shareholders
must be received at the Company's offices at 2200 Powell Street, Suite 800,
Emeryville, California 94608, no later than October 6, 2000, for inclusion in
the Company's Proxy statement and form of Proxy relating to such meeting. All
proposals must comply with applicable SEC rules and regulations. If the Company
elects to move the date of the 2000 Annual Meeting more than 30 days from the
date of the 1999 Annual Meeting, such proposals must be received by a reasonable
time prior to such meeting.

OTHER MATTERS

The Board of Directors is not aware of any other matter other than those
set forth in this Proxy statement that will be presented for action at the
Annual Meeting. If other matters properly come before the Annual Meeting, the
persons named as proxies intend to vote the shares they represent in accordance
with their best judgment in the interest of the Company.

DOCUMENTS INCLUDED WITH THIS PROXY STATEMENT

THE COMPANY IS PROVIDING HEREWITH, A COPY OF ITS ANNUAL REPORT ON FORM 10- KSB
FOR THE FISCAL YEAR ENDED JUNE 30, 1999, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES FILED THEREWITH. ALSO INCLUDED HEREWITH, IS A COPY OF THE COMPANY'S
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1999. IF ANY
PERSON RECEIVES THIS PROXY WITHOUT THE FOREGOING DOCUMENTS, THE COMPANY
UNDERWRITES TO PROVIDE, WITHOUT CHARGE, UPON A WRITTEN OR ORAL REQUEST OF SUCH
PERSON AND BY FIRST CLASS MAIL OR OTHER EQUAL PROMPT MEANS WITHIN ONE BUSINESS
DAY OF RECEIPT OF SUCH REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-KSB FOR THE YEAR ENDED JUNE 30, 1999, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES FILED THEREWITH AND A COPY OF THE COMPANY'S QUARTERLY REPORT ON FORM
10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1999. WRITTEN REQUESTS FOR SUCH
REPORTS SHOULD BE ADDRESSED TO THE OFFICE OF THE SECRETARY, U.S. WIRELESS DATA,
INC., 2200 POWELL STREET, SUITE 800, EMERYVILLE, CALIFORNIA 94608 AND THE
COMPANY'S TELEPHONE NUMBER AT SUCH OFFICE IS (510) 596-2025.

- 32 -
<PAGE>

ANNEX A

PROPOSED AMENDMENT TO SECTION (A) OF ARTICLE
FOURTH OF THE COMPANY'S ARTICLES OF INCORPORATION

(Amends Section (A) of Article Fourth by replacing it in its entirety with the
following section)

"A. The aggregate number of shares which the Corporation shall have
authority to issue is two hundred twenty-five million (225,000,000)
shares, consisting of two hundred million (200,000,000) shares of common
stock without par value per share (the "Common Stock") and twenty-five
million (25,000,000) shares of preferred stock without par value per share
(the "Preferred Stock").

<PAGE>

ANNEX B

U.S. WIRELESS DATA, INC.

2000 STOCK OPTION PLAN

Approved and Adopted by the Board of Directors on January 4, 2000

SECTION 1. Purpose. The purpose of the U.S. Wireless Data, Inc. 2000 Stock
Option Plan (this "Plan") is to provide a means whereby selected employees,
officers, directors, agents, consultants and independent contractors of U.S.
Wireless Data, Inc. (the "Company") or of any parent or subsidiary (as defined
in subsection 5.7 and referred to hereinafter as "related corporations")
thereof, may be granted incentive stock options and/or non-qualified stock
options to purchase the Common Stock (as defined in Section 3) of the Company,
in order to attract and retain the services or advice of such employees,
officers, directors, agents, consultants and independent contractors and to
provide added incentive to them by encouraging stock ownership in the Company.

SECTION 2. Administration.

(a) This Plan shall be administered by the Board of Directors of the
Company (the "Board"), except to the extent the Board delegates its authority to
a committee of the Board to administer this Plan. The administrator of this Plan
shall hereinafter be referred to as the "Plan Administrator."

(b) For so long as the Common Stock is registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), no Option
shall be granted to a director or officer (subject to Section 16 of the Exchange
Act) of the Company by the Board unless (i) approved in advance by the Board or
the Plan Administrator in accordance with the provisions of Rule 16b-3(d)(1)
under the Exchange Act (where the Plan Administrator, if not the entire Board,
is a committee of the Board composed solely of two or more non-employee
directors who satisfy the requirements of Rule 16b-3(b)(3) under the Exchange
Act), or (ii) approved in accordance with the provisions of Rule 16b-3(d)(2)
under the Exchange Act, except that an option may be granted absent such
approval if the option provides that no officer or director of the Company may
sell shares received upon the exercise of such option during the six-month
period immediately following the grant of such option.

2.1 Procedures. The Board shall designate one of the members of the Plan
Administrator as chairman. The Plan Administrator may hold meetings at such
times and places as it shall determine. The acts of a majority of the members of
the Plan Administrator present at meetings at which a quorum exists, or acts
reduced to or approved in writing by all Plan Administrator members, shall be
valid acts of the Plan Administrator.

2.2 Responsibilities. Except for the terms and conditions explicitly set
forth in this Plan, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted under
this Plan, including selection of the individuals to be granted options, the
number of shares to be subject to each option, the exercise price, and all other
terms and conditions of the options, including the designation of such options
as an incentive stock option or non-qualified stock option. Grants under this
Plan need not be identical in any respect, even when made simultaneously. The
interpretation and construction by the Plan Administrator of any terms or
provisions of this Plan or any option issued hereunder, or of any rule or
regulation promulgated in connection herewith, shall be conclusive and binding
on all interested parties, so long as such interpretation and construction with
respect to incentive stock options corresponds to the requirements of Internal
Revenue Code (the "Code") Section 422, the regulations thereunder, and any
amendments thereto.

<PAGE>

2.3 Section 16(b) Compliance and Bifurcation of Plan. It is the intention
of the Company that this Plan comply in all respects with Section 16(b) and Rule
16b-3 under the Exchange Act, to the extent applicable, and, if any Plan
provision is later found not to be in compliance with such Section or Rule, as
the case may be, the provision shall be deemed null and void, and in all events
the Plan shall be construed in favor of its meeting the requirements of Section
16(b) and Rule 16b-3 under the Exchange Act. Notwithstanding anything in the
Plan to the contrary, the Board, in its absolute discretion, may bifurcate the
Plan so as to restrict, limit or condition the use of any provision of the Plan
to participants who are officers and directors or other persons subject to
Section 16(b) of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other participants.

SECTION 3. Stock Subject to This Plan. The stock subject to this Plan shall
be the Company's Common Stock, no par value per share (the "Common Stock"),
presently authorized but unissued or subsequently acquired by the Company.
Subject to adjustment as provided in Section 7 hereof, the aggregate amount of
Common Stock to be delivered upon the exercise of all options granted under this
Plan shall not exceed 15,000,000 shares as such Common Stock was constituted on
the effective date of this Plan. If any option granted under this Plan shall
expire, be surrendered, exchanged for another option, canceled or terminated for
any reason without having been exercised in full, the unpurchased shares subject
thereto shall thereupon again be available for purposes of this Plan, including
for replacement options which may be granted in exchange for such surrendered,
canceled or terminated options.

SECTION 4. Eligibility. An incentive stock option may be granted only to
any individual who, at the time the option is granted, is an employee of the
Company or any related corporation. A nonqualified stock option may be granted
to any director, employee, officer, agent, consultant or independent contractor
of the Company or any related corporation, whether an individual or an entity.
Any party to whom an option is granted under this Plan shall be referred to
hereinafter as an "Optionee".

SECTION 5. Terms and Conditions of Options. Options granted under this Plan
shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan (the "Option
Agreement"). Notwithstanding the foregoing, options shall include or incorporate
by reference the following terms and conditions:

5.1 Number of Shares and Price. The maximum number of shares that may
be purchased pursuant to the exercise of each option and the price per share at
which such option is exercisable (the "exercise price") shall be as established
by the Plan Administrator, provided that the Plan Administrator shall act in
good faith to establish the exercise price which shall be not less than the fair
market value per share of the Common Stock at the time the option is granted
with respect to incentive stock options and not less than par value per share of
the Common Stock at the time the option is granted with respect to nonqualified
stock options and also provided that, with respect to incentive stock options
granted to greater than 10% shareholders, the exercise price shall be as
required by Section 6. In addition, no individual may be granted options under
the Plan to purchase more than 5,000,000 shares of Common Stock during any one
year, subject to adjustment as set forth in Section 7.

5.2 Term and Maturity. Subject to the restrictions contained in
Section 6 with respect to granting incentive stock options to greater than 10%
shareholders, the term of each incentive stock option shall be as established by
the Plan Administrator and, if not so established, shall be 10 years from the
date it is granted but in no event shall the term of any incentive stock option
exceed 10 years. The term of each nonqualified stock option shall be as
established by the Plan Administrator and, if not so established, shall be 10
years from the date it is granted. To ensure that the Company or related
corporation will achieve the purpose and receive the benefits contemplated in
this Plan, any option granted to any Optionee hereunder shall, unless the
condition of this sentence is waived or modified in the agreement evidencing the
option or by resolution adopted by the Plan Administrator, be exercisable
according to the following schedule:

<PAGE>

Period of Optionee's
Continuous Relationship
With the Company or Related
Corporation From the Date Portion of Total Option
the Option is Granted Which is Exercisable
---------------------------- -----------------------
after 1 year 33.3%
after 2 years 66.6%
after 3 years 100 %

5.3 Exercise. Subject to any vesting schedule described in subsection
5.2 above, each option may be exercised in whole or in part; provided, however,
that no fewer than 100 shares (or the remaining shares then purchasable under
the option, if less than 100 shares) may be purchased upon any exercise of an
option hereunder and that only whole shares will be issued pursuant to the
exercise of any option. Options shall be exercised by delivery to the Company of
notice of the number of shares with respect to which the option is exercised,
together with payment of the exercise price.

5.4 Payment of Exercise Price. Payment of the option exercise price
shall be made in full at the time the notice of exercise of the option is
delivered to the Company and shall be in cash, bank certified or cashier's check
or personal check (unless at the time of exercise the Plan Administrator in a
particular case determines not to accept a personal check) for the Common Stock
being purchased.

(a) delivery of shares of stock of the Company held by an Optionee
having a fair market value equal to the exercise price, such fair market value
to be determined in good faith by the Plan Administrator;

(b) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of sale
or loan proceeds necessary to pay the exercise price and any federal, state or
local withholding tax obligations that may arise in connection with the
exercise; or

(c) delivery of a properly executed exercise notice together with
instructions to the Company to withhold from the shares that would otherwise be
issued upon exercise that number of shares having a fair market value equal to
the option exercise price.

5.5 Withholding Tax Requirement. The Company or any related
corporation shall have the right to retain and withhold from any payment of cash
or Common Stock under the Plan the amount of taxes required by any government to
be withheld or otherwise deducted and paid with respect to such payment. At its
discretion, the Company may require an Optionee receiving shares of Common Stock
to reimburse the Company for any such taxes required to be withheld by the
Company and withhold such shares in whole or in part until the Company is so
reimbursed. In lieu thereof, the Company, at its option in its sole discretion,
shall (a) have the right to withhold from any other cash amounts due or to
become due from the Company to the Optionee an amount equal to such taxes or (b)
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld by the Company to reimburse the
Company for any such taxes and cancel (in whole or in part) any such shares so
withheld. If required by Section 16(b) of the Exchange Act, the election to pay
withholding taxes by delivery of shares held by any person who at the time of
exercise is subject to Section 16(b) of the Exchange Act, shall be made either
six months prior to the date the option exercise becomes taxable or at such
other times as the Company may determine as necessary to comply with Section
16(b) of the Exchange Act.

<PAGE>

5.6 Assignability and Transferability of Option. Options granted under
this Plan and the rights and privileges conferred hereby may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than (i) by will or by the applicable laws of descent and
distribution, (ii) pursuant to a qualified domestic relations order as defined
in Section 414(p) of the Code, or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder or (iii) as otherwise
determined by the Plan Administrator and set forth in the applicable Option
Agreement. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any option under this Plan or of any right or privilege conferred
hereby, contrary to the Code or to the provisions of this Plan, or the sale or
levy or any attachment or similar process upon the rights and privileges
conferred hereby shall be null and void. The designation by an Optionee of a
beneficiary does not, in and of itself, constitute an impermissible transfer
under this Section.

5.7 Termination of Relationship. If the Optionee's relationship with
the Company or any related corporation ceases for any reason other than
termination for cause, death or total disability, and unless by its terms the
option sooner terminates or expires, then the Optionee may exercise, for a
three-month period, that portion of the Optionee's option which is exercisable
at the time of such cessation, but the Optionee's option shall terminate at the
end of the three-month period following such cessation as to all shares for
which it has not theretofore been exercised, unless, in the case of a
nonqualified stock option, such provision is waived in the agreement evidencing
the option or by resolution adopted by the Plan Administrator within 90 days of
such cessation. If, in the case of an incentive stock option, an Optionee's
relationship with the Company or related corporation changes (i.e., from
employee to non-employee, such as a consultant), such change shall constitute a
termination of an Optionee's employment with the Company or related corporation
and the Optionee's incentive stock option shall become a non-qualified stock
option.

If an Optionee is terminated for cause, any option granted hereunder
shall automatically terminate as of the first discovery by the Company of any
reason for termination for cause, and such Optionee shall thereupon have no
right to purchase any shares pursuant to such option. "Termination for cause"
shall mean dismissal for dishonesty, conviction or confession of a crime
punishable by law (except minor violations), fraud, misconduct or disclosure of
confidential information. If an Optionee's relationship with the Company or any
related corporation is suspended pending an investigation of whether or not the
Optionee shall be terminated for cause, all Optionee's rights under any option
granted hereunder likewise shall be suspended during the period of
investigation.

If an Optionee's relationship with the Company or any related
corporation ceases because of a total disability, the Optionee's option shall
not terminate or, in the case of an incentive stock option, cease to be treated
as an incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates and expires). As used in
this Plan, the term "total disability" refers to a mental or physical impairment
of the Optionee which is expected to result in death or which has lasted or is
expected to last for a continuous period of 12 months or more and which causes
the Optionee to be unable, in the opinion of the Company and two (if more than
one is required by the Company in its sole discretion) independent physicians,
to perform his or her duties for the Company and to be engaged in any
substantial gainful activity. Total disability shall be deemed to have occurred
on the first day after the Company and the two (if more than one is required by
the Company in its sole discretion) independent physicians have furnished their
opinion of total disability to the Plan Administrator.

For purposes of this subsection 5.7, a transfer of relationship
between or among the Company and/or any related corporation shall not be deemed
to constitute a cessation of relationship with the Company or any of its related
corporations. For purposes of this subsection 5.7, with respect to incentive
stock options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.

As used herein, the term "related corporation", when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) or
other entity in, at the time of the granting of the option, an unbroken chain of
corporations ending with the Company, if stock or other interests possessing 50%

<PAGE>

or more of the total combined voting power of all classes of stock or other
interests of each of the corporations or other entities other than the Company
is owned by one of the other corporations or other entities in such chain. When
referring to a parent corporation or other entity, the term "related
corporation" shall mean any corporation or other entity in an unbroken chain of
corporations or other entities ending with the Company if, at the time of the
granting of the option, each of the corporations or other entities other than
the Company owns stock or other interests possessing 50% or more of the total
combined voting power of all classes of stock or other interests in one of the
other corporations or other entities in such chain.

5.8 Death of Optionee. If an Optionee dies while he or she has a
relationship with the Company or any related corporation or within the
three-month period (or 12-month period in the case of totally disabled
Optionees) following cessation of such relationship, any option held by such
Optionee to the extent that the Optionee would have been entitled to exercise
such option, may be exercised within one year after his or her death by the
personal representative of his or her estate or by the person or persons to whom
the Optionee's rights under the option shall pass by will or by the applicable
laws of descent and distribution.

5.9 Status of Shareholder. Neither the Optionee nor any party to which
the Optionee's rights and privileges under the option may pass shall be, or have
any of the rights or privileges of, a shareholder of the Company with respect to
any of the shares issuable upon the exercise of any option granted under this
Plan unless and until such option has been exercised.

5.10 Continuation of Employment. Nothing in this Plan or in any option
granted pursuant to this Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of a related corporation, or to
interfere in any way with the right of the Company or of any such related
corporation to terminate his or her employment or other relationship with the
Company at any time.

5.11 Modification and Amendment of Option. Subject to the requirements
of Code Section 422 with respect to incentive stock options and to the terms and
conditions and within the limitations of this Plan, the Plan Administrator may
modify or amend outstanding options granted under this Plan. The modification or
amendment of an outstanding option shall not, without the consent of the
Optionee, impair or diminish any of his or her rights or any of the obligations
of the Company under such option. Except as otherwise provided in this Plan, no
outstanding option shall be terminated without the consent of the Optionee.
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding incentive stock options granted under this Plan shall be made in
such a manner so as not to constitute a "modification" as defined in Code
Section 424(h) and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as defined
in Code Section 422(b).

5.12 Limitation on Value for Incentive Stock Options. As to all
incentive stock options granted under the terms of this Plan, to the extent that
the aggregate fair market value (determined at the time the incentive stock
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the Optionee during any calendar year
(under this Plan and all other incentive stock option plans of the Company, a
related corporation or a predecessor corporation) exceeds $100,000, such options
shall be treated as nonqualified stock options. The previous sentence shall not
apply if the Code is amended or if the Internal Revenue Service publicly rules,
issues a private ruling to the Company, any Optionee, or any legatee, personal
representative or distributee of an Optionee or issues regulations, changing or
eliminating such annual limit, in which case the limitation shall be that
provided by the Code or the Internal Revenue Service, as the case may be.

5.13 Valuation of Common Stock Received Upon Exercise.

5.13.1 Exercise of Options Under Sections 5.4(a) and (c). The
value of Common Stock received by the Optionee from an exercise under Sections
5.4(a) and 5.4(c) hereof shall be the fair market value, which shall mean the
last reported sales price, regular way, of the Common Stock on the date of
receipt by the Company of the Optionee's delivery of shares under Section 5.4(a)

<PAGE>

hereof or delivery of the exercise notice under Section 5.4(c) hereof (or, if no
sale takes place on any such day, the closing bid price of the Common Stock on
such day), on the principal securities exchange (including the National
Association of Securities Dealers, Inc.'s (the "NASD") National Market System)
on which the Common Stock is admitted or listed for trading, or, if the Common
Stock is not listed on any such exchange on any such day, the highest reported
bid price for the Common Stock as furnished by the NASD through NASDAQ, or a
similar organization if NASDAQ is no longer reporting such information, or, if
the Common Stock is not listed for trading on an exchange and is not quoted on
NASDAQ or any similar organization on any such day, the fair value of a share of
Common Stock on such day as determined by the Plan Administrator of the Company
in good faith.

5.13.2 Exercise of Option Under Section 5.4(b). The value of
Common Stock received by the Optionee from an exercise under Section 5.4(b)
hereof (a) in the case of the sale of the Common Stock received as a result of
the exercise by a broker on the date of receipt by the Company of the Optionee's
exercise notice, shall equal the sales price received for such shares; and (b)
in all other cases, shall be determined as provided in Section 5.13.1 hereof.

SECTION 6. Greater Than 10% Shareholders.

6.1 Exercise Price and Term of Incentive Stock Options. If incentive
stock options are granted under this Plan to employees who own more than 10% of
the total combined voting power of all classes of stock of the Company or any
related corporation, the term of such incentive stock options shall not exceed
five years and the exercise price shall be not less than 110% of the fair market
value of the Common Stock at the time the incentive stock option is granted.
This provision shall control notwithstanding any contrary terms contained in an
option agreement or any other document. The term and exercise price limitations
of this provision shall be amended to conform to any change required (or, in the
sole discretion of the Plan Administrator, permitted) by a change in the Code or
by a ruling or pronouncement of the Internal Revenue Service.

6.2 Attribution Rule. For purposes of subsection 6.1, in determining
stock ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his or her brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its shareholders, partners or beneficiaries. If an employee or a person
related to the employee owns an unexercised option or warrant to purchase stock
of the Company, the stock subject to that portion of the option or warrant which
is unexercised shall not be counted in determining stock ownership. For purposes
of this Section 6, stock owned by an employee shall include all stock owned by
him which is actually issued and outstanding immediately before the grant of the
incentive stock option to the employee.

SECTION 7. Adjustments Upon Changes in Capitalization. The aggregate number
and class of shares for which options may be granted under this Plan, the number
and class of shares covered by each outstanding option, and the exercise price
per share thereof (but not the total price), shall all be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock of the Company resulting from a split-up or consolidation of shares or any
like capital adjustment, or the payment of any stock dividend.

7.1. Effect of Liquidation, Reorganization or Change in Control.

7.1.1 Cash, Stock or Other Property for Stock. Except as
provided in subsection 7.1.2, upon a merger (other than a merger of the Company
in which the holders of Common Stock immediately prior to the merger have the
same proportionate ownership of Common Stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation, reorganization (other than a mere reincorporation or the creation of
a holding company) or liquidation of the Company, as a result of which the
shareholders of the Company receive cash or property other than capital stock in
exchange for or in connection with their shares of Common Stock, any option

<PAGE>

granted hereunder shall terminate, but the Optionee shall have the right
immediately prior to any such merger, consolidation, acquisition of property or
stock, separation, reorganization or liquidation to exercise such Optionee's
option in whole or in part whether or not the vesting requirements set forth in
the option agreement have been satisfied.

7.1.2 Conversion of Options on Stock for Stock Exchange. If the
shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted hereunder shall be converted into options
to purchase shares of Exchange Stock unless the Company and corporation issuing
the Exchange Stock, in their sole discretion, determine that any or all such
options granted hereunder shall not be converted into options to purchase shares
of Exchange Stock but instead shall terminate in accordance with the provisions
of subsection 7.1.1. The amount and price of converted options shall be
determined by adjusting the amount and price of the options granted hereunder in
the same proportion as used for determining the number of shares of Exchange
Stock the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization. Unless the Board
determines otherwise, the converted options shall be fully vested whether or not
the vesting requirements set forth in the option agreement have been satisfied.

7.2 Fractional Shares. In the event of any adjustment in the number
of shares covered by an option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.

7.3 Determination of Board to Be Final. All Section 7 adjustments
shall be made by the Board, and its determination as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive. Unless
an Optionee agrees otherwise, any change or adjustment to an incentive stock
option shall be made in such a manner so as not to constitute a "modification"
as defined in Code Section 425(h) and so as not to cause his or her incentive
stock option issued hereunder to fail to continue to qualify as an incentive
stock option as defined in Code Section 422(b).

SECTION 8. Securities Regulation. Shares shall not be issued with respect
to an option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange or inter-dealer quotation system upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance, including the availability of an exemption from
registration for the issuance and sale of any shares hereunder. Inability of the
Company to obtain from any regulatory body having jurisdiction the authority
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any shares hereunder or the unavailability of an exemption from registration
for the issuance and sale of any shares hereunder shall relieve the Company of
any liability in respect of the nonissuance or sale of such shares as to which
such requisite authority shall not have been obtained.

As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such representation is required by any relevant provision of the aforementioned
laws. At the option of the Company, a stop-transfer order against any shares of
stock may be placed on the official stock books and records of the Company, and
a legend indicating that the stock may not be pledged, sold or otherwise
transferred unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to

<PAGE>

assure exemption from registration. The Company may also require such other
action or agreement by the Optionees as it may from time to time deem to be
necessary or advisable. THE COMPANY SHALL NOT BE OBLIGATED, BY REASON OF THIS
PROVISION OR OTHERWISE, TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER.

Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities exchange
or inter-dealer quotation system, all stock issued hereunder if not previously
listed on such exchange or inter-dealer quotation system shall be authorized by
that exchange or system for listing thereon prior to the issuance thereof.

SECTION 9. Amendment and Termination.

9.1 Board Action. The Board may at any time suspend, amend or
terminate this Plan, provided that except as set forth in Section 7, the
approval of the holders of a majority of the Company's outstanding shares of
voting capital stock present and entitled to vote at any meeting is necessary
for the adoption by the Board of any amendment which will:

(a) increase the number of shares which are to be reserved for
the issuance of options under this Plan;

(b) permit the granting of stock options to a class of persons
other than those presently permitted to receive stock options under this Plan;
or

9.2 Automatic Termination. Unless sooner terminated by the Board,
this Plan shall terminate ten years from the earlier of (a) the date on which
this Plan is adopted by the Board or (b) the date on which this Plan is approved
by the shareholders of the Company. No option may be granted after such
termination or during any suspension of this Plan. The amendment or termination
of this Plan shall not, without the consent of the option holder, alter or
impair any rights or obligations under any option theretofore granted under this
Plan.

SECTION 10. Effectiveness Of This Plan. This Plan shall become effective
upon adoption by the Board so long as it is approved by the holders of a
majority of the Company's outstanding shares of voting capital stock present and
entitled to vote at any meeting at any time within 12 months before or after the
adoption of this Plan.

Adopted by the Board of Directors on January 4, 2000 and approved by the
shareholders on _________ __, 2000.

<PAGE>

U.S. WIRELESS DATA, INC.

NONQUALIFIED STOCK OPTION LETTER AGREEMENT

Date:_______________

TO: ______________________

We are pleased to inform you that you have been selected by the Plan
Administrator of U.S. Wireless Data, Inc. (the "Company") 2000 Stock Option Plan
(the "Plan"). The Plan was adopted by the Board of Directors and approved by the
shareholders. When you sign and return to the Company the Acceptance and
Acknowledgment attached to this Stock Option Agreement you will be entitled to
receive a nonqualified option for the purchase of ________ shares of the
Company's Common Stock, no par value ("Common Stock"), at an exercise price of
$____ per share, subject to the vesting provisions set forth herein. A copy of
the Plan is attached and the provisions thereof, including, without limitation,
those relating to withholding taxes, are incorporated into this Agreement by
reference. It is understood that this Option is not intended to constitute an
incentive stock option as that term is defined in Section 422A of the Internal
Revenue Code of 1986, as amended.

The terms of the option are as set forth in the Plan and in this Agreement.
The most important of the terms set forth in the Plan are summarized as follows:

Number of Shares: The option granted to you covers an aggregate of ______
shares of Common Stock.

Exercise Price: The exercise price per share of Common Stock subject to
your option is $_____ per share (the "Exercise Price").

Adjustments. The number of shares of Common Stock subject to your option
and the Exercise Price may be subject to adjustment under certain circumstances
as described in the Plan.

Date of Grant: The date of grant of the option is _______________.

Term: The term of the option is ten years from date of grant, unless sooner
terminated.

Vesting: Your option shall vest according to the following schedule,
provided you continue your relationship with the Company or a related
corporation:

Period of Your Continuous
Relationship With the
Company or a Related
Corporation From the Portion of Total Option
Date Option is Granted Which is Exercisable
-------------------------- -----------------------

after 1 year 33.3%
after 2 years 66.6%
after 3 years 100 %

Exercise: The vested portion of the option may be exercised, in whole or in
part, but not as to any fractional shares, during the term of the option. You
should use a Notice of Exercise of Nonqualified Stock Option in the form
attached to this Agreement when you exercise the option. During your lifetime
only you can exercise the option. The Plan also provides for exercise of the
option by the personal representative of your estate or the beneficiary thereof
following your death.

Payment for Shares: The vested portion of this option may be exercised by
the delivery of:

<PAGE>

(a) Cash, personal check (unless, at the time of exercise, the Plan
Administrator determines otherwise), certified or bank cashier's checks in an
amount equal to the aggregate Exercise Price for the number of shares as to
which the option is being exercised together with a properly executed Notice of
Exercise;

(b) Unless the Plan Administrator in its sole discretion determines
otherwise, shares of the capital stock of the Company held by you having a fair
market value at the time of exercise, as determined by the Plan Administrator in
accordance with the Plan, equal to the aggregate Exercise Price for the number
of shares as to which the option is being exercised;

(c) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise together with instructions to
the Company to withhold from the shares that would otherwise be issued upon
exercise that number of shares having a fair market value equal to the aggregate
Exercise Price for the number of shares as to which the option is being
exercised; or

(d) A properly executed Notice of Exercise together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the aggregate Exercise Price for the number of shares as
to which the option is being exercised.

Upon receipt of written Notice of Exercise and payment and delivery of any
other required documentation, the Company shall deliver to the person exercising
the option a certificate or certificates for the appropriate number of shares of
Common Stock. It shall be a condition to the performance of the Company's
obligation to issue or transfer Common Stock upon exercise of this option that
you pay, or make provision satisfactory to the Company for the payment of, any
taxes which the Company is obligated to collect with respect to the issue or
transfer of Common Stock upon exercise.

Termination: Your option will terminate immediately upon termination for
cause, as defined in the Plan, or three months after cessation of your
relationship with the Company or a related corporation, unless cessation is due
to death or total disability, in which case the portion of this option which is
vested at the time of such termination shall terminate one year after cessation
of such relationship. All unvested options will terminate immediately upon the
cessation of your relationship with the Company or a related corporation for any
reason, including, without limitation, termination for cause, resignation, death
or disability.

Transfer of Option: The option is not transferable except by will or by the
applicable laws of descent and distribution or pursuant to a qualified domestic
relations order.

Hold back: In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the Securities Act, including the Company's initial public offering,
Grantee shall not directly or indirectly sell, make any short sale of, loan,
hypothecate, pledge, offer, grant or sell any option or other contract for the
purchase of, purchase any option or other contract for the sale of, or otherwise
dispose of or transfer, or agree to engage in any of the foregoing transactions
with respect to, any option shares acquired under this Agreement without the
prior written consent of the Company or its underwriters. The period of such
restriction (the "Blackout Period") shall be in effect for such period of time
following the date of the final prospectus for the offering as may be requested
by the Company or such underwriters. In no event, however, shall such period
exceed 180 days. In the event of the declaration of a stock dividend, a
spin-off, a stock split, an adjustment in conversion ratio, a recapitalization
or a similar transaction affecting the Company's outstanding shares of Common
Stock without receipt of consideration, any new, substituted or additional
securities which are by reason of such transaction distributed with respect to
any option shares subject to the Blackout Period, or into which such option
shares thereby become convertible, shall immediately be subject to the
restrictions set forth herein. In order to enforce such restriction, the Company
may impose stop-transfer instructions with respect to the option shares acquired

<PAGE>

under this Agreement until the end of the applicable stand-off period. The
Company's underwriters shall be beneficiaries of the agreement set forth in this
subsection. This subsection shall not apply to option shares registered in the
public offering under the Securities Act, and Grantee shall be subject to this
subsection only if the directors and officers of the Company are subject to
similar arrangements.

Notice: All notices sent in connection with this option shall be in writing
and, if to the Company, shall be delivered personally to the President of the
Company or mailed to its principal office, addressed to the attention of the
President, and, if to you, shall be delivered personally or mailed to you at the
address noted on the attached Acceptance and Acknowledgment. Such addresses may
be changed at any time by notice from one party to the other.

YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE PLAN WHICH
DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE SECURITIES
LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE EXERCISED AND BEFORE THE
COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY HAS NO OBLIGATION TO REGISTER
THE SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION, AND IF IT
NEVER REGISTERS THE SHARES, YOU WILL NOT BE ABLE TO EXERCISE THE OPTION UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE PRESENT TIME, EXEMPTIONS
FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY LIMITED AND
MIGHT BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF THE OPTION. CONSEQUENTLY,
YOU MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE OPTION AND TO RECEIVE SHARES UPON
SUCH EXERCISE. IN ADDITION, YOU SHOULD CONSULT WITH YOUR TAX ADVISOR CONCERNING
THE RAMIFICATIONS TO YOU OF HOLDING OR EXERCISING YOUR OPTIONS OR HOLDING OR
SELLING THE SHARES UNDERLYING SUCH OPTIONS.

It is the intention of the Company that this Plan comply in all respects
with Section 16(b) and Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act"), to the extent applicable, and, if any Plan provision is later
found not to be in compliance with such Section or Rule, as the case may be, the
provision shall be deemed null and void, and in all events the Plan shall be
construed in favor of its meeting the requirements of Section 16(b) and Rule
16b-3 under the Exchange Act. Notwithstanding anything in the Plan to the
contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
participants who are officers and directors or other persons subject to Section
16(b) of the Exchange Act without so restricting, limiting or conditioning the
Plan with respect to other participants.

All decisions or interpretations made by the Plan Administrator with regard
to any question arising hereunder or under the Plan shall be binding and
conclusive on the Company and you.

This Agreement shall bind and inure to the benefit of the parties hereto
and the successors and assigns of the Company and, to the extent provided in the
Plan, your executors, administrators, legatees and heirs.

Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this Agreement and return it to the undersigned.

Very truly yours,

U.S. WIRELESS DATA, INC.

By:
---------------------------------

<PAGE>

ACCEPTANCE AND ACKNOWLEDGMENT

I, a resident of the State of ______________, accept the nonqualified stock
option described above and in the U.S. Wireless Data, Inc. 2000 Stock Option
Plan, and acknowledge receipt of a copy of this Agreement, including a copy of
the Plan. I have read and understand this Agreement and the Plan, including the
provisions of Section 8.

Dated:
----------------------

- --------------------------------------- -----------------------------------
Taxpayer I.D. Number

By his or her signature below, the spouse of the Optionee, if such Optionee
is legally married as of the date of his or her execution of this Agreement,
acknowledges that he or she has read this Agreement and the Plan and is familiar
with the terms and provisions thereof, and agrees to be bound by all the terms
and conditions of this Agreement and the Plan.

Dated:
-----------------------

------------------------------
Spouse's Signature

------------------------------
Printed Name

<PAGE>

NOTICE OF EXERCISE

U.S. Wireless Data, Inc.
2200 Powell Street, Suite 800
Emeryville, California 94608

Gentlemen:

I hereby exercise my right to purchase ______ shares of Common Stock (the
"Shares") of U.S. Wireless Data, Inc., a Colorado corporation, pursuant to, and
in accordance with, the U.S. Wireless Data, Inc. 2000 Nonqualified Stock Option
Agreement ("Agreement") dated ________. As provided in that Agreement, I deliver
herewith a certified or bank cashier's check in the amount of the aggregate
option price (unless alternative payment methods have been approved by the Plan
Administrator). Please deliver to me stock certificates representing the subject
shares registered as follows:

Name:
---------------------------------------
Address:
------------------------------------

Social Security Number:
---------------------

The aggregate exercise price is $___________ (total number of shares to be
purchased x $____ per share).

1. If the sale of the Shares and the resale thereof has not, prior to the
date hereof, been registered pursuant to a registration statement filed and
declared effective under the Securities Act of 1933, as amended (the "Act"), the
undersigned hereby agrees, represents, and warrants that:

(a) the undersigned is acquiring the Shares for his or her own
account (and not for the account of others), for investment and not with a view
to the distribution or resale thereof;

(b) by virtue of his or her position, the undersigned has access to
the same kind of information which would be available in a registration
statement filed under the Act;

(d) the undersigned understands that he or she may not sell or
otherwise dispose of the Shares in the absence of either (i) a registration
statement filed under the Act or (ii) an exemption from the registration
provisions thereof; and

(e) the certificates representing the Shares may contain a legend to
the effect of subsection (d) of this Section 1.

2. If the sale of the Shares and the resale thereof has been registered
pursuant to a registration statement filed and declared effective under the Act,
the undersigned hereby represents and warrants that he or she has received the
applicable prospectus and a copy of the most recent annual report, as well as
all other material sent to shareholders generally.

3. The undersigned acknowledges that the number of shares of Common Stock
subject to the Agreement is hereafter reduced by the number of shares of Common
Stock represented by the Shares.

4. The undersigned understands that there are certain tax implications to
his or her exercise of his or her right to purchase shares of Common Stock under
the Agreement. The undersigned further understands that it is his or her
obligation to confer with his or her own tax advisor with respect to such tax
implications.

Very truly yours,

-----------------------------------
(signature)

-----------------------------------
(please type or print name)

By:
--------------------------------

By:
--------------------------------
Name:
------------------------------
Title:
------------------------------

<PAGE>

U.S. WIRELESS DATA, INC.

INCENTIVE STOCK OPTION LETTER AGREEMENT

Date:
-----------------
TO:
---------------------

We are pleased to inform you that you have been selected by the Plan
Administrator of the U.S. Wireless Data, Inc. (the "Company") 2000 Stock Option
Plan (the "Plan"). The Plan was adopted by the Board of Directors, and approved
by the shareholders. When you sign and return to the Company the Acceptance and
Acknowledgment attached to this Stock Option Agreement you will be entitled to
receive an incentive option for the purchase of ________ shares of the Company's
Common Stock, no par value ("Common Stock"), at an exercise price of $_____ per
share subject to the vesting provisions set forth herein. A copy of the Plan is
attached and the provisions thereof, including, without limitation, those
relating to withholding taxes, are incorporated into this Agreement by
reference.

The terms of the option are as set forth in the Plan and in this Agreement.
The most important of the terms set forth in the Plan are summarized as follows:

Number of Shares: The option granted to you covers an aggregate of ______
shares of Common Stock.

Exercise Price: The exercise price per share of Common Stock subject to
your option is $_____ per share (the "Exercise Price").

Adjustments. The number of shares of Common Stock subject to your option
and the Exercise Price may be subject to adjustment under certain circumstances
as described in the Plan.

Date of Grant: The date of grant of the option is _______________.

Term. The term of the option is ten years from date of grant, unless sooner
terminated.

Vesting: Your option shall vest according to the following schedule,
provided you continue your relationship with the Company or a related
corporation:

after 1 year 33.3%
after 2 years 66.6%
after 3 years 100 %

<PAGE>

Exercise. The vested portion of the option may be exercised, in whole or in
part, but not as to any fractional shares, during the term of the option. You
should use a Notice of Exercise of Incentive Stock Option in the form attached
to this Agreement when you exercise the option. During your lifetime only you
can exercise the option. The Plan also provides for exercise of the option by
the personal representative of your estate or the beneficiary thereof following
your death.

Payment for Shares. The vested portion of this option may be exercised by
the delivery of:

(a) Cash, personal check (unless at the time of exercise the Plan
Administrator determines otherwise), or certified or bank cashier's checks in an
amount equal to the aggregate Exercise Price for the number of shares as to
which the option is being exercised together with a properly executed Notice of
Exercise;

(b) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise, together with shares of the
capital stock of the Company held by you having a fair market value at the time
of exercise, as determined by the Plan Administrator in accordance with the
Plan, equal to the aggregate Exercise Price for the number of shares as to which
the option is being exercised;

Upon receipt of written Notice of Exercise and payment and delivery of any
other required documentation, the Company shall deliver to the person exercising
the option a certificate or certificates for the appropriate number of shares of
Common Stock. It shall be a condition to the performance of the Company's
obligation to issue or transfer Common Stock upon exercise of this option that
you pay, or make provision satisfactory to the Company for the payment of , any
taxes which the Company is obligated to collect with respect to the issue or
transfer of Common Stock upon exercise.

Termination. Your option will terminate immediately upon termination for
cause, as defined in the Plan, or three months after cessation of your
relationship with the Company or a related corporation thereof, unless cessation
is due to death or total disability, in which case the portion of this option
which is vested at the time of such termination shall terminate one year after
cessation of such relationship. All unvested options will terminate immediately
upon the cessation of your relationship with the Company or a related
corporation for any reason, including, without limitation, termination for
cause, resignation, death or disability.

Transfer of Option. The option is not transferable except by will or by the
applicable laws of descent and distribution or pursuant to a qualified domestic
relations order.

<PAGE>

Notice: All notices sent in connection with this option shall be in
writing and, if to the Company, shall be delivered personally to the President
of the Company or mailed to its principal office, addressed to the attention of
the President, and, if to you, shall be delivered personally or mailed to you at
the address noted on the attached Acceptance and Acknowledgment. Such addresses
may be changed at any time by notice from one party to the other.

All decisions or interpretations made by the Plan Administrator with
regard to any question arising hereunder or under the Plan shall be binding and
conclusive on the Company and you.

Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this Agreement and return it to the undersigned.

Very truly yours,

U.S. WIRELESS DATA, INC.

By:
------------------------------

<PAGE>

ACCEPTANCE AND ACKNOWLEDGMENT

I, a resident of the State of __________, accept the stock option described
above granted under the U.S. Wireless Data, Inc. 2000 Stock Option Plan, and
acknowledge receipt of a copy of this Agreement, including a copy of the Plan. I
have read and understand this Agreement and the Plan, including the provisions
of Section 8 thereof.

Dated:
------------------------

- --------------------------------------- -----------------------------------
Taxpayer I.D. Number Signature

By his or her signature below, the spouse of the Optionee, if such Optionee
is legally married as of the date of such Optionee's execution of this
Agreement, acknowledges that he or she has read this Agreement and the Plan and
is familiar with the terms and provisions thereof, and agrees to be bound by all
the terms and conditions of this Agreement and the Plan.

Dated:
------------------------

------------------------------
Spouse's Signature

------------------------------
Printed Name

4
<PAGE>

NOTICE OF EXERCISE

U.S. Wireless Data, Inc.
2200 Powell Street, Suite 800
Emeryville, California 94608

Gentlemen:

I hereby exercise my right to purchase ______ shares of Common Stock (the
"Shares") of U.S. Wireless Data, Inc., a Colorado corporation, pursuant to, and
in accordance with, the U.S. Wireless Data, Inc. 2000 Incentive Stock Option
Agreement ("Agreement") dated __________. As provided in that Agreement, I
deliver herewith a certified or bank cashier's check in the amount of the
aggregate option price (unless alternative payment methods have been approved by
the Plan Administrator). Please deliver to me stock certificates representing
the subject shares registered as follows:

Name:
---------------------------------------
Address:
--------------------------------------

Social Security Number:
-----------------------

The aggregate exercise price is $___________ (total number of shares to be
purchased x $____ per share).

(a) the undersigned is acquiring the Shares for his or her own
account (and not for the account of others), for investment and not with a view
to the distribution or resale thereof;

(b) by virtue of his or her position, the undersigned has access to
the same kind of information which would be available in a registration
statement filed under the Act;

(e) the certificates representing the Shares may contain a legend to
the effect of subsection (d) of this Section 1.

3. The undersigned acknowledges that the number of shares of Common Stock
subject to the Agreement is hereafter reduced by the number of shares of Common
Stock represented by the Shares.

Very truly yours,

-----------------------------------
(signature)

-----------------------------------
(please type or print name)

By:
--------------------------------

By:
--------------------------------
Name:
------------------------------
Title:
------------------------------

<PAGE>

U.S. WIRELESS DATA, INC.
Annual Meeting of Shareholders -March 6, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned shareholder in U.S. Wireless Data, Inc. ("Company") hereby
constitutes and appoints Dean M. Leavitt and Robert E. Robichaud, and each of
them, his true and lawful attorneys and proxies, with full power of substitution
in and for each of them, to vote all shares of the Company which the undersigned
is entitled to vote at the Annual Meeting of Shareholders to be held at 2200
Powell Street, Suite 800, Emeryville, California, on March 6, 2000, at 2:00
p.m., Pacific Time, or at any postponement or adjournment thereof, on any and
all of the proposals contained in the Notice of the Annual Meeting of
Shareholders, with all the powers the undersigned would possess if present
personally at said meeting, or at any postponement or adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEES LISTED ON THE REVERSE SIDE and FOR THE APPROVAL OF PROPOSALS 2,
3, and 4.

(Continued and to be signed and dated on the other side)

<PAGE>

The Directors recommend a vote FOR all Proposals. Please mark
your votes
[X] as this
example
------
COMMON

<S> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Election of Directors GRANT WITHHOLD 3. Proposal to approve the [ ] [ ] [ ]
AUTHORITY AUTHORITY U.S. Wireless Data, Inc.
[ ] [ ] 2000 Stock Option Plan.

to vote for all to vote for all
nominees listed nominees
(except as listed at left
marked in the
contrary, see
instruction below)

4. Proposal to ratify M.R. FOR AGAINST ABSTAIN
Dean M. Leavitt, Chester N. Winter, Weiser & Co. LLP as [ ] [ ] [ ]
Alvin C. Rice independent auditors and
public accountants.
INSTRUCTION: To withhold authority to vote for any individual nominee,
line through the name of the nominee above.
FOR AGAINST ABSTAIN
2. Proposal to approve an amendment to [ ] [ ] [ ]
the Company's Articles of Incorporation,
to increase the authorized capital stock
of the Company to 225,000,000 of which
200,000,000 shares shall be designated
"Common Stock" and 25,000,000 shares of
which shall be designated "Preferred
Stock."

The above named proxies are granted the
authority, in their discretion, to act upon
such other matters as may properly come
before the meeting or any postponement or
adjournment thereof.

Dated , 2000

Signature(s)
-------------------------------
Signatures
----------------------------------

Please sign exactly as your name appears and
return this Proxy immediately in the enclosed
stamped self-addressed envelope.

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