SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-QSB
[X] Quarterly Report under Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2000.
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from to .
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Commission File No.: 0-22848
U.S. Wireless Data, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 84-1178691
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(State of incorporation) (IRS Employer Identification No.)
805 Third Ave, 8th Floor
New York, NY 10022
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(Address of principal executive offices, including zip code)
(212) 750-7766
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(Registrant's Telephone Number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past ninety days.
Yes [X] No [ ]
As of May 10, 2000 there were outstanding 32,328,020 shares of the Registrant's
Common Stock (no par value per share).
Transitional Small Business Disclosure Format
Yes [ ] No [X]
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U.S. WIRELESS DATA, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION Page
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Item 1. Financial Statements (Unaudited)
Balance Sheets -
March 31, 2000, and June 30, 1999 ........................... 3
Statements of Operations -
Three Months and Nine Months Ended March 31, 2000 and 1999 .. 4
Statements of Cash Flows -
Nine Months Ended March 31, 2000 and 1999 ................... 5
Notes to Financial Statements .................................. 6-15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .......................................... 15-22
PART II OTHER INFORMATION
Item 1. Legal Proceedings .............................................. 22
Item 2. Changes in Securities .......................................... 23
Item 3. Defaults on Senior Securities .................................. 24
Item 5. Other Information .............................................. 24
Item 6. Exhibits and Reports on Form 8-K .............................. 25
2
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<CAPTION>
U.S. WIRELESS DATA, INC.
BALANCE SHEET
March 31, 2000 June 30, 1999
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ASSETS
Current Assets:
Cash and cash equivalents ................................................... $ 38,514,000 $ 425,000
Accounts receivable, net of allowance for doubtful accounts of
$51,000 at March 31, 2000; $43,000 at June 30, 1999 ...................... 157,000 178,000
Inventory, net .............................................................. 147,000 215,000
Other current assets ........................................................ 195,000 14,000
Escrow held for payment of professional fees ................................ -- 112,000
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Total current assets ..................................................... 39,013,000 944,000
Processing units - deployed ................................................... 45,000 408,000
Fixed assets, net ............................................................. 670,000 405,000
Other assets .................................................................. 53,000 14,000
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Total assets .................................................................. $ 39,781,000 $ 1,771,000
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ............................................................ $ 1,547,000 $ 1,198,000
Accrued liabilities ......................................................... 388,000 413,000
Borrowings, current portion ................................................. 55,000 2,272,000
Other current liabilities ................................................... -- 450,000
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Total current liabilities ................................................. 1,990,000 4,333,000
Borrowings, long-term portion ................................................. -- 25,000
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Total liabilities ............................................................. 1,990,000 4,358,000
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Redeemable preferred stock:
Series B 6% cumulative convertible redeemable preferred stock,
no par value, $1.00 stated value, 1,954,705 and 5,000,000 shares
authorized, 227,352 and 1,954,705 shares issued and outstanding
at March 31, 2000 and June 30, 1999, respectively. Redeemable
at approximately $350,000 at March 31, 2000 ............................... 350,000 1,587,000
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Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, no par value, 15,000,000 shares authorized:
Series A, at $1.00 stated value, 0 and 4,000,000
shares authorized, and 0 and 752,000 issued and outstanding
at March 31, 2000 and June 30, 1999, respectively ..................... -- 752,000
Series C convertible, stated value $0.01 per share, liquidation
value $10.00 per share aggregating $50,616,000, 8,450,000 shares
authorized, 5,061,600 issued and outstanding at March 31, 2000 ........ 51,000
Common stock, at $1.00 stated value, 40,000,000 shares authorized;
32,328,020 and 17,816,075 shares issued and outstanding at
March 31, 2000 and June 30, 1999, respectively ......................... 32,328,000 17,816,000
Common stock to be distributed .............................................. -- 243,000
Additional paid-in capital .................................................. 89,535,000 12,082,000
Accumulated deficit ......................................................... (84,473,000) (35,067,000)
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Total stockholders' equity (deficit) ...................................... 37,441,000 (4,174,000)
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Total liabilities and stockholders' equity ................................ $ 39,781,000 $ 1,771,000
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Accompanying notes are an integral part of the financial statements
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<CAPTION>
U.S. WIRELESS DATA, INC.
STATEMENTS OF OPERATIONS
For the three months ended For the nine months ended
March 31, March 31,
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2000 1999 2000 1999
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As Restated As Restated
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Net revenues:
Product sales ..................................... $ 111,000 $ 124,000 $ 271,000 $ 633,000
Services .......................................... 88,000 137,000 196,000 509,000
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199,000 261,000 467,000 1,142,000
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Cost of revenues:
Product sales ..................................... 214,000 89,000 349,000 499,000
Services .......................................... 52,000 151,000 196,000 482,000
Settlement with supplier .......................... -- -- -- (240,000)
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266,000 240,000 545,000 741,000
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Gross (loss) profit .................................... (67,000) 21,000 (78,000) 401,000
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Operating expenses:
Selling, general and administrative ................ 1,953,000 431,000 4,016,000 3,857,000
Research and development ........................... 391,000 105,000 859,000 363,000
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Total operating expenses ........................ 2,344,000 536,000 4,875,000 4,220,000
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Loss from operations ................................... (2,411,000) (515,000) (4,953,000) (3,819,000)
Interest expense ....................................... (462,000) (1,118,000) (1,394,000) (1,757,000)
Interest credit ........................................ 597,000 -- 597,000 --
Interest income ........................................ 65,000 -- 65,000 --
Other income ........................................... -- -- 128,000 8,000
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Net loss ............................................... (2,211,000) (1,633,000) (5,557,000) (5,568,000)
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Preferred stock dividends .............................. (42,864,000) (25,000) (43,849,000) (571,000)
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Net loss available to common stockholders .............. $(45,075,000) $ (1,658,000) $(49,406,000) $ (6,139,000)
============ ============ ============ ============
Basic and diluted net loss per share, (after
provision for preferred stock dividends) ............... $ (1.89) $ (0.12) $ (2.34) $ (0.46)
============ ============ ============ ============
Weighted average common shares
outstanding - basic/diluted ............................ 23,900,000 13,669,000 21,197,000 13,247,000
============ ============ ============ ============
</TABLE>
Accompanying notes are an integral part of the financial statements
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<CAPTION>
U.S. WIRELESS DATA, INC.
STATEMENTS OF CASH FLOWS
For the nine months ended March 31,
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2000 1999
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As Restated
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................. $ (5,557,000) $ (5,568,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization .................................... 127,000 175,000
Bad debt expense ................................................. 25,000 --
Write down of inventory .......................................... 112,000
Gain on sale of merchant portfolio ............................... (124,000)
Non-cash consulting services and other ........................... 511,000 1,499,000
Non-cash compensation expense-variable stock option .............. -- (1,302,000)
Non-cash interest expense ........................................ 451,000 966,000
Non-cash reduction of payment due supplier ....................... -- (240,000)
Loss on sale of fixed assets ..................................... 16,000 --
Changes in current assets and liabilities:
Accounts receivable ........................................... (4,000) (60,000)
Inventory ..................................................... (44,000) 457,000
Escrow for professional fees .................................. 112,000 --
Other current assets .......................................... (181,000) (29,000)
Accounts payable .............................................. 349,000 (261,000)
Accrued liabilities ........................................... 74,000 1,019,000
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Net cash used in operating activities ......................... (4,133,000) (3,344,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets ......................................... (395,000) (46,000)
Proceeds from sale of merchant portfolio ......................... 450,000 --
Proceeds from sale of fixed assets ............................... 24,000 --
Processing units - deployed ...................................... -- (81,000)
(Increase) decrease in other assets .............................. (39,000) 9,000
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Net cash provided by (used in) investing activities ........... 40,000 (118,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ........................... 939,000 27,000
Principal payment on borrowings .................................. (1,827,000) (366,000)
Net proceeds from issuance of debt ............................... 1,585,000 2,310,000
Net proceeds from issuance of convertible debenture .............. -- 2,490,000
Proceeds from issuance of Series C preferred stock ............... 50,616,000 --
Payments of offering costs for Series C preferred stock .......... (6,102,000) --
Proceeds from exercises of options and warrants .................. 169,000 --
Redemption of Series A preferred stock ........................... -- (1,000,000)
Redemption of Series B preferred stock ........................... (2,198,000) --
Redemption of convertible debenture .............................. (1,000,000) --
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Net cash provided by financing activities ..................... 42,182,000 3,461,000
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Net increase (decrease) in cash and cash equivalents ..................... 38,089,000 (1,000)
Cash and cash equivalents, beginning of period ........................... 425,000 4,000
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Cash and cash equivalents, end of period ................................. $ 38,514,000 $ 3,000
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</TABLE>
Accompanying notes are an integral part of the financial statements
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U.S. WIRELESS DATA, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - BASIS OF PRESENTATION
The accompanying financial statements included herein have been
prepared by U.S. Wireless Data, Inc. (the "Company" or "USWD"), without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The financial statements for the three and nine
month period ended March 31, 1999 have been restated from the originally
reported Form 10-QSB. A Form 8-K was filed on July 2, 1999, incorporating
this restatement. The financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Rule
310 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
The results of operations of any interim period are not necessarily
indicative of the results of operations to be expected for the fiscal
year. For further information, refer to the financial statements and
accompanying footnotes included in the Company's Form 10-KSB for the year
ended June 30, 1999.
The year ended June 30, 1999 condensed balance sheet data was
derived from audited financial statements but does not include all
disclosures required by Generally Accepted Accounting Principles.
Note 2 - THE COMPANY
The Company was incorporated in the State of Colorado on July 30,
1991. The Company relocated its principal executive office from
California to New York City in February 2000. The Company is in the
business of providing products and services to enable the use of wireless
technology for electronic payment and other transactions. The Company's
Wireless Express Payment ServiceSM ("WEPS") gateway serves as a link
joining all parties involved in a wireless point-of-sale ("POS")
transaction. This enables businesses requiring mobility and/or faster
transaction speed to accept non-cash payments utilizing wireless
technology. By providing a seamless interface between a merchant's POS
terminal(s), wireless carriers and front-end processors, credit, debit
and other card transactions can be processed as fast as cash, without the
cost and inconvenience of being tethered to a telephone line. In
addition, WEPS' Internet-based tools offer on-line terminal activation
and online/real-time transaction monitoring, reporting and remote
terminal diagnostics.
Note 3 - BRIDGE FINANCING AND PRIVATE PLACEMENT
Bridge Financing
On December 23, 1999, the Company entered into an agreement with
Commonwealth Associates, L.P. ("Commonwealth") in connection with the
private placement (the "Private Placement") of the Company's Series C
Convertible Preferred Stock (the "Series C Preferred Stock"). The
securities issued in the Private Placement and 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 Commonwealth, the Company
entered into an agreement with ComVest Capital Management, LLC
("ComVest"), an affiliate of Commonwealth, pursuant to which ComVest
initially lent the Company $1,000,000 and Dean M. Leavitt, the Company's
Chairman and Chief Executive Officer lent the Company $100,000 (the
"Bridge Financing"). ComVest and Mr. Leavitt subsequently lent the
Company an additional $250,000 and $25,000, respectively. The loans were
collateralized by substantially all of the Company's assets pursuant to
general security agreements and bore interest at a rate of 8% per annum.
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The notes were 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 included 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 not specifically exempted. The lenders had the option to
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 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. In addition to the
Bridge Financing, the Company also borrowed $125,000 from ComVest and
$75,000 from Mr. Leavitt (the "Additional Notes"). The Additional Notes
were due on demand interest free. The Company repaid the full outstanding
amount of the Bridge Financing and Additional Notes on March 18, 2000,
from the Private Placement described below. The rights under the Bridge
Financing expired on March 18, 2000, when the loans were repaid.
In connection with the Bridge Financing, the Company also issued
ComVest and Mr. Leavitt warrants to purchase 13,636,363 shares and
1,363,637 shares, respectively, of Common Stock at an exercise price of
$.01 per share. These warrants are fully exercisable at any time, subject
to certain conditions, including the availability of a sufficient number
of shares of Common Stock for issuance upon exercise thereof. On March
10, 2000, Commonwealth and Mr. Leavitt exercised their warrants with
respect to 7,920,000 shares and 792,000 shares, respectively. The
remaining warrants expire on December 30, 2006. ComVest 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 remaining warrants to be fully exercised. As a result, the
Company entered into Economic Participation Agreements with the bridge
lenders which are intended to provide the bridge lenders with the
economic equivalent of ownership of the shares of Common Stock underlying
the warrants 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 Common Stock are authorized and
reserved for issuance upon the exercise of the warrants, unless the
Company failed to amend its Articles of Incorporation by April 28, 2000,
in which case the bridge lenders are entitled to liquidated damages which
are calculated in accordance with the agreement. The Economic
Participation Agreements were subsequently amended to extend the period
in which the Company must amend its Articles of Incorporation to July 11,
2000. If the agreements are not automatically terminated as contemplated
by the agreements within 195 days of the date of the agreements, then the
Company shall pay to the bridge lenders on such 195th day a nonconversion
fee of $550,000 and, in addition, until such time as the agreements are
terminated as provided for, the bridge lenders may elect to receive in
cash in consideration of canceling the agreements the greater of (A) $2.5
million or (B) the product of (1) the number of shares as adjusted per
the agreement and (2) the remainder of (x) the closing asking price of
the common stock on the last trading date prior to the exercise by the
bridge lenders of their liquidation right and (y) $0.01.
The Company established the value of the Bridge Warrants based upon
an assessment of the market rate of interest for debt securities with
similar attributes but without the stock purchase warrants feature. In
December 1999, the Company recorded a discount on the notes from the
Bridge Financing via a charge of $34,000 against the face value of the
notes for a proportionate amount of the warrant valuation. For the
quarter ended March 31, 2000, the Company recorded an additional charge
of $417,000 against the face value of the notes for the balance of the
warrant valuation. The Company accreted the carrying value of the notes
to their full face value by the time of repayment on March 17, 2000.
Private Placement
Commonwealth acted as placement agent in the Private Placement
pursuant to which, as of March 31, 2000, 506.16 Units have been sold at
$100,000 per Unit for aggregate proceeds of $50,616,000. Each Unit
consists of 10,000 shares of the Company's Series C Preferred Stock
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(which is initially convertible into 66,667 shares of Common Stock) and
warrants to purchase Common Stock equal to 25% of the number of shares
into which the Series C Preferred Stock is convertible. Under the terms
of the Private Placement, an additional 143.84 Units for aggregate
proceeds of $14,384,000 may be sold.
The Series C Preferred Stock has a liquidation preference of $10 per
share, plus accrued and unpaid dividends. The holders of Series C
Preferred Stock are entitled to vote their shares of Series C Preferred
Stock on an as converted basis with the holders of Common Stock as a
single class on all matters submitted to a vote of the shareholders,
except as otherwise required by applicable law and except that the
holders of Series C Preferred Stock voting separately as a class have the
right to elect two directors to the Board of Directors.
Each share of Series C Preferred Stock is convertible at any time,
subject to the approval by the shareholders of an amendment to the
Company's Articles of Incorporation to increase the number of authorized
shares of Common Stock, at the option of the holder, into a number of
shares of Common Stock determined by dividing the liquidation value by
the conversion price, initially $1.50 per share, which is subject to
adjustment for stock splits, recapitalizations and other similar events.
If the Company issues shares of Common Stock at a price per share less
than the then current conversion price, then, subject to certain
exceptions, the conversion price will be automatically reduced to such
lower price and the number of shares issuable upon conversion of the
Series C Preferred Stock shall be increased proportionately. The Series C
Preferred Stock automatically converts into Common Stock (a) if, at any
time commencing three months after June 17, 2000, the average closing bid
price of the Company's Common Stock exceeds 300% of the conversion price
for 20 consecutive trading days or (b) upon a public offering of the
Company's securities that raises gross proceeds in excess of $30,000,000,
provided the shareholders have approved an increase in authorized capital
to allow for the conversion of the Series C Preferred Stock.
The warrants issued in connection with the Private Placement (the
"Unit Warrants") are exercisable for a period of seven years for an
aggregate number of shares of Common Stock equal to 25% of the number of
shares into which the Series C Preferred Stock are convertible, at an
exercise price equal to the then applicable conversion price. The initial
exercise price is $1.50 per share, subject to adjustment under the same
circumstances as the conversion price of the Series C Preferred Stock.
The Unit Warrants are callable for a nominal price at the Company's
option on 30 days' notice to the holders of the Unit Warrants if (a) the
average closing bid price of the Company's Common Stock for 20
consecutive trading days exceeds 300% of the exercise price, as adjusted,
(b) the Company's Common Stock is trading on a national securities
exchange or Nasdaq SmallCap or National Market Systems, and (c) a
registration statement covering the shares issuable upon exercise of the
Unit Warrants has been declared effective and the shares issuable upon
exercise of the Unit Warrants are not otherwise subject to any lock-up
restrictions.
The terms of the Series C Preferred Stock and the Unit Warrants may
be amended, modified or waived by an agreement among the Company,
Commonwealth and a committee to be designated by Commonwealth whose
members hold in the aggregate not less than 20% of the outstanding Series
C Preferred Stock and not less than 20% of the outstanding Unit Warrants.
The Company has agreed to file a registration statement with respect
to the shares of Common Stock issuable upon conversion of the Series C
Preferred Stock and exercise of the Unit Warrants under the Securities
Act within nine months of the closing of the Private Placement. The
investors also have certain "piggyback" registration rights with respect
to the shares of Common Stock issuable upon conversion of the Series C
Preferred Stock and the exercise of the Unit Warrants.
Each investor who purchased Units in the Private Placement agreed not
to sell, transfer or otherwise dispose of any of the securities sold in
the Private Placement for a period of one year following the closing of
the transaction. Thereafter, investors may not sell, transfer or dispose
of more than 25% of such securities during each of the following four
90-day periods. The lock-up period may be extended by Commonwealth for up
to an additional six months from the closing of any public offering that
is consummated prior to the end of the initial lock-up period, in which
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event there shall be no further lock-up at the end of such period. The
Company's officers, directors and certain other existing shareholders
agreed to substantially the same lock-up provisions as to shares owned or
acquired by them.
Several of the Company's officers and directors purchased Units in
the Private Placement. Dean M. Leavitt, the Company's Chief Executive
Officer and Chairman purchased 2.5 Units, Charles I. Leone, the Company's
Chief Financial Officer, Chief Operating Officer and Secretary purchased
1 Unit and Robert E. Robichaud, the Company's former Chief Financial and
Accounting Officer, Treasurer and Secretary purchased .75 of a Unit.
Edwin Cooperman, a member of the Board, purchased 1 Unit and each of
Michael S. Falk and Amy Newmark, both also members of the Board,
purchased 2.5 Units. Barry Kaplan, also a member of the Board, purchased
25 Units. Mr. Kaplan also received from Commonwealth at no charge a
warrant to purchase 1.5 Units exercisable at $100,000 per Unit (from the
warrants Commonwealth received as compensation in the Private Placement).
As part of its compensation, Commonwealth received warrants to
purchase 126.5 Units, exercisable at $100,000 per Unit, a commission
equal to $3,543,000, which is 7% of the gross proceeds raised in the
Private Placement, and a structuring fee equal to $1,518,000, which is 3%
of the gross proceeds raised in the Private Placement. Pursuant to a
prior agreement with Peter J. Solomon Securities Company Limited ("PJSC")
relating to financing transactions entered into by the Company, the
Company issued to PJSC a warrant to purchase 25.3 Units at $100,000 per
Unit and a fee equal to $400,000. The warrants are exercisable commencing
on the date of issuance and for seven years thereafter. The Company
valued the unit warrants at $5.57 million.
Commonwealth has the right under an Agency Agreement to designate
two directors to the Board and the following individuals gave proxies to
Commonwealth to vote for the election of such designees: Messrs. Leavitt
and Leone, John H. Perveiler, the Company's Vice President/National Sales
Manager, Marc R. Shultz, the Company's Vice President of Business
Development, and Barry Kaplan, Alvin Rice and Chester Winter, each
members of the Board. On March 29, 2000, four new directors joined the
Board, including Michael S. Falk, the Chairman of Commonwealth, and Amy
L. Newmark, both of whom were designated by Commonwealth.
As a condition to the completion of the Private Placement, the
Company agreed that the exercise price of a warrant owned by Dean M.
Leavitt, the Company's Chairman and Chief Executive Officer, to purchase
2,687,500 shares of Common Stock should be reduced from $3.00 per share
to the market price of the Common Stock on January 4, 2000. No amount has
been charged to operations for compensation in connection with the
repricing because the exercise price equaled the market price on the date
of repricing. In March 2000, the FASB issued Interpretation No. 44
"Accounting for Certain Transactions Involving Stock Compensation". The
interpretation is not effective until July 1, 2000. Had the
interpretation been in effect on the date of the repricing, the warrant
would have been considered a variable warrant. On March 31, 2000, the
variable warrant would have resulted in $9.75 million in compensation
expense, which would have increased the current quarter's net loss and
net loss per share to $54.9 million and $2.30 per share, respectively. On
July 1, 2000, in accordance with Interpretation No. 44, the warrant will
be recorded as a variable warrant.
As a result of the Bridge Financing and Private Placement,
Commonwealth may be deemed to control the Company.
Note 4 - FINANCIAL CONDITION AND LIQUIDITY
The Company has incurred recurring losses from operations and has an
accumulated deficit of approximately $42 million. During the
implementation of its new business plan as described in Item 2 -
Management Discussion and Analysis, the Company expects expenses to
continue to exceed revenues during the initial phases of the business
plan.
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The Company's cash position of $38.5 million provides the Company, in
management's opinion, with the financial resources to pursue it's
business plan and fund monthly deficits. As of May 10, the Company is
debt free and has no current financing needs.
Note 5 - NET LOSS PER SHARE
Earnings (loss) per common share (EPS) is computed using Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS
No. 128 establishes standards for the computation, presentation, and
disclosure of earnings per share. Basic per share amounts are computed by
dividing the net loss available to common stockholders by the weighted
average number of common shares outstanding during the year. Diluted per
share amounts incorporate the incremental shares issuable upon the
assumed exercise of the Company's stock options and warrants and assumed
conversion of convertible securities. During fiscal 1999 and 2000 such
incremental amounts have been excluded from the calculation since their
effect would be anti-dilutive. Such stock options, warrants and
conversions could potentially dilute earnings per share in the future.
Note 6 - FINANCINGS, BORROWINGS AND STOCKHOLDERS' EQUITY
For the nine months ended March 31, 2000, the Company raised
$930,000 in a private offering of common stock and common stock purchase
warrants. The Company issued approximately 1,500,000 shares of common
stock and warrants to purchase approximately 301,000 shares of common
stock. The warrants are exercisable at $1.50 per share through July 6,
2004. An additional 727,273 shares of common stock were issued on the
conversion of $450,000 notes payable. In addition, as a result of the
private offering, Bridge Financing and Private Placement described above,
anti-dilution provisions of certain outstanding warrants were triggered
and the Company is required to adjust the exercise prices and the number
of shares of common stock issuable upon the exercise of such warrants.
During the none months ended March 31, 2000, approximately 752,000
shares of Series A Preferred Stock and accrued dividends of approximately
$23,000 were converted into approximately 1,177,000 shares of common
stock at various price levels.
In the fourth quarter of fiscal 1999, USWD entered into an agreement
with the purchasers of the Series B Preferred Stock and holders of the 6%
Debentures to file a registration statement with the SEC covering the
common stock underlying the Series B Preferred Stock, a common stock
purchase warrant issued at the same time as the Series B Preferred Stock,
the 6% Debentures, and the common stock purchase warrants issued to the
6% Debenture holders in July, 1998, within 30 days of May 11, 1999, to be
effective within 90 days of May 11, 1999. Failure to file the
registration statement by June 10, 1999 and/or obtain effectiveness of it
by August 9, 1999, resulted in the accrual of penalties against the
Company. The Company did not file the required registration statement
until June 30, 1999, and the registration statement has never been
declared effective. The Series B Preferred Stock and 6% Debentures
ultimately became subject to redemption at the option of the holders for
failure to obtain effectiveness of the registration statement. The
Company became subject to a late filing penalty of $74,000 and accrued
"late effectiveness" penalties of $188,000, $225,000 and $0 for the
quarters ended September 30, 1999, December 31, 1999 and March 31, 2000,
respectively. Upon redemption of these securities, approximately $372,000
of the penalties were waived by the holders and recorded as an interest
credit in the current fiscal quarter. Offering costs, and valuation of
related warrants and incentive shares were recorded against the aggregate
preference value of the preferred stock and will be accreted up to the
full redemption value by the date of mandatory redemption. Accretion and
accrued dividends for the first, second and third fiscal quarters was
$807,000, $126,000 and $49,000, respectively. As described below in this
Footnote and in Footnote 14 (Subsequent Events), the Company redeemed or
converted all outstanding shares of Series B Preferred Stock and 6%
Debentures on or before May 3, 2000. The previously accrued dividends
include $87,000 which was waived in conjunction with the Series B
Preferred Stock redemptions. This waived amount reduced preferred stock
dividends and accumulated deficit in the current fiscal quarter.
In the first quarter of fiscal year 2000, holders of the 6%
Debentures converted $200,000 of the debt into approximately 313,000
shares of common stock per the specified conversion formula.
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In the first quarter of fiscal year 2000, a Colorado based management
recruiting firm successfully completed a search for a key product
development engineer. The Company agreed to pay half the $17,000 fee in
the form of 13,600 shares of common stock, which was issued on February
23, 2000.
On January 20, 2000, the Company issued a 22,500 share common stock
purchase warrant to RBB Bank as an inducement to redeem shares of Series
B Preferred Stock and 6% Debentures held by RBB Bank, exercisable at
$1.50 per share. The warrant vests immediately, was issued with an
exercise price equal to the market price of the underlying stock on the
date of grant, and expires on July 6, 2004. The Company valued the
warrant at $32,000, which was charged as a deemed dividend to accumulated
deficit.
On February 11, 2000, holders of the 6% Debentures converted
$800,000 of the debt into approximately 405,000 shares of common stock
per the specified conversion formula. Upon conversion of the 6%
Debentures, approximately $225,000 of interest previously accrued was
waived by the holders and recorded as an interest credit in the current
fiscal quarter.
On March 15, 2000, the Company retained Lippert/Heilshorn and
Associates, Inc. to provide investor relations services. In addition to
monthly fees and expenses, the Company agreed to issue Lippert/Heilshorn
a 15,000 share common stock purchase warrant each year for the next 3
years. The warrants vest one year after date of grant, are issued with an
exercise price equal to the market price of the underlying stock on the
date of grant, and expire 5 years from the vesting date. The first year
grant was issued on March 28, 2000, exercisable at $5.344 per share,
which the Company valued at $52,000. The Company charged the valuation as
investor relations expense.
On March 17, 2000, the Company redeemed 227,353 shares of Series B
Preferred Stock and $1,000,000 of 6% Debentures from RBB Bank for a price
equal to 125% of the liquidation value or principal amount, as
applicable, of the Series B Preferred Stock and 6% Debentures and repaid
a loan in the amount of $250,000. In connection with the redemption, RBB
Bank also waived certain accrued penalties and dividends.
On March 28, 2000, the Company issued a 50,000 share common stock
purchase warrant to Cornell Consulting International, Inc. for executive
search services, exercisable at $5.344 per share. The warrant vests
immediately, was issued with an exercise price equal to the market price
of the underlying stock on the date of grant, and expires March 27, 2005.
The Company valued the warrant at $95,000 (based on the market value of
the services received less cash paid), which was charged as executive
search expenses.
On March 31, 2000, the Company redeemed 1,500,000 shares of the
Company's Series B Preferred Stock from Bold Street, LLC, for a price
equal to 125% of the liquidation value of the Series B Preferred Stock,
plus accrued dividends. As an inducement for the redemptions, the Company
also issued a common stock purchase warrant, expiring April 30, 2004, to
purchase 150,000 shares of Common Stock, exercisable at $2.28 per share.
In connection with such redemption, Bold Street waived certain accrued
penalties. Bold Street received certain "piggyback" registration rights
as to the shares of Common Stock underlying the warrant. The Company
valued the warrant at $536,000, which was charged as a deemed dividend to
accumulated deficit.
For the third fiscal quarter ended March 31, 2000: (i) 109,600 common
stock shares were issued on exercise of employee options for aggregate
proceeds of $81,452, (ii) 8,712,000 common stock shares were issued on
exercise of the Bridge Warrants for aggregate proceeds of $87,120, and
(iii) 218,235 common stock shares were issued on cashless exercises of
warrants aggregating 394,632 shares.
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Note 7 - SALE OF CREDIT CARD PORTFOLIO
On July 7, 1999, USWD sold a portion of its merchant credit card
portfolio to PMT Services Inc., a wholly owned subsidiary of Nova
Corporation. The transaction resulted in a cash payment to USWD of
$450,000. The sale included approximately 450 installed USWD owned TRANZ
Enabler point-of-sale devices deployed with a portion of the respective
merchants. A gain of $124,000 was recorded on the sale as other income.
Note 8 - RELATED PARTY TRANSACTIONS
On July 1, 1999, USWD entered into an agreement with Liviakis
Financial Communications, Inc. (LFC), to provide the Company with public
relations and investor relations services through March 15, 2000. The
Company issued 690,000 restricted shares of common stock 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. The Company recorded a charge to consulting expense of $352,000 for
the valuation of the shares. LFC agreed not to sell any USWD common stock
during the term of the consulting services agreement.
In December 1999, the Company issued 443,077 restricted shares of
common stock to John M. Liviakis, the principal owner of LFC, and a
significant Company shareholder, to replace shares transferred to a
finder in conjunction with the May 1999 Series B Preferred Stock
financing.
In order to induce Commonwealth to consummate the Private Placement,
Mr. Liviakis and LFC agreed that for a period beginning on March 15, 2000
and ending on the first anniversary of the final closing of the Private
Placement (the "Lock-up Period"), they will not sell, transfer or
otherwise dispose of any securities of the Company that were owned by
either of them as of March 14, 2000 or acquired during the Lock-up
Period, except for an aggregate of 1,139,000 shares which may be
transferred or sold under certain conditions.
On March 29, 2000, the Company issued each of the four new members of
the Board a nonqualified stock option for 250,000 shares of the Company's
common stock. The options are exercisable at $1.50 per share, vest one
third per yearly anniversary date following grant date and expire on the
earlier of ten years from the grant date or one year after cessation of
the Optionee's relationship with the Company. Since the exercise price
for the options was less than the market price of the common stock
($6.00) on the date of issue, the Company valued the options under APB 25
at an aggregate of $4.5 million. The value will be charged to
compensation expense over the vesting period of the options. For the
quarter ended March 31, 2000, the Company charged $12,000 to compensation
expense.
See additional disclosures of related party transactions in Note 3 -
Bridge Financing and Private Placement and in Note 14 - Subsequent
Events.
Note 9 - BENEFICIAL CONVERSION FEATURE - SERIES C PREFERRED STOCK
The value of the "in the money" conversion feature for the Series C
Preferred Stock from the closings of the Private Placement approximated
$42.4 million. The value was charged to increase accumulated deficit as
deemed dividends during the quarter ended March 31, 2000.
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Note 10 - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of non-cash financing and investing activities:
1. Conversion of $450,000 notes payable to 727,273 shares of common
stock.
2. Conversion of $1,000,000 6% convertible debenture into 718,018
shares of common stock.
3. Accretion on mandatory redeemable preferred stock of $982,000,
including accrued dividends of $84,000.
4. Conversion of 751,610 shares of Series A preferred stock and accrued
dividends to 1,134,113 shares of common stock.
5. Issuance of 690,000 and 443,077 shares of common stock to Liviakis
Financial Communications.
6. Recording of "in the money conversion feature" on Series C preferred
stock for $42.4 million.
7. Issuance of 243,000 shares of common stock classified as "to be
distributed" on June 30, 1999.
Note 11 - INVENTORY
March 31, 2000 June 30, 1999
-------------- -------------
Inventory consists of:
Raw material $ 139,000 $ 144,000
Work-in-process 133,000 --
Finished goods 230,000 331,000
Lower of cost or market reserve (355,000) (260,000)
--------- ---------
$ 147,000 $ 215,000
========= =========
The Company has established a reserve to reflect the estimated net
realizable value of the inventory as of March 31, 2000 and June 30, 1999.
Note 12 - COMMITMENTS AND CONTINGENCIES
The Company leases office facilities in Colorado and New York
expiring January 16, 2003 and September 29, 2001, respectively. Future
minimum annual lease commitments for the years subsequent to March 31,
2000 are $300,000, $190,000 and 64,000.
The Company has employment agreements with two of its executive
officers. The agreements are for initial terms of two years, with
automatic one-year extensions after the initial term. Effective May 4,
2000, the employment agreements commit the Company to annual salary
compensation of $425,000 and annual discretionary bonuses.
See additional disclosure regarding the Economic Participation
Agreements in Note 3 - Bridge Financing and Private Placement and Leases
in Note 14 - Subsequent Events.
Note 13 - LITIGATION
In April 1998, USWD entered into an agreement with certain former
noteholders of its Demand Notes under which USWD issued 525,800 shares of
common stock in settlement of the dispute regarding conversion terms of
their notes. Terms of the settlement entitled the noteholders to certain
guarantee and/or "put" provisions related to the shares issued in
conversion of the notes. The shares originally issued upon conversion of
the notes and the additional shares resulting from the settlement were
reflected as redeemable common stock on the balance sheet. The guarantee
expired as to all shares on June 19, 1999. The "put" expired as to all
shares on June 24, 1999. As of June 30, 1999, the "put" provisions
related to the shares had expired or been relinquished in return for the
Company's agreement to issue up to 200,000 shares of common stock to
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certain holders who had exercised their "put" rights. In the fourth
fiscal quarter of 1999, $49,000 was accrued to reflect the settlement.
The agreement has been executed and 200,000 shares of common stock were
issued on February 22, 2000.
Note 14 - SUBSEQUENT EVENTS
The Board of Directors approved an amendment to the Company's
Articles of Incorporation to increase authorized capital from 55,000,000
shares to 225,000,000 shares. Of that number, 200,000,000 shares would be
designated as no par value Common Stock and 25,000,000 shares would be
designated as preferred stock, with the rights, designations and
preferences of any series of preferred stock to be fixed and determined
by the Board of Directors at the time of issuance, without further action
by shareholders. The amendment to the Articles of Incorporation is to be
submitted to the Company's shareholders as soon as practicable.
The Board of Directors approved a new stock option plan, subject to
approval by the Company's shareholders at the next shareholder meeting.
Once approved by shareholders (and assuming an increase in authorized
common stock is also approved by shareholders) the option plan would
reserve 15,000,000 shares of Common Stock for issuance pursuant to
options that may be granted under the plan. To date, Dean Leavitt, the
Company's Chief Executive Officer, has been granted 2,500,000 options,
and other employees have been granted 678,000 options, to be issued with
the exercise price to be set as of the date of shareholder approval of
the plan. The plan is to be submitted to the Company's shareholders as
soon as practicable.
On April 28, 2000, the Company repaid $55,000 of principal plus
accrued interest to date on all outstanding notes classified under
current liabilities in the Balance Sheet at March 31, 2000.
On May 3, 2000, pursuant to purchase agreements reached with the
holders, the Company redeemed the remaining 227,352 outstanding shares of
Series B Preferred Stock for an aggregate price of $350,000 and, as an
inducement for the redemptions, common stock purchase warrants to
purchase an aggregate of 25,000 shares of the Company's Common Stock at
an exercise price of $1.50 per share. The warrants are exercisable
through April 30, 2004, and the Company valued the warrants at $60,000 on
the date of grant, which will be charged as a deemed dividend to
accumulated deficit.
The Company intends to enter into a new lease for office space in New
York City for a term of ten years. Assuming the Company signs the new
lease in mid May 2000, minimum annual lease commitments for the five
years subsequent to March 31, 2000 are $456,300, $608,400, $608,400,
$608,400, $608,400 and thereafter in the aggregate are $3,334,500. At the
same time, the Company is also negotiating with its current landlord and
a prospective tenant for the termination of its existing New York City
lease. Assuming the Company is released from it's existing New York City
lease effective July 1, 2000 with no loss or penalty, the Company would
be relieved of future minimum lease commitments of $164,000 and $110,000
for the years ending March 31, 2001 and 2002, respectively.
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On May 4, 2000, the Board approved an increase in Mr. Leavitt's
annual salary to $250,000. The Board also approved a bonus of $200,000 to
Mr. Leavitt for the year ending May 3, 2000, the first anniversary of Mr.
Leavitt's position as Chairman and Chief Executive Officer. Compensation
expense in the third fiscal quarter was charged $182,000 for the
proration of the bonus.
May 4, 2000, the Company issued a 25,000 share common stock purchase
warrant to Cornell Consulting International, Inc. for executive search
services, exercisable at $3.1875 per share. The warrant vests
immediately, is exercisable at a price equal to the market price of the
underlying stock on the date of grant, and expires 5 years from the date
of grant. The Company valued the warrant at $25,000 (based on the market
value of the services received less cash paid), which will be charged to
operations as executive search expenses in the fourth fiscal quarter.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The Company may, in discussions of its future plans, objectives and
expected performance in periodic reports filed by the Company with the
Securities and Exchange Commission (or documents incorporated by
reference therein) and in written and oral presentations made by the
Company, include projections or other forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 or Section 21E
of the Securities Exchange Act of 1934, as amended. Such projections and
forward-looking statements are based on assumptions, which the Company
believes are reasonable but are, by their nature, inherently uncertain.
In all cases, results could differ materially from those projected. Some
of the important factors that could cause actual results to differ from
any such projections or forward-looking statements include, but are not
limited to: the Company's requirement for additional capital; failure of
the Company to raise additional capital critical to continue ongoing
operations; the failure to execute definitive agreements with potential
strategic alliance partners; technological change; system capacity
constraints or system failures; the ability of the Company to develop new
distribution channels; or the intensification of competition. Additional
factors may be described in other reports filed by the Company under the
Securities Exchange Act of 1934. A detailed statement of risks and
uncertainties relating to forward-looking statements is set forth in the
Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
1999 filed on October 14, 1999, under the caption "Risk Factors" in Item
6 of that Report, and is hereby incorporated by reference.
OVERVIEW
The Company was incorporated in the State of Colorado in July 1991
for the purposes of designing, manufacturing and marketing wireless and
portable credit card and check authorization terminals for use in the
transaction processing business. The Company completed an initial public
offering in December 1993. The Company relocated its principal executive
office to New York City from California in February 2000. In late March
2000, the Company raised $50.6 million in gross proceeds from the Private
Placement.
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The Company has now repositioned itself as a facilitator of wireless
transaction and data services. It is a device- neutral, wireless
carrier-neutral, merchant acquirer and front-end processor neutral
enabler of wireless transaction processing services through the creation
of its Wireless Express Payment ServiceSM or WEPSSM ("WEPS"). WEPS
provides a gateway between all of the parties within a wireless
point-of-sale ("POS") transaction. By providing a seamless interface
between a merchant's POS terminals, wireless carriers and transaction
processors, credit, debit and other card transactions can be processed
almost as fast as cash, without the cost and inconvenience of being
tethered to a telephone line. In addition, WEPS' Internet-based tools
offer online, real-time transaction monitoring and reporting, remote
diagnostics and automated terminal activation.
USWD provides merchant acquirers, Independent Sales Organizations
("ISOs") and payment processors with a wireless transaction management
service that can be utilized at both conventional and emerging merchant
segments, permits the retrieval of on-line/real-time transactional
reports and diagnostics via the Internet and simplifies the customer
service and application development effort.
Revision of Business Plan
In fiscal year 1998, USWD entered into agreements with large
telecommunications carriers for direct distribution of USWD's products
and services to merchants. USWD signed joint marketing and operating
agreements with Bell Atlantic Mobile, Ameritech Mobile Communications,
Inc., and GTE Wireless. Commencing in the second quarter of fiscal 1998
and continuing into the first quarter of fiscal 1999, USWD made
significant investments to support a nationwide deployment of TRANZ
Enablers (a device developed by USWD that provides the ability for a
traditional dial-up terminal to communicate wirelessly) to merchants
through GTE's and other telecommunications carriers' national sales
forces. Under these deployment programs, the carrier's sales
representative introduced USWD's credit card processing solution and
TRANZ Enabler to the end user merchant. Upon execution of a credit card
processing agreement, a TRANZ Enabler unit(s) was provided to the
merchant by USWD at USWD's cost. Under this program, USWD retained a
portion of the monthly credit card fees based on the dollar volume and
number of transactions processed through the TRANZ Enabler.
Placements of TRANZ Enabler units pursuant to USWD's agreements with
telecommunications carriers did not develop as rapidly as anticipated and
did not reach anticipated (and necessary) levels to pay for the
infrastructure to support the programs. Costs to USWD of implementing the
joint marketing and distribution agreements with GTE Wireless, Bell
Atlantic Mobile and Ameritech exceeded revenue generated by the programs
throughout the entire program. USWD has phased-out this program.
USWD's continued focus on direct sales to the merchant community had
inadvertently positioned it in direct competition with the industry's
largest acquirers, a competitive stance that resulted in disappointing
sales. As the Company entered fiscal 1999, it was clear that the Company
did not have the requisite expertise as a merchant acquirer and that it
should not be in direct competition with firms that were its prospective
customers. USWD hired Roger Pierce, former President of First Data
Corporation and Chief Operating Officer of Visa International, as Chief
Executive Officer in August 1998. It was during this period that the
Company began the development of WEPS. Mr. Pierce retired in March 1999.
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In May 1999, Dean M. Leavitt, former President and Chief Executive
Officer of U.S. Data Capture, a credit card processing company serving a
broad spectrum of conventional card acceptors and emerging markets, was
hired as Chairman and Chief Executive Officer of USWD. Mr. Leavitt has
refined the Company's mission to become a device neutral, wireless
carrier-neutral and merchant acquirer-neutral provider of wireless
processing services. The Company also developed a complimentary suite of
Internet browser-based tools to simplify the activation, troubleshooting
and deployment of wireless terminal devices. As part of USWD's new
strategy, the Company has focused its resources on the continued
development of the WEPS platform and its suite of services and has phased
out the sale of products and services directly to merchants, thereby
positioning itself as a neutral enabler to the acquirer marketplace. The
Company now has significant efforts underway to broaden the use of WEPS
through the expansion of its sales channels via contracts with merchant
acquirers, ISO's and payment processors. The Company is also in the
process of expanding its WEPS offerings by certifying additional
WEPS-enabled POS devices and implementing connectivity to additional
processors.
WEPS
The Company's business plan is now focused on establishing WEPS as
the global standard for wireless POS transaction processing. WEPS
provides for a seamless interface between wireless POS terminals and
front-end processors (companies with established connections to the
credit and debit card issuers). The speed and mobility offered by WEPS
has the potential to open up vast new markets that have historically not
accepted card payments. Central to the Company's strategy is its position
as a "neutral" provider of wireless transaction services to the industry,
specifically neutral with respect to terminal manufacturers, wireless
carriers and card processors.
The transaction processing industry in the United States is large and
growing. In 1998, Americans used their credit and debit cards nearly 14
billion times, generating over $1 trillion in purchases. However, there
are two weaknesses in the electronic transaction processing industry -
slow transaction speed and lack of mobility. Until the mid-1980's, all
credit card processing was essentially paper-based. As improvements in
electronic terminal technologies evolved landline transmission became the
prevailing means for processing credit card transactions. Electronic
Draft Capture ("EDC"), the electronic authorization and settlement of
credit card transactions has since become the standard for processing POS
transactions. Merchant acquirers, transaction processors and credit card
issuers all require merchants to utilize EDC to conduct secure credit and
debit card transactions. However, this tethered methodology excludes
significant under-served markets that require mobility and/or speed, such
as quick service restaurants, transportation services, delivery-based
businesses, stadium concessions and others.
As the electronic transaction processing industry has evolved,
providers have devoted substantial resources to developing proprietary
solutions to gain competitive advantages, including the development of
wireless POS systems. However, with the increasing variety of terminal
manufacturers, wireless carriers and front-end processors needing to
communicate, and with each having proprietary systems and communication
protocols, the cost and complexity of connectivity has become a barrier
to deployment of wireless POS systems.
WEPS is designed to provide a solution to this connectivity problem.
WEPS provides a scalable, client-server architecture that serves as a
neutral gateway between all parties in a wireless POS transaction. This
architecture enables any WEPS-compliant POS terminals to communicate over
most major U.S. wireless carriers to any transaction processors that have
established WEPS connectivity.
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Typically, terminal manufacturers program a specific terminal to
communicate with a specific processor. With WEPS, terminal manufacturers
can now develop a single application to communicate to WEPS. The WEPS
server then performs the formatting necessary to communicate the
transaction to any front-end processor which has agreed to accept WEPS
facilitated transactions and with which WEPS connectivity has been
established. This process saves the terminal manufacturers significant
development expenses, reduces the time to bring new terminals to market,
and enables the development of "thin-client" terminals whose
characteristics are largely determined by the server. Transaction
processors benefit from WEPS by not having to negotiate with each
wireless carrier to build and support connections to each. Instead, they
simply connect to the WEPS server as a single point of contact. As new
terminals and transaction types become available, each transaction
processor will be able to use their existing WEPS connection to gain
wireless access with minimal development expense or effort on their end.
As WEPS enables new markets to accept wireless payment processing,
wireless carriers benefit from an increase in traffic and simplified
connectivity to the processors. By providing a single point of contact,
WEPS significantly minimizes the time and development cost for terminal
manufacturers and transaction processors.
USWD is targeting large merchant acquirers, front-end processors and
ISO's for the WEPS service. The initial response for WEPS from the
targeted prospects has been positive. The Company has entered into more
than fifty WEPS agreements with various targeted prospects, including
Card Service International (CSI), Paymentech Network Services, and
Certified Merchant Services (CMS), and anticipates adding additional
agreements in the near future. The WEPS agreement allows the client to
offer WEPS as a wireless transaction processing solution to a merchant.
The WEPS agreement defines the services and billing terms between the
Company and client if and when the merchant acquirer utilizes WEPS. A
WEPS agreement is not a firm commitment by the client to purchase any
goods or service from USWD.
The benefits of WEPS to a merchant include:
o Mobility - with today's wireless terminals and the WEPS service,
a terminal no longer needs to be stationary. Eliminating the need
for a phone line opens up an array of new markets.
o Speed - transaction speed of approximately 3-5 seconds in most
cases vs. 15-20 seconds for a traditional landline transaction.
o Installation speed and reduced costs - elimination of phone lines
enhance the installation process and reduce the costs associated
with phone lines.
o On-line, real-time Internet reporting - WEPS online merchant site
offers merchants a look at their transactions as they occur as
well as detailed statistics and reports.
WEPS enables a business that requires mobility and/or transaction
speed to accept POS transactions. WEPS target markets include:
o Fast-food restaurants.
o Delivery services.
o Transportation services such as taxicabs, limos and buses.
o Stadiums, arenas and amusement parks.
o Public parking lots such as at airports.
o Movie theatres.
o Golf tournaments and racetracks.
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WEPS Internet-based tools provide the merchant, merchant acquirer and
front-end processor with a new level of control and management over their
wireless POS systems:
o Internet-based on-line activation, deactivation, and terminal
diagnostic tools - WEPS automates the terminal activation and
deactivation process, significantly decreasing the installation
time for new terminals. USWD can perform real-time, remote
diagnostic services for immediate problem solving.
o Internet-based on-line access to real-time transaction reports -
WEPS provides real-time transaction reporting, which allows for
previously unavailable levels of tracking and accountability.
USWD continues to establish connectivity between the wireless
networks, WEPS server and various front-end processors. Commercial
transactions running through the WEPS platform began in the second
quarter of fiscal 2000. The Company is also working with several POS
terminal manufacturers and front-end processors as part of the ongoing
process of adding additional devices to the WEPS menu of offerings.
The Company is exploring opportunities for the WEPS platform to
transport data to provide solutions for various non-payment applications
or applications with a combination of payment and non-payment data. Over
the long term, the Company intends to further its service offerings by:
o Expanding into selected international markets.
o Enabling wireless processing of ATM transactions.
o Transporting non-payment oriented transactions such as health
care related transactions, vending machine inventory reports, EBT
transactions and telemetric data.
o Becoming a vehicle for the transport of frequency and loyalty
program information.
o Recognizing and storing signatures in the WEPS network, and
accommodating nonconventional payment and debit transactions.
Year 2000 Issues
While the Company believes the greatest risks associated with the
Year 2000 issue have passed, the Company cannot be certain that Year 2000
issues with respect to the electronic payments infrastructure utilized by
credit card processors, banks and financial institutions within the
United States and on which USWD is reliant will not emerge over the
coming months. USWD could be adversely, materially affected, both
operationally and financially, to the extent third parties with whom it
interfaces, either directly or indirectly, have not properly addressed
their Year 2000 issues. The Company does not have an available
contingency plan that would alleviate a disruption of service in the
electronic transaction sector.
RESULTS OF OPERATION - FISCAL 2000 COMPARED TO FISCAL 1999
Revenue
Revenue from services of $88,000 for the third quarter of fiscal
2000 decreased 36% from revenue of $137,000 generated during the third
quarter of fiscal 1999 as the Company continued the implementation of its
new business model. As noted in the overview section above, the Company
is now marketing WEPS to merchant acquirers, ISO's and front-end
processors. The Company currently has over 50 "Clients" (merchant
acquirers, payment processors or independent service organizations) under
contract for WEPS. Billing for the new WEPS service accounted for $72,000
of the services revenue during the third quarter of fiscal 2000. This
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represents an increase of 57% from the second quarter of fiscal 2000, and
should continue increasing as the number of active terminals increase
from the growth in Clients and merchants. The Company is also working to
increase the number of WEPS certified devices and obtaining
communications connectivity and integration to additional front-end
processors. In addition, the Company sold one of its two existing
merchant credit card portfolios at the beginning of July 1999 (see Other
Income, below). The lost revenue from this portfolio accounted for a
decrease of approximately $108,000 in services revenue between the
current quarter and the same quarter of the prior year. Revenues from
product sales decreased to $111,000 in the current quarter from $124,000
in the prior period as the Company completes the transition from one-time
product sales to a recurring revenue model based on WEPS service. For the
nine months ended March 31, 2000, total revenues decreased to $467,000
from $1,142,000 in the prior year, again due to transition from the old
to the new business model.
Gross Profit
The Company recorded a gross loss of $67,000 in the third fiscal
quarter of 2000 compared to a gross profit of $21,000 in the third
quarter of fiscal 1999. The third quarter negative product margin versus
28% for the same quarter of the previous year reflects markdowns on
product sales and a $112,000 write down in the value of inventory. The
prior year nine-month product cost included a $240,000 one- time gain
resulting from the successful restructuring of a note payable to a former
terminal equipment supplier. The services costs include the initial setup
and ongoing communications costs associated with the terminals connected
through WEPS or terminals deployed via the previous credit-card
portfolios. The services margin was $36,000 for the current quarter
versus a loss of $14,000 for the same quarter of the prior year. The
spread in services revenue and cost structure are impacted by the
initialization of new terminals, the quantity of active terminals,
transaction volume and the associated rates the Company bills its Clients
for such services versus its charges from the various carrier networks.
Prior period service costs were distorted by excess wireless addresses
associated with the previous credit-card portfolios or other inventorying
of addresses.
Operating Expenses
Selling, general and administrative expense was $1,953,000 in the
current quarter, versus $431,000 in the third quarter of fiscal 1999. For
the current nine-month period, selling, general and administrative
expense was $4,016,000 versus $3,857,000 in the prior year.
Selling, general and administrative expense for the same quarter of
the prior year was reduced due to a $658,000 non-cash credit to reflect a
change in the carrying value of a variable stock option due to the change
in the Company's stock during the quarter. Increases in other expenses
for the current quarter versus the same quarter of the previous fiscal
year include increased activity for marketing, including promotions and
travel, recruiting, and other general and administrative expenses. Also
adding to the increase were non-cash charges for warrant grants valued at
$52,000 for investor relations and $95,000 for executive recruiting. The
Company also accrued $182,000 in the current quarter for the proration of
Mr. Leavitt's bonus.
20
<PAGE>
Selling, general and administrative expenses increased $159,000 to
$4,016,000 for the nine months ended March 31, 2000, versus the same
period of the prior year. The underlying makeup of the expenses are
changing as the Company transitions to its new business plan.
Research and development expenses increased to $391,000 in the third
fiscal quarter of 2000 from $105,000 in the same quarter of the prior
year. This increase was due primarily to an increase in the number of
employees and full time consultants focused on the implementation of
WEPS. For the nine-month period ending this fiscal year versus the prior,
research and development increased $496,000 to $859,000, also due
primarily to increased staffing.
Interest, Other Income and Preferred Stock Dividends
Interest income amounted to $65,000 for the current fiscal quarter
versus negligible amounts for prior periods. Prior to March 2000, the
Company had substantial liquidity problems. The Company's receipt of the
net cash from the Private Placement in late March 2000 provided the
Company with a large cash balance from which it earned interest income in
March, and from which it will earn interest or other investment income in
future periods.
Interest expense of $462,000 in the quarter ended March 31, 2000,
includes $451,000 of non-cash interest expense related to the Bridge
Warrants. Interest expense of $1,118,000 for the same quarter of the
previous year includes $950,000 of interest and late registration
penalties on the 6% Debentures. Interest expense for the first nine
months of this fiscal year decreased to $1,394,000 from $1,757,000 for
the same period of the previous fiscal year.
The Interest credit of $597,000 in the quarter ended March 31, 2000,
related primarily to the reversal of accrued interest and penalties on
the 6% Debentures and Series B Preferred Stock. The interest and
penalties were waived as part of the redemption agreements reached with
the holders.
Other income of $128,000 for the nine-month period ended March 31,
2000 included a $124,000 gain on the July 1999 sale of a portion of
USWD's merchant credit card portfolio to PMT Services Inc., a wholly
owned subsidiary of Nova Corporation. The transaction resulted in a cash
payment to USWD of $450,000. The sale included approximately 450
installed USWD owned TRANZ Enabler point-of-sale devices deployed with a
portion of the respective merchants.
The $42,864,000 preferred stock dividend for the third fiscal
quarter of 2000 includes $42,364,000 charged for the value of the "in the
money" conversion feature for the Series C Preferred Stock from the
closings of the Private Placement and $592,000 for warrants issued and
cash paid to induce the redemption of the Series B Preferred Stock.
Preferred stock dividends of $43,849,000 for the nine month period ended
March 31, 2000, include, in addition to the amounts above, $874,000 to
accrete the value of the Series B preferred stock up to its redemption
value by the date at which mandatory redemption is available to the
holders. The preferred stock dividend of $571,000 for the nine months
ended March 31, 1999, includes $465,000 of warrants and cash paid in the
inducement of the redemption of the Series A Preferred Stock and $106,000
of dividends accrued for the Series A Preferred Stock.
21
<PAGE>
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
In late March 2000, the Company closed on $50.616 million in gross
proceeds from the Private Placement. Net proceeds to the Company amounted
to $44.6 million, after payment of commissions, fees and expenses of $6
million.
As of May 10, 2000, the Company has redeemed all outstanding Series
A Preferred Stock, Series B Preferred Stock, 6% Debentures and repaid the
notes from the Bridge Financing and other notes, and has no current
financing needs.
The Company's success in raising funds from the Private Placement
frees management from the daily struggles of operating with little to no
liquidity and long-term solution to its cash needs. During the
implementation of its new business plan that the Company expects to
aggressively pursue, the Company expects expenses to continue to exceed
revenues during the initial phases of the plan. Interest income provided
from the available cash balance will help to reduce monthly deficits. The
Company's cash position of $38.5 million as of March 31, 2000, provides,
in management's opinion, the financial resources to pursue it's business
plan and fund monthly deficits. In addition, the Company's currently
anticipated capital equipment expenditures for its technology
infrastructure are not extensive.
Prior to March 2000, USWD faced significant challenges due to its
then current financial condition and lack of liquidity. The Company has
incurred recurring losses from operations and has an accumulated deficit
of approximately $84.6 million at March 31, 2000.
PART II OTHER INFORMATION
ITEM 1 - LITIGATION
Settlement of Claims of Certain Noteholders
In April 1998, USWD entered into an agreement with certain former
noteholders of its Demand Notes under which USWD issued 525,800 shares of
common stock in settlement of the dispute regarding conversion terms of
their notes. Terms of the settlement entitled the noteholders to certain
guarantee and/or "put" provisions related to the shares issued in
conversion of the notes. The shares originally issued upon conversion of
the notes and the additional shares resulting from the settlement were
reflected as redeemable common stock on the balance sheet. The guarantee
expired as to all shares on June 19, 1999. The "put" expired as to all
shares on June 24, 1999. As of June 30, 1999, the "put" provisions
related to the shares had expired or been relinquished in return for the
Company's agreement to issue up to 200,000 shares of common stock to
certain holders who had exercised their "put" rights. In the fourth
fiscal quarter of 1999, $49,000 was accrued to reflect the settlement.
The agreement has been executed and 200,000 shares of common stock were
issued on February 22, 2000.
22
<PAGE>
ITEM 2 - CHANGES IN SECURITIES
Recent Sales of Unregistered Securities
During the fiscal quarter ended March 31, 2000, the Company sold or
issued the following equity securities without registering the securities
under the Securities Act of 1933, as amended (the "Act").
On January 20, 2000, the Company issued a 22,500 share common stock
purchase warrant to RBB Bank.
On February 11, 2000, holders of the 6% Debentures converted $800,000
of the debt into 404,599 shares of common stock per the specified
conversion formula.
On March 15, 2000, the Company retained Lippert/Heilshorn and
Associates, Inc. to provide investor relations services. In addition to
monthly fees and expenses, the Company agreed to issue Lippert/Heilshorn
a 15,000 share common stock purchase warrant each year for the next 3
years. The warrants vest one year after date of grant, are issued with an
exercise price equal to the market price of the underlying stock on the
date of grant, and expire 5 years from the vesting date. The first year
grant was issued on March 28, 2000, with an exercise price of $5.344 per
share.
On March 28, 2000, the Company issued a 50,000 share common stock
purchase warrant to Cornell Consulting International, Inc. for executive
search services. The warrant vests immediately and is exercisable at
$5.344 per share.
On March 31, 2000, the Company redeemed 1,500,000 shares of the
Company's Series B Convertible Preferred Stock from Bold Street, LLC. The
Company also issued a common stock purchase warrant, expiring April 30,
2004, to purchase 150,000 shares of Common Stock exercisable at $2.28 per
share. Bold Street received certain "piggyback" registration rights as to
the shares of Common Stock underlying the warrant.
For the third fiscal quarter ended March 31, 2000: (i) 109,600 common
stock shares were issued on exercise of employee options, (ii) 8,712,000
common stock shares were issued on exercise of the Bridge Warrants, and
(iii) 218,235 common stock shares were issued on cashless exercises of
warrants aggregating 394,632 shares.
As to each of the foregoing transactions, the Company relied upon the
registration exemption contained in Section 4(2) of the Act. The
transactions did not involve a public offering of securities; the Company
received investment representations from each purchaser to the effect
that such purchaser was taking for investment only and not with a view to
distribution of the securities; the Company had reason to believe that
each purchaser had such knowledge and experience, either alone or through
a purchaser representative not affiliated with the Company, that such
purchaser was capable of evaluating the merits and risks of an investment
in the Company; each purchaser, either in his or her capacity as an
investor or an employee or consultant to the Company, had access to
adequate information concerning the Company and its business; all
certificates representing the securities were appropriately imprinted
23
<PAGE>
with customary "restricted securities" legends, and instructions were
lodged with the Company's transfer agent with respect to all shares of
common stock issued in the transactions as "restricted securities."
ITEM 3 - DEFAULT ON SENIOR SECURITIES
In the fourth quarter of fiscal 1999, USWD entered into an agreement
with the purchasers of its Series B Preferred Stock and holders of its 6%
Debentures to file a registration statement with the SEC covering the
common stock underlying the Series B Preferred Stock, a common stock
purchase warrant issued at the same time as the Series B Preferred Stock,
the 6% Debentures, and the common stock purchase warrants issued to the
6% Debenture holders in July 1998, within 30 days of May 6, 1999, to be
effective within 90 days of May 6, 1999. This date was subsequently
extended to May 11, 1999. USWD filed the required registration statement
on June 30, 1999. The Company thereby became subject to a late filing
penalty of $74,000 (following waiver of the "late filing" penalty by the
holder of 1,500,000 shares of Series B Preferred Stock). The registration
statement did not become effective by August 10, 1999. The Company
therefore become subject to an initial "late effectiveness" penalty of 3%
of the total original purchase price of $1,800,000 of 6% Debentures and
1,954,705 shares of Series B Preferred Stock, which were outstanding as
of August 10, 1999. Additional late effectiveness penalties accrue
monthly (or for any portion of any month) that the registration statement
is not effective, in amounts equal to 2% of the original purchase price
of the outstanding Series B Preferred Stock and 3% of the face amount of
the outstanding 6% Debentures. As of December 31, 1999, $413,000 of
penalties was accrued as a charge to interest expense. The registration
statement has not become effective as of the date of filing this report.
As of October 10, 1999, the Series B Registration Statement had not
been declared effective. The holders of the Series B Preferred Stock had
the right to require USWD to redeem the shares of Series B Preferred
Stock for $1.25 per share plus accrued penalties and dividends
(approximately $2,700,000 as of December 31, 1999), and holders of the 6%
Debentures to redeem the $1,800,000 face amount at 120% of the face value
(increased to 125% based on pending redemption proposal) plus accrued
penalties and interest (approximately 2,520,000 as of December 31, 1999).
As of March 31, 2000, the Company had redeemed 1,727,353 shares of
Series B Preferred Stock at prices equal to 125% of the liquidation value
of the Series B Preferred Stock and warrants to purchase and aggregate of
150,000 shares of Common Stock at $1.50 per share, and repurchased
$200,000 of the 6% Debentures. The remaining $800,000 of 6% Debentures
and accrued interest were converted into 404,745 shares of Common Stock
at $2.05 per share. The Company redeemed the remaining 227,353 shares of
Series B Preferred Stock on May 3, 2000, for an aggregate of $350,000 and
warrants to purchase an aggregate of 25,000 shares of Common Stock at an
exercise price of $1.50 per share. In connection with these redemptions,
the holders of the securities waived any rights they may have had arising
out of any of the above described defaults.
ITEM 5 - OTHER INFORMATION
On January 4, 2000, the Board of Directors approved an amendment to
the Company's Articles of Incorporation to increase authorized capital
from 55,000,000 shares to 225,000,000 shares. Of that number, 200,000,000
shares would be designated as no par value Common Stock and 25,000,000
shares would be designated as preferred stock, with the rights,
designations and preferences of any series of preferred stock to be fixed
and determined by the Board of Directors at the time of issuance, without
further action by shareholders. The amendment to the Articles of
Incorporation is to be submitted to the Company's shareholders as soon as
practicable.
24
<PAGE>
On January 4, 2000, the Board of Directors approved a new stock
option plan, subject to approval by the Company's shareholders at the
next shareholder meeting. Once approved by shareholders (and assuming an
increase in authorized common stock is also approved by shareholders) the
option plan would reserve 15,000,000 shares of Common Stock for issuance
pursuant to options that may be granted under the plan. To date, Dean
Leavitt, the Company's Chief Executive Officer, was granted 2,500,000
options, and other employees were granted 678,000 options, to be issued
with the exercise price to be set as of the date of shareholder approval
of the plan. The plan is to be submitted to the Company's shareholders as
soon as practicable.
On May 3, 2000, pursuant to Purchase Agreements reached with the
holders, the Company redeemed the remaining 227,352 outstanding shares of
Series B Preferred Stock.
The Company intends to enter into a new lease for office space in New
York City for a term of ten years. At the same time, the Company is also
negotiating with its current landlord and a prospective tenant for the
termination of its existing New York City lease.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits required by Item 601 of Regulation S-B
4.1 Form of Nonqualified Stock Option Certificate issued to Edwin M.
Cooperman dated March 29, 2000 *
4.2 Form of Nonqualified Stock Option Certificate issued to Michael S.
Falk dated March 29, 2000 *
4.3 Form of Nonqualified Stock Option Certificate issued to Barry A.
Kaplan dated March 29, 2000 *
4.4 Form of Nonqualified Stock Option Certificate issued to Amy L. Newmark
dated March 29, 2000 *
4.5 Nonqualified Stock Option Certificate issued to Charles I. Leone dated
February 15, 2000 *
4.6 Form of Common Stock Purchase Warrant (originally issued to Dean M.
Leavitt as of May 3, 1999), as re-executed as of January 4, 2000 to
reflect repricing authorized as of such date *
4.7 Form of Common Stock Purchase Warrant for 22,500 shares issued to RBB
Bank dated January 20, 2000.
4.8 Form of Common Stock Purchase Warrant for 15,000 shares issued to
Lippert/Heilshorn & Associates, Inc. dated March 28, 2000
4.9 Form of Common Stock Purchase Warrant for 50,000 shares issued to
Cornell Consulting International, Inc. dated March 28, 2000
4.10 Form of Common Stock Purchase Warrant for 25,000 shares issued to
Cornell Consulting International, Inc. dated May 4, 2000
4.11 Lock-up Agreement between the Company and John M. Liviakis and
Liviakis Financial Communications, Inc. dated March 15, 2000**
25
<PAGE>
10.1 Form of Redemption Agreement between the Company and Bold Street, LLC
dated January 31, 2000**
10.2 Form of Repurchase Agreement between the Company and RBB Bank
Aktiengesellschaft dated January 18, 2000**
10.3 Form of Purchase Agreement between the Company and The Cuttyhunk Fund
dated May 3, 2000
10.4 Form of Purchase Agreement between the Company and Tonga Partners LP
dated May 3, 2000
10.5 Form of Employment Agreement between USWD and Charles I. Leone dated
February 11, 2000 *
27 Financial Data Schedule
- -----------------
* Management compensatory agreement.
** To be filed by amendment.
b) Reports on Form 8-K
On January 12, 2000, the Company filed a report on Form 8-K reporting
an event of December 23, 1999. The report contained disclosures under
Item 5 - Other Events, relating to various agreements entered into in
connection with a proposed equity private placement and a bridge
financing.
On March 24, 2000, the Company filed a report on Form 8-K reporting
an event of March 17, 2000. The report contained disclosures under Item 5
- Other Events, relating to the issuance of a press release on March 20,
2000 announcing a closing of a private placement raising $37.8 million of
gross proceeds. The Report also disclosed the relocation of the Company's
principal executive offices from California to New York.
On March 30, 2000, the Company filed a report on Form 8-K reporting
an event of March 28, 2000. The report contained disclosures under Item 5
- Other Events, relating to the issuance of a press release on March 29,
2000 announcing a closing of a private placement raising an additional
$12.8 million of gross proceeds. The press release also announced the
appointment of four new Directors to the Board of Directors, raising the
number of Board Members to seven.
On April 12, 2000, the Company filed a report on Form 8-K reporting
an event of March 28, 2000. The report contained disclosures under Item 1
- Change of Control and Item 5 - Other Events, relating to a series of
transactions entered into in connection with the equity private
placement.
On April 18, 2000, the Company filed a report on Form 8-K/A, amending
the Form 8-K filing of April 12, 2000, to include various Exhibits.
On April 24, 2000, the Company filed a report on Form 8-K/A-2,
further amending the Form 8-K filing of April 12, 2000, to include an
additional Exhibit.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. WIRELESS DATA, INC.
Registrant
Date: May 15, 2000 By: \s\ Dean M. Leavitt
---------------------------
Chief Executive Officer
May 15, 2000 By: \s\ Charles I. Leone
---------------------------
Chief Financial Officer
and Chief Operating Officer
27
THIS OPTION AND THE STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES
LAWS. THIS OPTION AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF
COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER (WHICH SHALL BE IN
FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY SATISFACTORY TO THE COMPANY),
SUCH REGISTRATION IS NOT THEN REQUIRED. NO REGISTRATION RIGHTS HAVE BEEN GRANTED
WITH RESPECT TO THIS OPTION AS OF ITS ORIGINAL DATE OF ISSUANCE.
U.S. WIRELESS DATA, INC.
NONQUALIFIED STOCK OPTION CERTIFICATE
U.S. Wireless Data, Inc., a Colorado corporation ("Company"), for good and
valuable consideration, including the incentive to the Optionee to remain as a
director, employee or consultant to the Company as a result of ownership or
increased ownership of the Company's no par value common stock ("Common Stock"),
the receipt and sufficiency of which consideration hereby is acknowledged,
irrevocably grants to the Optionee the option ("Option") to purchase the
following number of shares of Common Stock:
Optionee Number of Shares
-------- ----------------
Edwin M. Cooperman ---250,000---
The effective date of this grant is March 29, 2000 ("Date of Grant") and is
subject to the following terms and conditions:
1. EXERCISE PRICE. The purchase price ("Exercise Price") for shares of
Common Stock purchasable pursuant to this Option shall be One and 50/100 Dollars
($1.50) per share, which shall be paid in full in cash at the time of exercise;
provided, however, that the Board of Directors of the Company may in its sole
discretion permit payment to be made with shares of the Company's Common Stock
owned by Optionee (a "Cashless Exercise"). Optionee shall have no rights with
respect to dividends or have any other rights as a shareholder with respect to
shares subject to this Option until Optionee has given written notice of the
exercise of the Option and has paid in full for such shares.
2. VESTING AND TIME OF EXERCISE. This Option will vest one third per yearly
anniversary date following grant date. This Option may be exercised as to all or
any portion of the vested shares covered by this Option Grant at any time, and
shall expire on the earlier of ten years from the grant date, or one year after
cessation of the Optionee's relationship with the Company in any capacity,
including service provided to the Company as an employee, officer, director or
<PAGE>
consultant. The period of time during which the Option may be exercised is
referred to herein as the "Option Period."
3. NUMBER OF SHARES PURCHASABLE AT ANY ONE TIME. This Option may be
exercised only for at least 100 shares of Common Stock or a multiple thereof or
for the full number of shares for which the Option is then exercisable.
4. NONTRANSFERABILITY OF OPTION. This Option may not be transferred by
Optionee otherwise than by will or the laws of descent and distribution. During
Optionee's lifetime, this Option shall be exercisable only by Optionee.
5. CHANGES IN CAPITAL; CERTAIN REORGANIZATIONS. If the outstanding Common
Stock of the Company which is subject to this Option shall at any time be
changed or exchanged by declaration of a stock dividend, split-up, subdivision
or combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number of and kind of shares subject to the Option and the Option Price shall be
appropriately and equitably adjusted so as to maintain the proportionate number
of shares without changing the aggregate option price. In the event of a
dissolution or liquidation of the Company, or a merger, consolidation, sale of
all or substantially all of its assets, or other corporate reorganization in
which the Company is not the surviving corporation, or in which the Company is
the surviving corporation but holders of Common Stock receive securities of
another corporation, this Option shall terminate as of the effective date of
such event, provided that immediately prior to such event, Optionee shall have
the right to exercise this Option as to all shares underlying this Option,
irrespective of the number of Options actually vested at the time.
6. MANNER OF EXERCISE.
(a) This Option may be exercised in whole or in part at any time and
from time to time within the Option Period, subject to the terms and conditions
contained herein, by the delivery of written notice of exercise to the Chief
Financial Officer of the Company, as required by subsection (d) of this Section,
accompanied by (i) full payment, in cash or certified or bank check, payable to
the Company, or, (ii) if permitted by the Company's Board of Directors in its
sole discretion, shares of the Company's Common Stock having a fair market value
equal to the aggregate exercise price for the number of shares purchased which
the Optionee has held for at least six months prior to the time of exercise of
the Option.
(b) For purposes of this Section, "Market Price" means the average of
the closing prices of sales on the principal domestic securities exchange on
which such security may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the bid and asked prices quoted on
Nasdaq (including the OTC Bulletin Board ) as of the close of trading in New
York City on such day, in each such case averaged over a period of five (5)
consecutive days consisting of the business day immediately preceding the day as
of which Market Price is being determined and the four (4) consecutive business
days prior to such day; provided that if such security is listed on any
principal domestic securities exchange or quoted on Nasdaq, the terms "business
2
<PAGE>
day" and "business days" means a day or days, as applicable, on which such
exchange or Nasdaq is open for trading or quotation, as the case may be,
notwithstanding whether any quotation is available on any particular business
day and, if not, then the Market Price shall be determined based upon those
remaining days during the aforesaid 5-day period for which quotations are
available. If the shares are not so listed or traded on any principal domestic
securities exchange or quoted on Nasdaq, the Market Price shall be the fair
value thereof, as determined in good faith by the Board of Directors of the
Company.
(c) Certificates for the shares of Common Stock purchased upon
exercise of this Option shall be delivered by the Company to the Purchaser
within five (5) business days after the Exercise Date.
(d) The notice of exercise (i) shall state the election to exercise
the Option, (ii) shall state the number of shares in respect to which the Option
is being exercised, (iii) shall state Optionee's address, (iv) shall state
Optionee's social security number, (v) shall contain such representations and
agreements concerning Optionee's investment intent with respect to such shares
of Common Stock as shall be satisfactory to the Company's counsel, and (vi)
shall be signed by Optionee. As a further condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
(e) Unless this Option has expired or all of the purchase rights
represented hereby have been exercised, the Company shall, in addition to
certificates for Common Stock issued upon exercise of this Option, prepare upon
exercise of this Option, a new Option representing the rights formerly
represented by this Option that have not expired or been exercised. The Company
shall, within five (5) business days after the Exercise Date, deliver such new
Option to the Optionee.
7. AMENDMENT AND ADMINISTRATION. The Board of Directors shall have the
authority to interpret this Option, and generally to conduct and administer the
exercise of this Option and to make all determinations in connection herewith
which may be necessary or advisable, and all such actions of the Board shall be
final and conclusive for all purposes and binding upon Optionee.
8. MISCELLANEOUS. This Option shall inure to the benefit of and be binding
upon each successor of the Company. All obligations imposed upon and all rights
granted to the Optionee and all rights reserved by the Company under this Option
shall be binding upon and inure to the benefit of Optionee, Optionee's heirs,
personal representatives, administrators and successors. Unless the context
requires otherwise, words denoting the singular may be construed as denoting the
plural, and words of the plural may be construed as denoting the singular and
words of one gender my be construed as denoting such other gender as is
appropriate.
3
<PAGE>
IN WITNESS WHEREOF, this Option has been issued by the Company effective as
of the Date of Grant.
U.S. WIRELESS DATA, INC. Accepted by Optionee:
a Colorado corporation
By
-------------------------------- --------------------------------
Dean M. Leavitt Print Name
Chief Executive Officer
Attest
------------------------------
Charles I. Leone
Secretary
4
THIS OPTION AND THE STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES
LAWS. THIS OPTION AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF
COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER (WHICH SHALL BE IN
FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY SATISFACTORY TO THE COMPANY),
SUCH REGISTRATION IS NOT THEN REQUIRED. NO REGISTRATION RIGHTS HAVE BEEN GRANTED
WITH RESPECT TO THIS OPTION AS OF ITS ORIGINAL DATE OF ISSUANCE.
U.S. WIRELESS DATA, INC.
NONQUALIFIED STOCK OPTION CERTIFICATE
U.S. Wireless Data, Inc., a Colorado corporation ("Company"), for good and
valuable consideration, including the incentive to the Optionee to remain as a
director, employee or consultant to the Company as a result of ownership or
increased ownership of the Company's no par value common stock ("Common Stock"),
the receipt and sufficiency of which consideration hereby is acknowledged,
irrevocably grants to the Optionee the option ("Option") to purchase the
following number of shares of Common Stock:
Optionee Number of Shares
-------- ----------------
Michael S. Falk ---250,000---
The effective date of this grant is March 29, 2000 ("Date of Grant") and is
subject to the following terms and conditions:
1. EXERCISE PRICE. The purchase price ("Exercise Price") for shares of
Common Stock purchasable pursuant to this Option shall be One and 50/100 Dollars
($1.50) per share, which shall be paid in full in cash at the time of exercise;
provided, however, that the Board of Directors of the Company may in its sole
discretion permit payment to be made with shares of the Company's Common Stock
owned by Optionee (a "Cashless Exercise"). Optionee shall have no rights with
respect to dividends or have any other rights as a shareholder with respect to
shares subject to this Option until Optionee has given written notice of the
exercise of the Option and has paid in full for such shares.
2. VESTING AND TIME OF EXERCISE. This Option will vest one third per yearly
anniversary date following grant date. This Option may be exercised as to all or
any portion of the vested shares covered by this Option Grant at any time, and
shall expire on the earlier of ten years from the grant date, or one year after
<PAGE>
cessation of the Optionee's relationship with the Company in any capacity,
including service provided to the Company as an employee, officer, director or
consultant. The period of time during which the Option may be exercised is
referred to herein as the "Option Period."
3. NUMBER OF SHARES PURCHASABLE AT ANY ONE TIME. This Option may be
exercised only for at least 100 shares of Common Stock or a multiple thereof or
for the full number of shares for which the Option is then exercisable.
4. NONTRANSFERABILITY OF OPTION. This Option may not be transferred by
Optionee otherwise than by will or the laws of descent and distribution. During
Optionee's lifetime, this Option shall be exercisable only by Optionee.
5. CHANGES IN CAPITAL; CERTAIN REORGANIZATIONS. If the outstanding Common
Stock of the Company which is subject to this Option shall at any time be
changed or exchanged by declaration of a stock dividend, split-up, subdivision
or combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number of and kind of shares subject to the Option and the Option Price shall be
appropriately and equitably adjusted so as to maintain the proportionate number
of shares without changing the aggregate option price. In the event of a
dissolution or liquidation of the Company, or a merger, consolidation, sale of
all or substantially all of its assets, or other corporate reorganization in
which the Company is not the surviving corporation, or in which the Company is
the surviving corporation but holders of Common Stock receive securities of
another corporation, this Option shall terminate as of the effective date of
such event, provided that immediately prior to such event, Optionee shall have
the right to exercise this Option as to all shares underlying this Option,
irrespective of the number of Options actually vested at the time.
6. MANNER OF EXERCISE.
(a) This Option may be exercised in whole or in part at any time and
from time to time within the Option Period, subject to the terms and conditions
contained herein, by the delivery of written notice of exercise to the Chief
Financial Officer of the Company, as required by subsection (d) of this Section,
accompanied by (i) full payment, in cash or certified or bank check, payable to
the Company, or, (ii) if permitted by the Company's Board of Directors in its
sole discretion, shares of the Company's Common Stock having a fair market value
equal to the aggregate exercise price for the number of shares purchased which
the Optionee has held for at least six months prior to the time of exercise of
the Option.
(b) For purposes of this Section, "Market Price" means the average of
the closing prices of sales on the principal domestic securities exchange on
which such security may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the bid and asked prices quoted on
Nasdaq (including the OTC Bulletin Board ) as of the close of trading in New
York City on such day, in each such case averaged over a period of five (5)
consecutive days consisting of the business day immediately preceding the day as
of which Market Price is being determined and the four (4) consecutive business
days prior to such day; provided that if such security is listed on any
principal domestic securities exchange or quoted on Nasdaq, the terms "business
day" and "business days" means a day or days, as applicable, on which such
exchange or Nasdaq is open for trading or quotation, as the case may be,
notwithstanding whether any quotation is available on any particular business
day and, if not, then the Market Price shall be determined based upon those
remaining days during the aforesaid 5-day period for which quotations are
available. If the shares are not so listed or traded on any principal domestic
securities exchange or quoted on Nasdaq, the Market Price shall be the fair
value thereof, as determined in good faith by the Board of Directors of the
Company.
2
<PAGE>
(c) Certificates for the shares of Common Stock purchased upon
exercise of this Option shall be delivered by the Company to the Purchaser
within five (5) business days after the Exercise Date.
(d) The notice of exercise (i) shall state the election to exercise
the Option, (ii) shall state the number of shares in respect to which the Option
is being exercised, (iii) shall state Optionee's address, (iv) shall state
Optionee's social security number, (v) shall contain such representations and
agreements concerning Optionee's investment intent with respect to such shares
of Common Stock as shall be satisfactory to the Company's counsel, and (vi)
shall be signed by Optionee. As a further condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
(e) Unless this Option has expired or all of the purchase rights
represented hereby have been exercised, the Company shall, in addition to
certificates for Common Stock issued upon exercise of this Option, prepare upon
exercise of this Option, a new Option representing the rights formerly
represented by this Option that have not expired or been exercised. The Company
shall, within five (5) business days after the Exercise Date, deliver such new
Option to the Optionee.
7. AMENDMENT AND ADMINISTRATION. The Board of Directors shall have the
authority to interpret this Option, and generally to conduct and administer the
exercise of this Option and to make all determinations in connection herewith
which may be necessary or advisable, and all such actions of the Board shall be
final and conclusive for all purposes and binding upon Optionee.
8. MISCELLANEOUS. This Option shall inure to the benefit of and be binding
upon each successor of the Company. All obligations imposed upon and all rights
granted to the Optionee and all rights reserved by the Company under this Option
shall be binding upon and inure to the benefit of Optionee, Optionee's heirs,
personal representatives, administrators and successors. Unless the context
requires otherwise, words denoting the singular may be construed as denoting the
plural, and words of the plural may be construed as denoting the singular and
words of one gender my be construed as denoting such other gender as is
appropriate.
3
<PAGE>
IN WITNESS WHEREOF, this Option has been issued by the Company effective as
of the Date of Grant.
U.S. WIRELESS DATA, INC. Accepted by Optionee:
a Colorado corporation
By
-------------------------------- --------------------------------
Dean M. Leavitt Print Name
Chief Executive Officer
Attest
------------------------------
Charles I. Leone
Secretary
4
THIS OPTION AND THE STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES
LAWS. THIS OPTION AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF
COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER (WHICH SHALL BE IN
FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY SATISFACTORY TO THE COMPANY),
SUCH REGISTRATION IS NOT THEN REQUIRED. NO REGISTRATION RIGHTS HAVE BEEN GRANTED
WITH RESPECT TO THIS OPTION AS OF ITS ORIGINAL DATE OF ISSUANCE.
U.S. WIRELESS DATA, INC.
NONQUALIFIED STOCK OPTION CERTIFICATE
U.S. Wireless Data, Inc., a Colorado corporation ("Company"), for good and
valuable consideration, including the incentive to the Optionee to remain as a
director, employee or consultant to the Company as a result of ownership or
increased ownership of the Company's no par value common stock ("Common Stock"),
the receipt and sufficiency of which consideration hereby is acknowledged,
irrevocably grants to the Optionee the option ("Option") to purchase the
following number of shares of Common Stock:
Optionee Number of Shares
-------- ----------------
Barry A. Kaplan ---250,000---
The effective date of this grant is March 29, 2000 ("Date of Grant") and is
subject to the following terms and conditions:
1. EXERCISE PRICE. The purchase price ("Exercise Price") for shares of
Common Stock purchasable pursuant to this Option shall be One and 50/100 Dollars
($1.50) per share, which shall be paid in full in cash at the time of exercise;
provided, however, that the Board of Directors of the Company may in its sole
discretion permit payment to be made with shares of the Company's Common Stock
owned by Optionee (a "Cashless Exercise"). Optionee shall have no rights with
respect to dividends or have any other rights as a shareholder with respect to
shares subject to this Option until Optionee has given written notice of the
exercise of the Option and has paid in full for such shares.
2. VESTING AND TIME OF EXERCISE. This Option will vest one third per yearly
anniversary date following grant date. This Option may be exercised as to all or
any portion of the vested shares covered by this Option Grant at any time, and
shall expire on the earlier of ten years from the grant date, or one year after
cessation of the Optionee's relationship with the Company in any capacity,
including service provided to the Company as an employee, officer, director or
consultant. The period of time during which the Option may be exercised is
referred to herein as the "Option Period."
<PAGE>
3. NUMBER OF SHARES PURCHASABLE AT ANY ONE TIME. This Option may be
exercised only for at least 100 shares of Common Stock or a multiple thereof or
for the full number of shares for which the Option is then exercisable.
4. NONTRANSFERABILITY OF OPTION. This Option may not be transferred by
Optionee otherwise than by will or the laws of descent and distribution. During
Optionee's lifetime, this Option shall be exercisable only by Optionee.
5. CHANGES IN CAPITAL; CERTAIN REORGANIZATIONS. If the outstanding Common
Stock of the Company which is subject to this Option shall at any time be
changed or exchanged by declaration of a stock dividend, split-up, subdivision
or combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number of and kind of shares subject to the Option and the Option Price shall be
appropriately and equitably adjusted so as to maintain the proportionate number
of shares without changing the aggregate option price. In the event of a
dissolution or liquidation of the Company, or a merger, consolidation, sale of
all or substantially all of its assets, or other corporate reorganization in
which the Company is not the surviving corporation, or in which the Company is
the surviving corporation but holders of Common Stock receive securities of
another corporation, this Option shall terminate as of the effective date of
such event, provided that immediately prior to such event, Optionee shall have
the right to exercise this Option as to all shares underlying this Option,
irrespective of the number of Options actually vested at the time.
6. MANNER OF EXERCISE.
(a) This Option may be exercised in whole or in part at any time and
from time to time within the Option Period, subject to the terms and conditions
contained herein, by the delivery of written notice of exercise to the Chief
Financial Officer of the Company, as required by subsection (d) of this Section,
accompanied by (i) full payment, in cash or certified or bank check, payable to
the Company, or, (ii) if permitted by the Company's Board of Directors in its
sole discretion, shares of the Company's Common Stock having a fair market value
equal to the aggregate exercise price for the number of shares purchased which
the Optionee has held for at least six months prior to the time of exercise of
the Option.
(b) For purposes of this Section, "Market Price" means the average of
the closing prices of sales on the principal domestic securities exchange on
which such security may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the bid and asked prices quoted on
Nasdaq (including the OTC Bulletin Board ) as of the close of trading in New
York City on such day, in each such case averaged over a period of five (5)
consecutive days consisting of the business day immediately preceding the day as
of which Market Price is being determined and the four (4) consecutive business
days prior to such day; provided that if such security is listed on any
principal domestic securities exchange or quoted on Nasdaq, the terms "business
day" and "business days" means a day or days, as applicable, on which such
exchange or Nasdaq is open for trading or quotation, as the case may be,
notwithstanding whether any quotation is available on any particular business
day and, if not, then the Market Price shall be determined based upon those
remaining days during the aforesaid 5-day period for which quotations are
available. If the shares are not so listed or traded on any principal domestic
securities exchange or quoted on Nasdaq, the Market Price shall be the fair
value thereof, as determined in good faith by the Board of Directors of the
Company.
2
<PAGE>
(c) Certificates for the shares of Common Stock purchased upon
exercise of this Option shall be delivered by the Company to the Purchaser
within five (5) business days after the Exercise Date.
(d) The notice of exercise (i) shall state the election to exercise
the Option, (ii) shall state the number of shares in respect to which the Option
is being exercised, (iii) shall state Optionee's address, (iv) shall state
Optionee's social security number, (v) shall contain such representations and
agreements concerning Optionee's investment intent with respect to such shares
of Common Stock as shall be satisfactory to the Company's counsel, and (vi)
shall be signed by Optionee. As a further condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
(e) Unless this Option has expired or all of the purchase rights
represented hereby have been exercised, the Company shall, in addition to
certificates for Common Stock issued upon exercise of this Option, prepare upon
exercise of this Option, a new Option representing the rights formerly
represented by this Option that have not expired or been exercised. The Company
shall, within five (5) business days after the Exercise Date, deliver such new
Option to the Optionee.
7. AMENDMENT AND ADMINISTRATION. The Board of Directors shall have the
authority to interpret this Option, and generally to conduct and administer the
exercise of this Option and to make all determinations in connection herewith
which may be necessary or advisable, and all such actions of the Board shall be
final and conclusive for all purposes and binding upon Optionee.
8. MISCELLANEOUS. This Option shall inure to the benefit of and be binding
upon each successor of the Company. All obligations imposed upon and all rights
granted to the Optionee and all rights reserved by the Company under this Option
shall be binding upon and inure to the benefit of Optionee, Optionee's heirs,
personal representatives, administrators and successors. Unless the context
requires otherwise, words denoting the singular may be construed as denoting the
plural, and words of the plural may be construed as denoting the singular and
words of one gender my be construed as denoting such other gender as is
appropriate.
3
<PAGE>
IN WITNESS WHEREOF, this Option has been issued by the Company effective as
of the Date of Grant.
U.S. WIRELESS DATA, INC. Accepted by Optionee:
a Colorado corporation
By
-------------------------------- --------------------------------
Dean M. Leavitt Print Name
Chief Executive Officer
Attest
------------------------------
Charles I. Leone
Secretary
4
THIS OPTION AND THE STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES
LAWS. THIS OPTION AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF
COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER (WHICH SHALL BE IN
FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY SATISFACTORY TO THE COMPANY),
SUCH REGISTRATION IS NOT THEN REQUIRED. NO REGISTRATION RIGHTS HAVE BEEN GRANTED
WITH RESPECT TO THIS OPTION AS OF ITS ORIGINAL DATE OF ISSUANCE.
U.S. WIRELESS DATA, INC.
NONQUALIFIED STOCK OPTION CERTIFICATE
U.S. Wireless Data, Inc., a Colorado corporation ("Company"), for good and
valuable consideration, including the incentive to the Optionee to remain as a
director, employee or consultant to the Company as a result of ownership or
increased ownership of the Company's no par value common stock ("Common Stock"),
the receipt and sufficiency of which consideration hereby is acknowledged,
irrevocably grants to the Optionee the option ("Option") to purchase the
following number of shares of Common Stock:
Optionee Number of Shares
-------- ----------------
Amy L. Newmark ---250,000---
The effective date of this grant is March 29, 2000 ("Date of Grant") and is
subject to the following terms and conditions:
1. EXERCISE PRICE. The purchase price ("Exercise Price") for shares of
Common Stock purchasable pursuant to this Option shall be One and 50/100 Dollars
($1.50) per share, which shall be paid in full in cash at the time of exercise;
provided, however, that the Board of Directors of the Company may in its sole
discretion permit payment to be made with shares of the Company's Common Stock
owned by Optionee (a "Cashless Exercise"). Optionee shall have no rights with
respect to dividends or have any other rights as a shareholder with respect to
shares subject to this Option until Optionee has given written notice of the
exercise of the Option and has paid in full for such shares.
2. VESTING AND TIME OF EXERCISE. This Option will vest one third per yearly
anniversary date following grant date. This Option may be exercised as to all or
any portion of the vested shares covered by this Option Grant at any time, and
shall expire on the earlier of ten years from the grant date, or one year after
cessation of the Optionee's relationship with the Company in any capacity,
including service provided to the Company as an employee, officer, director or
consultant. The period of time during which the Option may be exercised is
referred to herein as the "Option Period."
3. NUMBER OF SHARES PURCHASABLE AT ANY ONE TIME. This Option may be
exercised only for at least 100 shares of Common Stock or a multiple thereof or
for the full number of shares for which the Option is then exercisable.
<PAGE>
4. NONTRANSFERABILITY OF OPTION. This Option may not be transferred by
Optionee otherwise than by will or the laws of descent and distribution. During
Optionee's lifetime, this Option shall be exercisable only by Optionee.
5. CHANGES IN CAPITAL; CERTAIN REORGANIZATIONS. If the outstanding Common
Stock of the Company which is subject to this Option shall at any time be
changed or exchanged by declaration of a stock dividend, split-up, subdivision
or combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number of and kind of shares subject to the Option and the Option Price shall be
appropriately and equitably adjusted so as to maintain the proportionate number
of shares without changing the aggregate option price. In the event of a
dissolution or liquidation of the Company, or a merger, consolidation, sale of
all or substantially all of its assets, or other corporate reorganization in
which the Company is not the surviving corporation, or in which the Company is
the surviving corporation but holders of Common Stock receive securities of
another corporation, this Option shall terminate as of the effective date of
such event, provided that immediately prior to such event, Optionee shall have
the right to exercise this Option as to all shares underlying this Option,
irrespective of the number of Options actually vested at the time.
6. MANNER OF EXERCISE.
(a) This Option may be exercised in whole or in part at any time and
from time to time within the Option Period, subject to the terms and conditions
contained herein, by the delivery of written notice of exercise to the Chief
Financial Officer of the Company, as required by subsection (d) of this Section,
accompanied by (i) full payment, in cash or certified or bank check, payable to
the Company, or, (ii) if permitted by the Company's Board of Directors in its
sole discretion, shares of the Company's Common Stock having a fair market value
equal to the aggregate exercise price for the number of shares purchased which
the Optionee has held for at least six months prior to the time of exercise of
the Option.
(b) For purposes of this Section, "Market Price" means the average of
the closing prices of sales on the principal domestic securities exchange on
which such security may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the bid and asked prices quoted on
Nasdaq (including the OTC Bulletin Board ) as of the close of trading in New
York City on such day, in each such case averaged over a period of five (5)
consecutive days consisting of the business day immediately preceding the day as
of which Market Price is being determined and the four (4) consecutive business
days prior to such day; provided that if such security is listed on any
principal domestic securities exchange or quoted on Nasdaq, the terms "business
day" and "business days" means a day or days, as applicable, on which such
exchange or Nasdaq is open for trading or quotation, as the case may be,
notwithstanding whether any quotation is available on any particular business
day and, if not, then the Market Price shall be determined based upon those
remaining days during the aforesaid 5-day period for which quotations are
available. If the shares are not so listed or traded on any principal domestic
securities exchange or quoted on Nasdaq, the Market Price shall be the fair
value thereof, as determined in good faith by the Board of Directors of the
Company.
2
<PAGE>
(c) Certificates for the shares of Common Stock purchased upon
exercise of this Option shall be delivered by the Company to the Purchaser
within five (5) business days after the Exercise Date.
(d) The notice of exercise (i) shall state the election to exercise
the Option, (ii) shall state the number of shares in respect to which the Option
is being exercised, (iii) shall state Optionee's address, (iv) shall state
Optionee's social security number, (v) shall contain such representations and
agreements concerning Optionee's investment intent with respect to such shares
of Common Stock as shall be satisfactory to the Company's counsel, and (vi)
shall be signed by Optionee. As a further condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
(e) Unless this Option has expired or all of the purchase rights
represented hereby have been exercised, the Company shall, in addition to
certificates for Common Stock issued upon exercise of this Option, prepare upon
exercise of this Option, a new Option representing the rights formerly
represented by this Option that have not expired or been exercised. The Company
shall, within five (5) business days after the Exercise Date, deliver such new
Option to the Optionee.
7. AMENDMENT AND ADMINISTRATION. The Board of Directors shall have the
authority to interpret this Option, and generally to conduct and administer the
exercise of this Option and to make all determinations in connection herewith
which may be necessary or advisable, and all such actions of the Board shall be
final and conclusive for all purposes and binding upon Optionee.
8. MISCELLANEOUS. This Option shall inure to the benefit of and be binding
upon each successor of the Company. All obligations imposed upon and all rights
granted to the Optionee and all rights reserved by the Company under this Option
shall be binding upon and inure to the benefit of Optionee, Optionee's heirs,
personal representatives, administrators and successors. Unless the context
requires otherwise, words denoting the singular may be construed as denoting the
plural, and words of the plural may be construed as denoting the singular and
words of one gender my be construed as denoting such other gender as is
appropriate.
3
<PAGE>
IN WITNESS WHEREOF, this Option has been issued by the Company
effective as of the Date of Grant.
U.S. WIRELESS DATA, INC. Accepted by Optionee:
a Colorado corporation
By
-------------------------------- --------------------------------
Dean M. Leavitt Print Name
Chief Executive Officer
Attest
------------------------------
Charles I. Leone
Secretary
4
THIS OPTION AND THE STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES
LAWS. THIS OPTION AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF
COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER (WHICH SHALL BE IN
FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY SATISFACTORY TO THE COMPANY),
SUCH REGISTRATION IS NOT THEN REQUIRED. NO REGISTRATION RIGHTS HAVE BEEN GRANTED
WITH RESPECT TO THIS OPTION AS OF ITS ORIGINAL DATE OF ISSUANCE.
U.S. WIRELESS DATA, INC.
NONQUALIFIED STOCK OPTION CERTIFICATE
U.S. Wireless Data, Inc., a Colorado corporation ("Company"), for good and
valuable consideration, including the incentive to the Optionee to remain as an
employee of the Company as a result of ownership or increased ownership of the
Company's no par value common stock ("Common Stock"), the receipt and
sufficiency of which consideration hereby is acknowledged, irrevocably grants to
the Optionee the option ("Option") to purchase the following number of shares of
Common Stock:
Optionee Number of Shares
-------- -----------------
Charles I. Leone 350,000
The effective date of this grant is February 15, 2000 ("Date of Grant") and is
subject to the following terms and conditions:
1. EXERCISE PRICE. The purchase price ("Exercise Price") for shares of
Common Stock purchasable pursuant to this Option shall be Two and 434/1000
Dollars ($2.434) per share, which shall be paid in full in cash at the time of
exercise; provided, however, that the Board of Directors of the Company may in
its sole discretion permit payment to be made with shares of the Company's
Common Stock owned by Optionee (a "Cashless Exercise"). The Exercise Price
represents the fair market price of the Company's Common Stock as of the date
this Option is granted. Optionee shall have no rights with respect to dividends
or have any other rights as a shareholder with respect to shares subject to this
Option until Optionee has given written notice of the exercise of the Option and
has paid in full for such shares.
2. VESTING AND TIME OF EXERCISE. This Option will vest 116,666 shares per
yearly anniversary date following grant date. In the event Optionee is
terminated from employment with the Company without "cause" or elects to
terminate his employment with the Company for "good reason" (as such terms are
defined in the Employment Agreement between the Company and Optionee entered
into as of February 11, 2000), all of the options represented hereby shall
become immediately vested at said termination date. This Option may be exercised
as to all or any portion of the vested shares covered by this Option Grant at
any time, and shall expire on the earlier of ten years from the grant date, or
one year after cessation of the Executive's relationship with the Company in any
capacity, including service provided to the Company as an employee, officer,
director or consultant. The period of time during which the Option may be
exercised is referred to herein as the "Option Period."
3. NUMBER OF SHARES PURCHASABLE AT ANY ONE TIME. This Option may be
exercised only for at least 100 shares of Common Stock or a multiple thereof or
for the full number of shares for which the Option is then exercisable.
<PAGE>
4. DEATH OF OPTIONEE. If Optionee dies during Optionee's employment with
the Company, this Option shall be exercisable only as to that portion
exercisable as of the date of death and within one year after Optionee's death,
or the last day of the Option Period, whichever is earlier, by the personal
representative or administrator of Optionee's estate, or by any trustee, heir,
legatee or beneficiary to whom Optionee's rights under this Option shall pass by
will or the laws of descent and distribution to the extent that Optionee was
entitled to exercise this Option at the time of Optionee's death.
5. RETIREMENT OF OPTIONEE. If Optionee's employment with the Company
terminates by reason of retirement, the Option shall be exercisable within the
one year period following Optionee's retirement as described above, but not
later than the last day of the Option Period, and then only to the extent to
which the Option was exercisable at the time of such termination of employment
by retirement. However, if Optionee dies within three months after termination
by retirement, the Option, to the extent it was exercisable at the time of
Optionee's death, shall thereafter be exercisable for one year after the date of
Optionee's death, but not later than the last day of the Option Period.
6. DISABILITY OF OPTIONEE. If Optionee becomes permanently and totally
disabled, and at the time of such disability Optionee is entitled to exercise
one or more installments under this Option, Optionee shall have the right to
exercise this Option within one year after such disability provided Optionee
exercises this Option within the Option Period and then only to the extent to
which this Option was exercisable at the time of such disability. For purposes
of this Section, an Optionee shall be considered to be totally and permanently
disabled if a qualified medical physician approved by the Company certifies to
the Company that such Optionee is unable to be gainfully employed by the Company
by reason of a diagnosed and determinable physical or mental impairment which
can be expected to result in death or has lasted and can be expected to last for
a continuous period of not less than 12 months.
7. NONTRANSFERABILITY OF OPTION. This Option may not be transferred by
Optionee otherwise than by will or the laws of descent and distribution. During
Optionee's lifetime, this Option shall be exercisable only by Optionee.
8. LEAVE OF ABSENCE. For purposes of this Option, (i) a leave of absence,
duly authorized in writing by the Company, for military service or sickness, or
for any other purpose approved by the Company, if the period of such leave does
not exceed 90 days, and (ii) a leave of absence in excess of 90 days, duly
authorized in writing by the Company, provided Optionee's right to reemployment
is guaranteed either by statute or by contract, shall not be deemed a
termination of employment.
9. CHANGES IN CAPITAL; CERTAIN REORGANIZATIONS. If the outstanding Common
Stock of the Company which is subject to this Option shall at any time be
changed or exchanged by declaration of a stock dividend, split-up, subdivision
or combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number of and kind of shares subject to the Option and the Option Price shall be
appropriately and equitably adjusted so as to maintain the proportionate number
of shares without changing the aggregate option price. In the event of a
dissolution or liquidation of the Company, or a merger, consolidation, sale of
all or substantially all of its assets, or other corporate reorganization in
which the Company is not the surviving corporation, or in which the Company is
the surviving corporation but holders of Common Stock receive securities of
another corporation, this Option shall terminate as of the effective date of
such event, provided that immediately prior to such event, Optionee shall have
the right to exercise this Option as to all shares underlying this Option,
irrespective of the number of Options actually vested at the time.
10. MANNER OF EXERCISE.
(a) This Option may be exercised in whole or in part at any time and
from time to time within the Option Period, subject to the terms and conditions
contained herein, by the delivery of written notice of exercise to the Chief
Financial Officer of the Company, as required by subsection (d) of this Section,
2
<PAGE>
accompanied by (i) full payment, in cash or certified or bank check, payable to
the Company, or, (ii) if permitted by the Company's Board of Directors in its
sole discretion, shares of the Company's Common Stock having a fair market value
equal to the aggregate exercise price for the number of shares purchased which
the Optionee has held for at least six months prior to the time of exercise of
the Option.
(b) For purposes of this section, "Market Price" means the average of
the closing prices of sales on the principal domestic securities exchange on
which such security may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the bid and asked prices quoted on
Nasdaq (including the OTC Bulletin Board ) as of the close of trading in New
York City on such day, in each such case averaged over a period of five (5)
consecutive days consisting of the business day immediately preceding the day as
of which Market Price is being determined and the four (4) consecutive business
days prior to such day; provided that if such security is listed on any
principal domestic securities exchange or quoted on Nasdaq, the terms "business
day" and "business days" means a day or days, as applicable, on which such
exchange or Nasdaq is open for trading or quotation, as the case may be,
notwithstanding whether any quotation is available on any particular business
day and, if not, then the Market Price shall be determined based upon those
remaining days during the aforesaid 5-day period for which quotations are
available. If the shares are not so listed or traded on any principal domestic
securities exchange or quoted on Nasdaq, the Market Price shall be the fair
value thereof, as determined in good faith by the Board of Directors of the
Company.
(c) Certificates for the shares of Common Stock purchased upon
exercise of this Option shall be delivered by the Company to the Purchaser
within five (5) business days after the Exercise Date.
(d) The notice of exercise (i) shall state the election to exercise
the Option, (ii) shall state the number of shares in respect to which the Option
is being exercised, (iii) shall state Optionee's address, (iv) shall state
Optionee's social security number, (v) shall contain such representations and
agreements concerning Optionee's investment intent with respect to such shares
of Common Stock as shall be satisfactory to the Company's counsel, and (vi)
shall be signed by Optionee. As a further condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
(e) Unless this Option has expired or all of the purchase rights
represented hereby have been exercised, the Company shall, in addition to
certificates for Common Stock issued upon exercise of this Option, prepare upon
exercise of this Option, a new Option representing the rights formerly
represented by this Option that have not expired or been exercised. The Company
shall, within five (5) business days after the Exercise Date, deliver such new
Option to the Optionee.
11. AMENDMENT AND ADMINISTRATION. The Board of Directors shall have the
authority to interpret this Option, and generally to conduct and administer the
exercise of this Option and to make all determinations in connection herewith
which may be necessary or advisable, and all such actions of the Board shall be
final and conclusive for all purposes and binding upon Optionee.
12. MISCELLANEOUS. This Option shall inure to the benefit of and be binding
upon each successor of the Company. All obligations imposed upon and all rights
granted to the Optionee and all rights reserved by the Company under this Option
shall be binding upon and inure to the benefit of Optionee, Optionee's heirs,
personal representatives, administrators and successors. Unless the context
requires otherwise, words denoting the singular may be construed as denoting the
plural, and words of the plural may be construed as denoting the singular and
words of one gender my be construed as denoting such other gender as is
appropriate.
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IN WITNESS WHEREOF, this Option has been issued by the Company effective as
of the Date of Grant, which is February 15, 2000.
U.S. WIRELESS DATA, INC. Accepted by Optionee:
a Colorado corporation
By /s/ Dean M. Leavitt /s/ Charles I. Loene
------------------------------------- ----------------------------
Dean M. Leavitt Charles I. Leone
Chief Executive Officer
4
WARRANT
THE SECURITIES REPRESENTED BY THIS INSTRUMENT (INCLUDING THE SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND
HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR SALE
IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION
WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN OPINION OF
COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
Number: DML-1 5,375,000 Shares
WARRANT TO PURCHASE COMMON STOCK
U.S. Wireless Data, Inc, a Colorado corporation (the "Corporation"), hereby
grants to Dean Michael Leavitt (the "Holder") the right to purchase from the
Corporation 5,375,000 shares of the common stock of the Corporation (the
"Warrant Shares"), subject to the terms and conditions set forth below. This
Warrant is issued in connection with and subject to certain rights, privileges
and restrictions set forth in the Employment Agreement entered into between the
Holder and the Corporation (the "Employment Agreement") as of May 3, 1999.
1) Term. This Warrant may be exercised into fully paid and nonassessable shares
of the Corporation's Common Stock, at the option of the Holder, at any time and
from time to time in whole or in part during the ten years ending May 3, 2009
(the "Exercise Period").
2) Purchase Price. 2,687,500 shares of this Warrant shall be exercisable into
the Corporation's Common Stock at a price of Eighty-Seven and one half cents
(.875) per share (the current fair market value of the Common Stock), as
adjusted pursuant to Section 9 below (the "Market Portion"). 2,687,500 shares of
this Warrant shall be exercisable into the Corporation's Common Stock at a price
of One and 465/1000 Dollars ($1.465) per share as adjusted pursuant to Section 9
below (the "$1.465 Portion").
3) Exercise of Warrant. This Warrant may be exercised in whole or in part, but
not for less than one thousand (1000) Warrant Shares and in excess of 1000
Warrant Shares in increments of 1000 Warrant Shares. It is exercisable at any
time during the Exercise Period as set forth below by the surrender of the
Warrant to the Corporation at its principal office together with the Notice of
Exercise annexed hereto duly completed and executed on behalf of the Holder,
accompanied by the amount, in full, of the aggregate purchase price of the
Warrant Shares in immediately available funds. The Corporation agrees that the
Warrant Shares so purchased shall be issued as soon as practicable thereafter,
and that the Holder shall be deemed the record owner of such Warrant Shares as
of and from the close of business on the date on which this Warrant shall be
surrendered together with payment in full as required above.
(a) The Market Portion of this Warrant shall vest only during employment of
Holder by the Corporation (except for acceleration as provided herein) and shall
be exercisable in accordance with the following formula:
(1) 10% on or after the date of this Warrant; plus an additional
(2) 7.5% on or after each of the 2nd day of each of the 12 calendar months
thereafter
(3) 100% on or after May 2, 2000
(b) The $1.465 Portion of this Warrant shall vest only during employment of
Holder by the Corporation (except for acceleration as provided herein) and shall
be exercisable in accordance with the following formula:
(1) 50% on or after May 2, 2000; plus an additional
(2) 8.33% on or after each of the 2nd day of each of the 6 calendar months
thereafter
(3) 100% on or after November 2, 2000
<PAGE>
(c) The Market Portion of this Warrant and any portion thereof must be
exercised, to the extent otherwise exercisable, within 180 days of termination
of Holder's employment with the Corporation or any unexercised portion shall
then expire, except that if such 180-day period expires in the same calendar
year as termination of employment, such post-termination exercise period will
extend until January 31 of the following year. Holder shall have until 5 years
from date of his termination of employment with the Corporation to exercise the
$1.465 Portion of this Warrant, to the extent otherwise exercisable upon
termination..
(d) Section 5(a)(3) of the Employment Agreement contains provisions for
acceleration of this Warrant upon a Change of Control or termination without
Cause or for Good Reason.
4) Cashless Exercise Option. Notwithstanding the foregoing, in lieu of
exercising this Warrant for cash, the Holder may elect to receive Warrant Shares
equal to the value of this Warrant (or equal to the value of the portion of the
Warrant Shares thereof being exercised) which shall be that number of Warrant
Shares when multiplied times the Fair Market Value for such Warrant Shares is
equal to the excess, if any, by which the Fair Market Value of the aggregate
Warrant Shares being exercised exceeds the aggregate Exercise Price (determined
by subtracting the Warrant Exercise Price for one Warrant Share on the exercise
date from the Fair Market Value of one Warrant Share on the exercise date
multiplied by the number of Warrant Shares exercised) on the exercise date. Fair
Market Value of one share of a Warrant Share shall mean the closing price per
share of the Corporation's Common Stock for the trading day immediately
preceding such date. The closing price for each such day shall be the last sale
price regular way or, in the case no such sale takes place on such day, the
average of the closing bid and asked prices regular way, in either case on the
principal securities exchange on which the shares of such Common Stock of the
Corporation are listed or admitted to trading, or if applicable, the last sale
price, or in the case no sale takes place on such day, the average of the
closing bid and asked prices of such Common Stock on the National Association of
Securities Dealers, Inc. (the "NASD") Automated Quotation System (the NASD
Automated Quotation System being hereinafter referred to as "Nasdaq") or as
listed on the OTC Electronic Bulletin Board (the quotation system for the
non-Nasdaq over-the-counter market) (Nasdaq and the OTC Electronic Bulletin
Board being collectively referred to hereinafter as the "OTC Market"), or on or
with any comparable quotation or listing service, or if there shall have been no
sales in the OTC Market on such day or, if such Common Stock is not quoted or
listed in the OTC Market, or on or with any comparable quotation or listing
service, the average of the closing bid and asked prices as furnished by two
members of the NASD selected from time to time by the Corporation for that
purpose. If such bid and asked prices are not available, then the Fair Market
Value per share shall be equal to the fair market value of such Common Stock as
determined in good faith by the board of directors of the Corporation. In the
event of a cashless exercise, the underlying Warrant must be surrendered, and no
new Warrant shall be issued, except for the balance of the Warrant not exercised
or used to pay the Warrant Exercise Price.
5) Fractional Interest. The Corporation shall not be required to issue any
fractional shares on the exercise of this Warrant.
6) Warrant Confers No Rights of Shareholder. The Holder shall not have any
rights as a shareholder of the Corporation with regard to the Warrant Shares
prior to actual exercise resulting in the purchase of the Warrant Shares.
However, as long as the Warrant remains outstanding, Holder shall receive all
shareholder notices and correspondence, shall be notified of all shareholder
action and meetings and shall have the right to attend all shareholder meetings.
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<PAGE>
7) Investment Representation. Neither this Warrant nor the Warrant Shares
issuable upon the exercise of this Warrant have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. The Holder acknowledges by acceptance of the Warrant that (a)
he has acquired this Warrant for investment and not with a view to distribution;
and either (b) he has a pre-existing personal or business relationship with the
Corporation, or its executive officers, or by reason of his business or
financial experience be has the capacity to protect his own interests in
connection with the transaction; and (c) he is an accredited investor as that
term is defined in Regulation D promulgated under the Securities Act. The Holder
agrees that any Warrant Shares issuable upon exercise of this Warrant will be
acquired for investment and not with a view to distribution and such Warrant
Shares will not be registered under the Securities Act and applicable state
securities laws and that such Warrant Shares may have to be held indefinitely
unless they are subsequently registered or qualified under the Securities Act
and applicable state securities laws or, based on an opinion of counsel
reasonably satisfactory to the Corporation, an exemption from such registration
and qualification is available. The Holder by acceptance hereof, consents to the
placement of the following restrictive legends or similar legends, on each
certificate to be issued to the Holder by the Corporation in connection with the
issuance of such Warrant Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES
LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) There
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS COVERING SUCH
SECURITIES, OR (B) THE HOLDER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THE SECURITIES SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND THE QUALIFICATION REQUIREMENTS
UNDER APPLICABLE STATE LAW.
8) Reservation of Shares. The Corporation agrees at all times during the
Exercise Period to have authorized and reserved, for the exclusive purpose of
issuance and delivery upon exercise of this Warrant, a sufficient number of
shares of its common stock to provide for the exercise of the rights represented
hereby. The Corporation intends to increase the authorized Common Stock under
the Articles of Incorporation at the next meeting of shareholders, to a number
as appropriate to take into consideration the foreseeable needs of the
Corporation.
9) Adjustment for Re-Classification of Capital Stock. If the Corporation at any
time during the Exercise Period shall, by subdivision, combination or
re-classification of securities, change any of the securities to which purchase
rights under this Warrant exist under the same or different number of securities
of any class or classes, this Warrant shall thereafter entitle the Holder to
acquire such number and kind of securities as would have been issuable as a
result of such change with respect to the Warrant Shares immediately prior to
such subdivision, combination, or reclassification. If shares of the
Corporation's common stock are subdivided into a greater number of shares of
common stock, the purchase price for the Warrant Shares upon exercise of this
Warrant shall be proportionately reduced and the Warrant Shares shall be
proportionately increased; and conversely, if shares of the Corporation's common
stock are combined into a smaller number of common stock shares, the price shall
he proportionately increased, and the Warrant Shares shall be proportionately
decreased.
10) Pre-emptive Rights. In case the Corporation 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 Corporation (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 Corporation.
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<PAGE>
11) Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Corporation of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any Warrant or stock certificate, and in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and upon reimbursement to the Corporation of all reasonable expenses
incidental thereto, and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Corporation will make and deliver a new Warrant
or stock certificate of like tenor and dated as of such cancellation, in lieu of
this Warrant or stock certificate.
12) Assignment. The Holder of this Warrant shall not assign or transfer this
Warrant without the written consent of the Corporation; provided however, that
the Holder, if a limited liability company, may assign this Warrant to its
Members without the consent of the Corporation, and provided further that the
Holder may assign and transfer the Warrant to members of his immediate family,
or to a family trust or the like without consent to the Corporation, and upon
death of the Holder, his personal representative, executor or the like may
exercise all vested portions of the Warrant. Notwithstanding the foregoing,
Holder may transfer or pledge any vested portion of the $1.465 Portion of this
Warrant and may pledge any vested portion of the Market Portion of this Warrant,
without Corporation consent. The Holder of this Warrant shall not assign his
Warrant unless such assignment is in compliance with applicable state and
federal securities laws. In giving its consent to an assignment, the Corporation
may request an opinion of counsel reasonably acceptable to it that such transfer
is in compliance with all applicable state and federal securities laws.
13) Registration Rights.
(a) If, at any time following the date of issuance of this Warrant, the
Corporation shall file a registration statement for the sale by the Corporation
to the public of its equity securities (other than any registration statement on
Form S-4, Form S-8, or any successor form) with the Securities and Exchange
Commission (the "Commission") while any Registrable Securities (as hereinafter
defined) are outstanding, the Corporation shall give the Holder at least 45
days' prior written notice of the filing of such registration statement. If
requested by the Holder in writing within 30 days after receipt of any such
notice, the Corporation shall, at the Corporation's sole expense (other than the
fees and disbursements of counsel for the Holder and the underwriting discounts,
if any, payable in respect of the Registrable Securities sold by the Holder),
register or qualify all or, at the Holder's option, any portion of the
Registrable Securities of the Holder concurrently with the registration of such
other securities, all to the extent requisite to permit the public offering and
sale of the Registrable Securities through the facilities of all securities
exchanges and the over-the-counter markets on which the Corporation's securities
are traded, and will use its best efforts through its officers, directors,
auditors, and counsel to cause such registration statement to become effective
as promptly as practicable. Notwithstanding the foregoing, if the managing
underwriter of any such offering shall advise the Corporation in writing that,
in its opinion, the distribution of all or a portion of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by the Corporation would materially adversely affect
the distribution of such securities by the Corporation for its own account, then
the Holder if he has requested registration of his Registrable Securities shall
not be entitled to have such Holder's Registrable Securities (or the portions
thereof so designated by the managing underwriter) included in such registration
statement, provided that no such exclusion or reduction shall be made as to any
Registrable Securities if any securities of the Corporation are included in such
registration statement for the account of any person other than the Corporation
and the holder unless the securities included in such registration statement for
such other person shall have been reduced pro rata to the reduction of the
Registrable Securities which were requested to be included in such registration.
As used herein, "Registrable Securities" shall mean the Warrant Shares then
issuable thereunder, if any which, in each case, have not been previously sold
pursuant to a registration statement or Rule 144 promulgated under the
Securities Act.
4
<PAGE>
(b) In the event of a registration pursuant to the provisions of this
Section 13, the Corporation shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder may reasonably
request; provided, however, that the Corporation shall not by reason of this
Section 13 be required to qualify to do business in any state in which it is not
otherwise required to qualify to do business or to file a general consent to
service of process.
(c) The Corporation shall keep effective any registration or qualification
contemplated by this Section 13 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Holder to complete the offer and sale of the
Registrable Securities covered thereby. The Corporation shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of nine months from the date on which the Holder is first free to sell
such Registrable Securities; provided, however, that, if the Corporation is
required to keep any such registration or qualification in effect with respect
to securities other than the Registrable Securities beyond such period, the
Corporation shall keep such registration or qualification in effect as it
relates to the Registrable Securities for so long as such registration or
qualification remains or is required to remain in effect in respect of such
other securities.
(d) In the event of a registration pursuant to the provisions of this
Section 13, the Corporation shall furnish to the Holder such reasonable number
of copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Securities Act and the rules and regulations
thereunder, and such other documents, as the Holder may reasonably request to
facilitate the disposition of the Registrable Securities included in such
registration.
(e) In the event of a registration pursuant to the provisions of this
Section 13, the Corporation shall furnish the Holder with an opinion of its
counsel (reasonably acceptable to the Holder) to the effect that (i) the
registration statement has become effective under the Securities Act and no
order suspending the effectiveness of the registration statement, preventing or
suspending the use of the registration statement, any preliminary prospectus,
any final prospectus, or any amendment or supplement thereto has been issued,
nor to the best knowledge of such counsel has the Commission or any securities
or blue sky authority of any jurisdiction instituted or threatened to institute
any proceedings with respect to such an order, (ii) each document, if any,
incorporated by reference in the registration statement and the prospectus
included therein (except for financial statements and related schedules, as to
which such counsel need express no opinion) complied as to form when filed with
the Commission in all material respects with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder, and (iii) the registration statement and the prospectus
included therein and any supplements or amendments thereto (except for financial
statements and related schedules, as to which such counsel need express no
opinion) comply as to form in all material respects with the Securities Act and
the rules and regulations of the Commission thereunder. In addition, such
counsel shall state that it has participated in conferences with officers and
other representatives of the Corporation, and representatives of independent
accountants for the Corporation, at which conferences such counsel made
inquiries of such officers, representatives and accountants; discussed the
contents of the preliminary prospectus; the registration statement; and the
prospectus and related matters were discussed and, although such counsel is not
passing and does not assume any responsibility for accuracy, completeness or
5
<PAGE>
fairness, the statements contained in the preliminary prospectus, the
registration statement and the prospectus, on the basis of the foregoing, no
facts have come to the attention of such counsel which lead it to believe that
either the registration statement or on any amendment thereto, at the time such
registration statement or amendment became effective or the preliminary
prospectus or prospectus or amendment or any supplement thereto as of the date
of such opinion contained any untrue statement or a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and schedules and
other financial and statistical data included in the preliminary prospectus, the
registration statement or prospectus). The Corporation shall also furnish to the
Holder a "cold" comfort letter from the independent certified public accountants
of the Corporation in customary form and substance.
(f) In the event of a registration pursuant to the provisions of this
Section 13, the Corporation and the Holder shall enter into a cross-indemnity
agreement and a contribution agreement, each in customary form, with each
underwriter, if any, and, if requested, enter into an underwriting agreement
containing conventional representations, warranties, allocation of expenses, and
customary closing conditions, including, without limitation, opinions of counsel
and accountants, "cold" comfort letters, with any underwriter who acquires any
Registrable Securities.
(g) The Corporation agrees that, until all the Registrable Securities have
been sold under a registration statement or pursuant to Rule 144 under the Act,
it shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Securities to sell such securities under Rule 144.
14) Indemnification.
(a) Subject to the conditions set forth below, the Corporation agrees to
indemnify and hold harmless the Holder and each person, if any, who controls the
Holder within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, from and against any and all loss, liability, charge,
claim, damage and expense whatsoever (which shall include, for all purposes of
this Section 14, without limitation, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, relating to
the sale of any of the Registrable Securities, or (B) in any application or
other document or communication (in this Section 10 collectively called an
"application") executed by or on behalf of the Corporation or based upon written
information furnished by or on behalf of the Corporation filed in any
jurisdiction in order to register or qualify any of the Registrable Securities
under the securities or blue sky laws thereof or filed with the Commission or
any securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Corporation with respect
to the Holder by or on behalf of such person expressly for inclusion in any
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any representation, warranty, covenant, or agreement of the
Corporation contained in this Warrant. The foregoing agreement to indemnify
shall be in addition to any liability the Corporation may otherwise have,
including liabilities arising under this Warrant.
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<PAGE>
If any action is brought against the Holder or any controlling persons of
the Holder (an "indemnified party") in respect of which indemnity may be sought
against the Corporation pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Corporation in writing of the
institution of such action (but the failure so to notify shall not relieve the
Corporation from any liability under this Section 13(a) unless the Corporation
shall have been materially prejudiced by such failure or relieve the Corporation
from any liability other than pursuant to this Section 13(a)) and the
Corporation shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Corporation in connection with the defense of such action or the
Corporation shall not have employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to the
Corporation, in any of which events such fees and expenses shall be borne by the
Corporation and the Corporation shall not have the right to direct the defense
of such action on behalf of the indemnified party or parties. Anything in this
Section 13 to the contrary notwithstanding, the Corporation shall not be liable
for any settlement of any such claim or action effected without its written
consent, which shall not be unreasonably withheld. The Corporation agrees
promptly to notify the Holder of the commencement of any litigation or
proceedings against the Corporation or any of its officers or directors in
connection with the sale of any Registrable Securities or any preliminary
prospectus, prospectus, registration statement, or amendment or supplement
thereto, or any application relating to any sale of any Registrable Securities.
(b) The Holder agrees to indemnify and hold harmless the Corporation, each
director of the Corporation, each officer of the Corporation who shall have
signed any registration statement covering Registrable Securities held by the
Holder, each other person, if any, who controls the Corporation within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, and its or their respective counsel, to the same extent as the foregoing
indemnity from the Corporation to the Holder in Section 13(a), but only with
respect to statements or omissions, if any, made in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information furnished to the
Corporation with respect to the Holder by or on behalf of the Holder expressly
for inclusion in any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
as the case may be. If any action shall be brought against the Corporation or
any other person so indemnified based on any such registration statement,
preliminary prospectus, or final prospectus, or any amendment or supplement
thereto, or in any application, and in respect of which indemnity may be sought
against the Holder pursuant to this Section 13(b), the Holder shall have the
rights and duties given to the Corporation, and the Corporation and each other
person so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 13(a); provided, however, that the
obligations of the Holder hereunder shall be limited to an amount equal to the
net proceeds to the Holder of securities sold as contemplated herein.
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 14(a) or (b)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Warrant expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act or otherwise, then
the Corporation (including for this purpose any contribution made by or on
7
<PAGE>
behalf of any director of the Corporation, any officer of the Corporation who
signed any such registration statement, any controlling person of the
Corporation, and its or their respective counsel), as one entity, and the
Registrable Securities of the Holder included in such registration in the
aggregate (including for this purpose any contribution by or on behalf of an
indemnified party), as a second entity, shall contribute to the losses,
liabilities, claims, damages, and expenses whatsoever to which any of them may
be subject, on the basis of relevant equitable considerations such as the
relative fault of the Corporation and the Holder in connection with the facts
which resulted in such losses, liabilities, claims, damages and expenses. The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission, or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission, or alleged omission relates
to information supplied by the Corporation or by the Holder, and the parties,
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement, alleged statement, omission, or alleged omission. The
Corporation and the Holder agree that it would be unjust and inequitable if the
respective obligations of the Corporation and the Holder for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 14(c). No person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
representation. For purposes of this Section 14(c), each person, if any, who
controls the Holder within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act and counsel to the Holder or control person
shall have the same rights to contribution as the Holder or control person and
each person, if any, who controls the Corporation within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act, each officer of
the Corporation who shall have signed any such registration statement, each
director of the Corporation, and its or their respective counsel shall have the
same rights to contribution as the Corporation, subject in each case to the
provisions of this Section 14(c). Anything in this Section 14 to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its or his written consent.
This Section 14 is intended to supersede any right to contribution under the
Securities Act, the Exchange Act or otherwise.
15) Governing Law. This Warrant shall be governed by and construed in accordance
with the laws of the State of Colorado applicable to contracts between Colorado
residents entered into and to be performed entirely within the State of
Colorado.
16) Amendments. Any term of this Warrant may be amended with the written consent
of the Company and the Holders.
17) Notices. Unless otherwise provided, any notice required or permitted under
this Warrant shall be given in writing and shall be deemed effectively given
upon personal delivery to the party to be notified by hand or professional
courier service or five (5) days after deposit with the United States Post
Office, by registered or certified mail, postage prepaid and addressed to the
party to be notified at the address indicated for such party in the Subscription
Agreement, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties.
18) Attorneys' Fees. If any action at law or in equity is necessary to enforce
or interpret the terms of this Warrant, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which such party may be entitled.
8
<PAGE>
19) Expenses. The Corporation shall pay all registrar and transfer agent and
similar expenses in connection with issuance of the Warrant and the shares of
Common Stock upon exercise of the Warrant.
Originally executed as of May 3, 1999; reexecuted as of January 4, 2000, to
reflect repricing authorized as of such date.
By:
-------------------------------
U.S. Wireless Data, Inc.
The name and address of the registered Holder of this Warrant is:
Dean Michael Leavitt
50 Catherine Road
Scarsdale, New York 10583
<PAGE>
NOTICE OF EXERCISE
To: ______________________
1. The undersigned hereby elects to purchase ______ shares of Common Stock of
____________________________, pursuant to the terms of the attached Warrant and
tenders herewith payment of the purchase price for such shares in full.
2. In exercising this Warrant, the undersigned hereby confirms and acknowledges
that the shares of Common Stock are being acquired solely for the account of the
undersigned and not as a nominee for any other party, or for investment, and
that the undersigned will not offer, sell or otherwise dispose of any such
shares of Common Stock except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws.
3. Please issue a certificate representing said shares of Common Stock in the
name of the undersigned:
4. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned:
Dated: HOLDER
-------------------------------
By:
---------------------------------
(Print Name & Title)
WARRANT AND THE STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE THIS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT, UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY OR COUNSEL FOR THE
REGISTERED HOLDER (WHICH SHALL BE IN FORM AND FROM SUCH COUNSEL AS SHALL BE
REASONABLY SATISFACTORY TO THE COMPANY), SUCH REGISTRATION IS NOT THEN REQUIRED.
U.S. WIRELESS DATA, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable consideration, the
receipt of which is hereby acknowledged by U.S. Wireless Data, Inc., a Colorado
corporation (the "Company"), RBB BANK or registered assigns (the "Holder") is
hereby granted the right to purchase at any time until 5:00 P.M., Pacific Coast
time, on July 6, 2004 (the "Expiration Date"), (22,500) fully paid and
nonassessable shares of the Company's Common Stock, no par value per share (the
"Common Stock") at an exercise price of $1.50 per share (the "Exercise Price")
subject to further adjustment as set forth in Section 6 hereof.
2. Exercise of Warrants. This Warrant is exercisable in whole or in part
for whole shares of the Company's Common Stock at the Exercise Price per share
of Common Stock payable hereunder, payable in cash or by certified or official
bank check. In lieu of paying cash to exercise this Warrant, the Holder may, by
designating a "cashless" exercise on the Notice of Exercise Form, acquire a
number of whole shares of the Company's Common Stock equal to (a) Exercise
Price, multiplied by (b) the number of shares of Common Stock purchasable under
the portion of the Warrant tendered to the Company, divided by (c) the Market
Value of the Company's Common Stock. Upon surrender of this Warrant Certificate
with the annexed Notice of Exercise Form duly executed, together with payment of
the Exercise Price for the shares of Common Stock purchased, the Holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased. For the purposes of this Section 2, "Market Value" shall be an
amount equal to the average closing bid price of a share of Common Stock for the
five (5) business days immediately preceding the Company's receipt of the Notice
of Exercise Form duly executed.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrants. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Adjustments to Exercise Terms.
If the Company at any time prior to the full execution of this Warrant
shall, by subdivision, combination, merger, spin-off, re-classification or like
capital adjustment of the securities, change any of the securities to which
purchase rights under this Warrant exist into the same or different number of
securities of any class or classes, this Warrant shall thereafter entitle the
Holder to acquire such number and kind of securities as would have been issuable
as a result of such change with respect to the securities acquirable immediately
prior to such transaction. If the securities acquirable upon exercise of this
<PAGE>
Warrant are subdivided into a greater number of securities (including pursuant
to any stock dividend paid to all holders of such securities), or if such
securities are combined into a lesser number of securities, then the purchase
price for the securities acquirable upon exercise of this Warrant and the
securities acquirable pursuant to this Warrant shall be proportionately and
equitably adjusted.
7. Transfer to Comply with the Securities Act: No Registration Rights. This
Warrant has not been registered under the Securities Act of 1933, as amended
(the "Act") and has been issued to the Holder for investment and not with a view
to the distribution of either the Warrant or the Warrant Shares. Neither this
Warrant nor any of the Warrant Shares of any other security issued or issuable
upon exercise of this Warrant may be sold, transferred, pledged or hypothecated
in the absence of an effective registration statement under the Act and
applicable state securities laws relating to such security, unless the opinion
of counsel satisfactory to the Company, such registrations are not required
under the Act. Each certificate for the Warrant, the Warrant Shares and any
other security issued or issuable upon exercise of this Warrant shall contain a
legend on the face thereof, in form and substance satisfactory to counsel for
the Company, setting for the restrictions on transfer contained in this Section.
The holder is not being granted any rights to have the Warrant or the Warrant
Shares registered under the Act of any state securities laws.
8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed telexed or sent to facsimile transmission, or,
if mailed, two days after the date of deposit in the United States mails, as
follows:
(i) if to the Company, to:
U.S. Wireless Data, Inc.
2200 Powell Street, Suite 800
Emeryville, California 94608
ATTN: Robert Robichaud, Chief Financial Officer
Telecopier No.: (510) 596-2029
Telephone No.: (510) 5596-2025
(ii) If to the Holder, to such address and facsimile number as
appears in the records of the Company.
A party shall give notice to the other in accordance with this Section to change
the address, facsimile number or person to whom notices shall be given.
9. Supplements and Amendments: Whole Agreement. This Warrant may be amended
or supplemented only by an instrument in writing signed by the parties hereto.
This Warrant contains the full understanding of the parties hereto with respect
to the subject matter hereof and thereof and there are no representations,
warranties, agreements or understandings other than expressly contained herein
and therein.
10. Governing Law. This Warrant shall be deemed to be a contract made under
the laws of the State of Colorado and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
11. Descriptive Headings. Descriptive headings of the several Sections of
this Warrant are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
January 20, 2000.
U.S. WIRELESS DATA, INC.
By:
-------------------------------
DEAN M. LEAVITT
Chief Executive Officer
Attest:
- ---------------------------------
Name: Robert R. Robichaud
Chief Financial Officer
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE THIS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND CAN BE TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN
THE OPINION OF COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER
(WHICH SHALL BE IN FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY
SATISFACTORY TO THE COMPANY), SUCH REGISTRATION IS NOT THEN REQUIRED.
U.S. WIRELESS DATA, INC.
COMMON STOCK PURCHASE WARRANT
Dated March 28, 2000 Warrant No. 15
1. Issuance; Exercisability. For good and valuable consideration, the
receipt of which is hereby acknowledged by U.S. Wireless Data, Inc., a Colorado
corporation (the "Company"), Lippert/Heilshorn & Associates, Inc., or registered
assigns (the "Holder"), is hereby granted the right to purchase at any time
commencing on March 28, 2001 and continuing until 5:00 P.M., Eastern Time, on
March 27, 2006 (or the next regular business day thereafter if such day is not a
regular business day) (the "Expiration Date"), Fifteen Thousand (15,000) fully
paid and nonassessable shares of the Company's Common Stock, no par value per
share (the "Common Stock") at an exercise price of $5.344 per share (the
"Exercise Price") subject to further adjustment as set forth in Section 7
hereof.
2. Exercise of Warrants; Cashless Exercise Option. This Warrant is
exercisable in whole or in part for whole shares of Common Stock at the Exercise
Price per share payable hereunder, payable in cash or by certified or official
bank check. In lieu of paying cash to exercise this Warrant, the Holder may, by
designating a "cashless" exercise on the Notice of Exercise Form, acquire a
number of whole shares of the Company's Common Stock equal to (a) the difference
between (i) the Market Value of the Company's Common Stock and (ii) the Exercise
Price, multiplied by (b) the number of shares of Common Stock purchasable under
the portion of the Warrant tendered to the Company, divided by (c) the Market
Value of the Company's Common Stock. Upon surrender of this Warrant Certificate
with the annexed Notice of Exercise Form duly executed, together with payment of
the Exercise Price for the shares of Common Stock purchased, the Holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased. For the purposes of this Section 2, "Market Value" shall be an
amount equal to: (a) the average last sale price on the principal exchange on
which the Common Stock is traded, for the five (5) business days immediately
preceding the Company's receipt of the duly executed Notice of Exercise Form; or
(b) if the Common Stock is not traded on an exchange, the average closing bid
price of a share of Common Stock on the OTC Bulletin Board or equivalent trading
market where the Common Stock is traded, for the five (5) business days
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 2
immediately preceding the Company's receipt of the duly executed Notice of
Exercise Form; or (c) if not publicly traded, an amount determined in good faith
by the Company's Chief Financial Officer.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Representations of Holder. In connection with the issuance of this
Warrant, Holder represents and warrants to the Company that:
a) Holder is acquiring the Warrant (and if applicable the Warrant
Shares) for investment only and has no intention to transfer, sell or otherwise
dispose of such Warrant, except as permitted pursuant to, and in compliance
with, applicable federal and state securities laws.
b) Holder, either alone or through the assistance of advisors not
affiliated with the Company, has such experience in business and financial
matters that Holder is fully capable of evaluating the merits and risks of
making an investment in the Company.
c) Holder is aware that the Company files reports with the United
States Securities and Exchange Commission under the Securities Exchange Act of
1934 pursuant to which it reports current information concerning the Company,
its business and financial condition. Holder has examined such reports to the
full extent necessary prior to determining to accept this Warrant. Holder also
has been given the opportunity to ask questions of, and has received
satisfactory answers to, all such questions from the Company's authorized
representatives. Holder is familiar with the business and financial condition of
the Company and that ownership of the Warrant is a speculative investment.
d) Holder acknowledges and understands that this and the underlying
Warrant Shares cannot be transferred unless they are currently or subsequently
registered under the Securities Act of 1933 (the "Securities Act") and
applicable state securities laws, or exemptions from such registration
requirements are available. Holder further acknowledges and understands that the
Company is under no obligation to register the Warrant or the Warrant Shares to
make any exemption from registration available and that in the absence of
registration or an available registration exemption, the Warrant and the Warrant
Shares may not be transferred to any other person without the consent of the
Company, which it may validly withhold if the Warrant and the Warrant Shares are
not registered or exempt from registration.
e) Holder understands that the certificate evidencing the Warrant and
the Warrant Shares may be imprinted with legends, and/or stop-transfer
instructions may be lodged with the Company's transfer agent, prohibiting the
transfer of the Warrant and the Warrant Shares unless they are registered, or
registration is not required in the opinion of counsel satisfactory to the
Company. Holder consents to the lodging of any such stop transfer instructions
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 3
and/or such legends being imprinted on the certificates evidencing the Warrant
and the Warrant Shares. Holder does not have any contract, agreement or
arrangement with any person to sell, transfer or grant participation of any sort
with respect to any of the Warrant or the Warrant Shares.
f) Holder is aware of the terms and conditions of Rule 144 adopted by
the United States Securities and Exchange Commission under the Securities Act,
which permits limited public resale of securities acquired in a non-public
offering, including the securities issued on exercise of the Warrant, subject to
the satisfaction of certain conditions. Those conditions include, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one year after the party has purchased and paid
for the securities to be sold, the sale's being through a broker in an
unsolicited "brokers' transaction," and the amount of securities being sold
during any three-month period not exceeding specified limitations (generally, 1%
of the total outstanding shares if the Company). Holder understands that unless
the Warrant and the Warrant Shares are registered for public resale that the
most likely method for resale of the Warrant Shares will be pursuant to SEC Rule
144. Holder understands and acknowledges that the Company has not made any
representations, guarantees or commitments about the availability of Rule 144 to
allow sales of the Warrant or the Warrant Shares in the future.
g) Holder understands that there may be tax implications of the
acceptance of this Warrant and/or an exercise of the right to purchase shares of
Common Stock pursuant to the exercise of this Warrant. Holder also understands
that it is Holder's obligation to confer with its tax advisor with respect to
such tax implications, and to the extent Holder felt necessary, has done so
prior to accepting or exercising the Warrant.
h) Holder understands that an investment in the Warrant is inherently
risky and could result in the loss of all money invested in purchasing the
Warrant and/or the Warrant Shares. Holder would not be required to change
lifestyle in the event of a loss of all of the money invested in purchasing the
Warrant or the Warrant Shares.
i) Holder fully understands the implications of accepting the Warrant
and (if applicable) determining to exercise the Warrant, and has consulted with
any and all persons it deemed appropriate, including its attorney and/or
accountant, prior to determining to accept or exercise this Warrant.
7. Adjustments to Exercise Terms. If the Company at any time prior to the
full execution of this Warrant shall, by subdivision, combination, merger,
spin-off, re-classification or like capital adjustment of the securities, change
any of the securities to which purchase rights under this Warrant exist into the
same or different number of securities of any class or classes, this Warrant
shall thereafter entitle the Holder to acquire such number and kind of
securities as would have been issuable as a result of such change with respect
to the securities acquirable immediately prior to such transaction. If the
securities acquirable upon exercise of this Warrant are subdivided into a
greater number of securities (including pursuant to any stock dividend paid to
all holders of such securities), or if such securities are combined into a
lesser number of securities, then the purchase price for, and the number of
shares issuable upon, exercise of this Warrant shall be proportionately and
equitably adjusted.
8. Transfer to Comply with the Securities Act; No Registration Rights. This
Warrant has not been registered under the Securities Act of 1933, as amended,
(the "Act") and has been issued to the Holder for investment and not with a view
to the distribution of either the Warrant or the Warrant Shares. Neither this
Warrant nor any of the Warrant Shares or any other security issued or issuable
upon exercise of this Warrant may be sold, transferred, pledged or hypothecated
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 4
in the absence of an effective registration statement under the Act and
applicable state securities laws relating to such security, unless in the
opinion of counsel satisfactory to the Company, such registrations are not
required under the Act. Each certificate for the Warrant, the Warrant Shares and
any other security issued or issuable upon exercise of this Warrant shall
contain a legend on the face thereof, in form and substance satisfactory to
counsel for the Company, setting forth the restrictions on transfer contained in
this Section. The holder is not being granted any rights to have the Warrant or
the Warrant Shares registered under the Act or any state securities laws.
9. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
(i) if the to Company, to:
U.S. Wireless Data, Inc.
ATTN: Chief Financial Officer
805 Third Avenue, 8th Floor
New York, NY 10022
Telecopier No.: (212) 750-7836
Telephone No.: (212) 750-7766
(ii) if to the Holder, to such address and facsimile number as
appears in the records of the Company.
A party shall give notice to the other in accordance with this Section to change
the address, facsimile number or person to whom notices shall be given.
10. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties hereto with
respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
11. Governing Law. This Warrant shall be deemed to be a contract made under
the laws of the State of Colorado and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
12. Descriptive Headings. Descriptive headings of the several Sections of
this Warrant are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant effective
as of the date first set forth above (the date agreement was reached by the
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 5
parties that this Warrant be issued and the date as of which all consideration
receivable by the Company from the Holder for issuance of this Warrant had been
received).
U.S. WIRELESS DATA, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Attest:
- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
HOLDER
Lippert/Heilshorn & Associates, Inc.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address:
-----------------------------------------
-----------------------------------------
Facsimile:
-------------------------------
Telephone:
-------------------------------
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 6
WARRANT EXERCISE AGREEMENT
To: U.S. Wireless Data, Inc.
Attn: Finance
805 Third Ave, 8th Floor
New York, NY 10022
Dated:
THE UNDERSIGNED Registered Holder, pursuant to the provisions set forth in
the attached Common Stock Purchase Warrant dated ______________________, hereby
subscribes for and purchases _________________ shares of Common Stock covered by
such Warrant (the "Shares") and herewith elects to make:
[Check the box below that applies.]
( ) a Cashless Exercise at the Exercise Price provided by such Warrant.
( ) full cash payment of $ for the Shares
--------------------------------------
at the Exercise Price provided by such Warrant.
THE UNDERSIGNED Registered Holder, in order to induce the Company to issue
the Shares, represents that:
1. If I am a natural person, I am over eighteen (18) years of age. I am
acquiring the Shares for investment only and that I have no intention to
transfer, sell or otherwise dispose of such Shares, except as permitted pursuant
to, and in compliance with, applicable federal and state securities laws.
2. I represent and warrant that I, either alone or through the assistance
of advisors not affiliated with the Company, have such experience in business
and financial matters that I am fully capable of evaluating the merits and risks
of making an investment in the Company.
3. I am aware that the Company files reports with the United States
Securities and Exchange Commission under the Securities Exchange Act of 1934
pursuant to which it reports current information concerning the Company, its
business and financial condition. I have examined such reports to the full
extent I felt necessary prior to determining to exercise this Warrant. I have
also been given the opportunity to ask questions of, and have received
satisfactory answers to, all such questions from the Company's authorized
representatives. I am familiar with the business and financial condition of the
Company and that ownership of the Shares is a speculative investment.
4. I acknowledge and understand that the Shares must be held indefinitely
unless they are currently or subsequently registered under the Securities Act of
1933 (the "Securities Act") and applicable state securities laws, or exemptions
from such registration requirements are available. I further acknowledge and
understand that the Company is under no obligation to register the Shares or to
make any exemption from registration available to me and that in the absence of
registration or an available registration exemption, the Shares may not be
transferred to any other person without the consent of the Company, which it may
validly withhold if the Shares are not registered or exempt from registration.
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 7
5. I understand that the certificate evidencing the Shares may be imprinted
with legends, and/or stop-transfer instructions may be lodged with the Company's
transfer agent, prohibiting the transfer of the Shares unless they are
registered, or registration is not required in the opinion of counsel
satisfactory to the Company. I consent to the lodging of any such stop transfer
instructions and/or such legends being imprinted on the certificates evidencing
the Shares. I do not have any contract, agreement or arrangement with any
persons to sell, transfer or grant participation of any sort to any third person
with respect to any of the Shares.
6. I am aware of the terms and conditions of Rule 144 adopted by the United
States Securities and Exchange Commission under the Securities Act, which
permits limited public resale of securities acquired in a non-public offering,
including the securities issued on exercise of the Warrant, subject to the
satisfaction of certain conditions. Those conditions include, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one year after the party has purchased and paid
for the securities to be sold, the sale's being through a broker in an
unsolicited "brokers' transaction," and the amount of securities being sold
during any three-month period not exceeding specified limitations (generally, 1%
of the total outstanding shares if the Company). I understand that unless the
Shares are registered for public resale that the most likely method for resale
will be pursuant to SEC Rule 144. I understand and acknowledge that the Company
has not made any representations, guarantees or commitments to me about the
availability of Rule 144 to allow sales of the Shares in the future.
7. I acknowledge that the number of shares of Common Stock subject to the
Warrant is hereafter reduced by the number of shares of Common Stock represented
by the Shares and request that the Company reissue another Warrant for any
remaining shares (as applicable in the case where I have exercised the Warrant
for less than the full number of shares issuable on exercise).
8. I understand that there may be tax implications of my exercise of my
right to purchase shares of Common Stock pursuant to the exercise of this
Warrant. I also understand that it is my obligation to confer with my own tax
advisor with respect to such tax implications, and to the extent I felt it
necessary, I have done so prior to exercising this Warrant.
9. I understand that an investment in the Shares is inherently risky and
that I could lose all of the money I am investing in purchasing the Shares. I
would not be required to change my lifestyle in the event I was to lose all of
the money I am investing in purchasing the Shares.
10. I fully understand the implications of exercising this Warrant and have
consulted with any and all persons I deemed appropriate, including my attorney
and/or accountant, prior to determining to exercise the Warrant.
These agreements shall bind and inure to the benefit of my heirs, legal
representatives, successors and assigns.
My current address of record is:
--------------------------------------------------
--------------------------------------------------
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 8
and my Social Security Number is:
-----------------------------------------------
---------------------------------------------
(Signature)
---------------------------------------------
(Print or type name)
---------------------------------------------
---------------------------------------------
(Address)
NOTICE: The signature on this Exercise Agreement must correspond with the
name as written upon the face of the within Warrant, or upon the Assignment
thereof if applicable, in every particular, without alteration, enlargement, or
any change whatsoever, and must be Medallion guaranteed by a bank (other than a
savings bank), or by a firm having membership on a registered national
securities exchange.
SIGNATURE GUARANTEE
Authorized Signature:
-----------------------------------------------------------
Name of Bank or Firm:
-----------------------------------------------------------
Dated:
--------------------------------------------------------------------------
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE THIS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND CAN BE TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN
THE OPINION OF COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER
(WHICH SHALL BE IN FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY
SATISFACTORY TO THE COMPANY), SUCH REGISTRATION IS NOT THEN REQUIRED.
U.S. WIRELESS DATA, INC.
COMMON STOCK PURCHASE WARRANT
Dated March 28, 2000 Warrant No. 16
1. Issuance; Exercisability. For good and valuable consideration, the
receipt of which is hereby acknowledged by U.S. Wireless Data, Inc., a Colorado
corporation (the "Company"), Cornell Consulting International, Inc., or
registered assigns (the "Holder") is hereby granted the right to purchase at any
time commencing on March 28, 2000 and continuing until 5:00 P.M., Eastern Time,
on March 27, 2005 (or the next regular business day thereafter if such day is
not a regular business day) (the "Expiration Date"), Fifty Thousand (50,000)
fully paid and nonassessable shares of the Company's Common Stock, no par value
per share (the "Common Stock") at an exercise price of $5.344 per share (the
"Exercise Price") subject to further adjustment as set forth in Section 7
hereof.
2. Exercise of Warrants; Cashless Exercise Option. This Warrant is
exercisable in whole or in part for whole shares of Common Stock at the Exercise
Price per share payable hereunder, payable in cash or by certified or official
bank check. In lieu of paying cash to exercise this Warrant, the Holder may, by
designating a "cashless" exercise on the Notice of Exercise Form, acquire a
number of whole shares of the Company's Common Stock equal to (a) the difference
between (i) the Market Value of the Company's Common Stock and (ii) the Exercise
Price, multiplied by (b) the number of shares of Common Stock purchasable under
the portion of the Warrant tendered to the Company, divided by (c) the Market
Value of the Company's Common Stock. Upon surrender of this Warrant Certificate
with the annexed Notice of Exercise Form duly executed, together with payment of
the Exercise Price for the shares of Common Stock purchased, the Holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased. For the purposes of this Section 2, "Market Value" shall be an
amount equal to: (a) the average last sale price on the principal exchange on
which the Common Stock is traded, for the five (5) business days immediately
preceding the Company's receipt of the duly executed Notice of Exercise Form; or
(b) if the Common Stock is not traded on an exchange, the average closing bid
price of a share of Common Stock on the OTC Bulletin Board or equivalent trading
market where the Common Stock is traded, for the five (5) business days
immediately preceding the Company's receipt of the duly executed Notice of
Exercise Form; or (c) if not publicly traded, an amount determined in good faith
by the Company's Chief Financial Officer.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
<PAGE>
Warrant Agreement
U.S Wireless Data, Inc.
Page 2
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Representations of Holder. In connection with the issuance of this
Warrant, Holder represents and warrants to the Company that:
a) Holder is acquiring the Warrant (and if applicable the Warrant
Shares) for investment only and has no intention to transfer, sell or otherwise
dispose of such Warrant, except as permitted pursuant to, and in compliance
with, applicable federal and state securities laws.
b) Holder, either alone or through the assistance of advisors not
affiliated with the Company, has such experience in business and financial
matters that Holder is fully capable of evaluating the merits and risks of
making an investment in the Company.
c) Holder is aware that the Company files reports with the United
States Securities and Exchange Commission under the Securities Exchange Act of
1934 pursuant to which it reports current information concerning the Company,
its business and financial condition. Holder has examined such reports to the
full extent necessary prior to determining to accept this Warrant. Holder also
has been given the opportunity to ask questions of, and has received
satisfactory answers to, all such questions from the Company's authorized
representatives. Holder is familiar with the business and financial condition of
the Company and that ownership of the Warrant is a speculative investment.
d) Holder acknowledges and understands that the Warrant and the
underlying Warrant Shares cannot be transferred unless they are currently or
subsequently registered under the Securities Act of 1933 (the "Securities Act")
and applicable state securities laws, or exemptions from such registration
requirements are available. Holder further acknowledges and understands that the
Company is under no obligation to register the Warrant or the Warrant Shares to
make any exemption from registration available and that in the absence of
registration or an available registration exemption, the Warrant and the Warrant
Shares may not be transferred to any other person without the consent of the
Company, which it may validly withhold if the Warrant and the Warrant Shares are
not registered or exempt from registration.
e) Holder understands that the certificate evidencing the Warrant and
the Warrant Shares may be imprinted with legends, and/or stop-transfer
instructions may be lodged with the Company's transfer agent, prohibiting the
transfer of the Warrant and the Warrant Shares unless they are registered, or
registration is not required in the opinion of counsel satisfactory to the
Company. Holder consents to the lodging of any such stop transfer instructions
and/or such legends being imprinted on the certificates evidencing the Warrant
and the Warrant Shares. Holder does not have any contract, agreement or
arrangement with any person to sell, transfer or grant participation of any sort
with respect to any of the Warrant or the Warrant Shares.
f) Holder is aware of the terms and conditions of Rule 144 adopted by
the United States Securities and Exchange Commission under the Securities Act,
which permits limited public resale of securities acquired in a non-public
offering, including the securities issued on exercise of the Warrant, subject to
the satisfaction of certain conditions. Those conditions include, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one year after the party has purchased and paid
<PAGE>
Warrant Agreement
U.S Wireless Data, Inc.
Page 3
for the securities to be sold, the sale's being through a broker in an
unsolicited "brokers' transaction," and the amount of securities being sold
during any three-month period not exceeding specified limitations (generally, 1%
of the total outstanding shares if the Company). Holder understands that unless
the Warrant and the Warrant Shares are registered for public resale that the
most likely method for resale of the Warrant Shares will be pursuant to SEC Rule
144. Holder understands and acknowledges that the Company has not made any
representations, guarantees or commitments about the availability of Rule 144 to
allow sales of the Warrant or the Warrant Shares in the future.
g) Holder understands that there may be tax implications of the
acceptance of this Warrant and/or an exercise of the right to purchase shares of
Common Stock pursuant to the exercise of this Warrant. Holder also understands
that it is Holder's obligation to confer with its tax advisor with respect to
such tax implications, and to the extent Holder felt necessary, has done so
prior to accepting or exercising the Warrant.
h) Holder understands that an investment in the Warrant is inherently
risky and could result in the loss of all money invested in purchasing the
Warrant and/or the Warrant Shares. Holder would not be required to change
lifestyle in the event of a loss of all of the money invested in purchasing the
Warrant or the Warrant Shares.
i) Holder fully understands the implications of accepting the Warrant
and (if applicable) determining to exercise the Warrant, and has consulted with
any and all persons it deemed appropriate, including its attorney and/or
accountant, prior to determining to accept or exercise this Warrant.
7. Adjustments to Exercise Terms. If the Company at any time prior to the
full execution of this Warrant shall, by subdivision, combination, merger,
spin-off, re-classification or like capital adjustment of the securities, change
any of the securities to which purchase rights under this Warrant exist into the
same or different number of securities of any class or classes, this Warrant
shall thereafter entitle the Holder to acquire such number and kind of
securities as would have been issuable as a result of such change with respect
to the securities acquirable immediately prior to such transaction. If the
securities acquirable upon exercise of this Warrant are subdivided into a
greater number of securities (including pursuant to any stock dividend paid to
all holders of such securities), or if such securities are combined into a
lesser number of securities, then the purchase price for, and the number of
shares issuable upon, exercise of this Warrant shall be proportionately and
equitably adjusted.
8. Transfer to Comply with the Securities Act; No Registration Rights. This
Warrant has not been registered under the Securities Act of 1933, as amended,
(the "Act") and has been issued to the Holder for investment and not with a view
to the distribution of either the Warrant or the Warrant Shares. Neither this
Warrant nor any of the Warrant Shares or any other security issued or issuable
upon exercise of this Warrant may be sold, transferred, pledged or hypothecated
in the absence of an effective registration statement under the Act and
applicable state securities laws relating to such security, unless in the
opinion of counsel satisfactory to the Company, such registrations are not
required under the Act. Each certificate for the Warrant, the Warrant Shares and
any other security issued or issuable upon exercise of this Warrant shall
contain a legend on the face thereof, in form and substance satisfactory to
counsel for the Company, setting forth the restrictions on transfer contained in
this Section. The holder is not being granted any rights to have the Warrant or
the Warrant Shares registered under the Act or any state securities laws.
9. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
<PAGE>
Warrant Agreement
U.S Wireless Data, Inc.
Page 4
(i) if the to Company, to:
U.S. Wireless Data, Inc.
ATTN: Chief Financial Officer
805 Third Avenue, 8th Floor
New York, NY 10022
Telecopier No.: (212) 750-7836
Telephone No.: (212) 750-7766
(ii) if to the Holder, to such address and facsimile number as
appears in the records of the Company.
A party shall give notice to the other in accordance with this Section to change
the address, facsimile number or person to whom notices shall be given.
10. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties hereto with
respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
11. Governing Law. This Warrant shall be deemed to be a contract made under
the laws of the State of Colorado and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
12. Descriptive Headings. Descriptive headings of the several Sections of
this Warrant are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant effective
as of the date first set forth above (the date agreement was reached by the
parties that this Warrant be issued and the date as of which all consideration
receivable by the Company from the Holder for issuance of this Warrant had been
received).
U.S. WIRELESS DATA, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Attest:
- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
Warrant Agreement
U.S Wireless Data, Inc.
Page 5
HOLDER
Cornell Consulting International, Inc.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address:
-----------------------------------------
-----------------------------------------
Facsimile:
-------------------------------
Telephone:
-------------------------------
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 6
WARRANT EXERCISE AGREEMENT
To: U.S. Wireless Data, Inc.
Attn: Finance
805 Third Ave, 8th Floor
New York, NY 10022
Dated:
THE UNDERSIGNED Registered Holder, pursuant to the provisions set forth in
the attached Common Stock Purchase Warrant dated ______________________, hereby
subscribes for and purchases _________________ shares of Common Stock covered by
such Warrant (the "Shares") and herewith elects to make:
[Check the box below that applies.]
( ) a Cashless Exercise at the Exercise Price provided by such Warrant.
( ) full cash payment of $ for the Shares
--------------------------------------
at the Exercise Price provided by such Warrant.
THE UNDERSIGNED Registered Holder, in order to induce the Company to issue
the Shares, represents that:
1. If I am a natural person, I am over eighteen (18) years of age. I am
acquiring the Shares for investment only and that I have no intention to
transfer, sell or otherwise dispose of such Shares, except as permitted pursuant
to, and in compliance with, applicable federal and state securities laws.
2. I represent and warrant that I, either alone or through the assistance
of advisors not affiliated with the Company, have such experience in business
and financial matters that I am fully capable of evaluating the merits and risks
of making an investment in the Company.
3. I am aware that the Company files reports with the United States
Securities and Exchange Commission under the Securities Exchange Act of 1934
pursuant to which it reports current information concerning the Company, its
business and financial condition. I have examined such reports to the full
extent I felt necessary prior to determining to exercise this Warrant. I have
also been given the opportunity to ask questions of, and have received
satisfactory answers to, all such questions from the Company's authorized
representatives. I am familiar with the business and financial condition of the
Company and that ownership of the Shares is a speculative investment.
4. I acknowledge and understand that the Shares must be held indefinitely
unless they are currently or subsequently registered under the Securities Act of
1933 (the "Securities Act") and applicable state securities laws, or exemptions
from such registration requirements are available. I further acknowledge and
understand that the Company is under no obligation to register the Shares or to
make any exemption from registration available to me and that in the absence of
registration or an available registration exemption, the Shares may not be
transferred to any other person without the consent of the Company, which it may
validly withhold if the Shares are not registered or exempt from registration.
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 7
5. I understand that the certificate evidencing the Shares may be imprinted
with legends, and/or stop-transfer instructions may be lodged with the Company's
transfer agent, prohibiting the transfer of the Shares unless they are
registered, or registration is not required in the opinion of counsel
satisfactory to the Company. I consent to the lodging of any such stop transfer
instructions and/or such legends being imprinted on the certificates evidencing
the Shares. I do not have any contract, agreement or arrangement with any
persons to sell, transfer or grant participation of any sort to any third person
with respect to any of the Shares.
6. I am aware of the terms and conditions of Rule 144 adopted by the United
States Securities and Exchange Commission under the Securities Act, which
permits limited public resale of securities acquired in a non-public offering,
including the securities issued on exercise of the Warrant, subject to the
satisfaction of certain conditions. Those conditions include, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one year after the party has purchased and paid
for the securities to be sold, the sale's being through a broker in an
unsolicited "brokers' transaction," and the amount of securities being sold
during any three-month period not exceeding specified limitations (generally, 1%
of the total outstanding shares if the Company). I understand that unless the
Shares are registered for public resale that the most likely method for resale
will be pursuant to SEC Rule 144. I understand and acknowledge that the Company
has not made any representations, guarantees or commitments to me about the
availability of Rule 144 to allow sales of the Shares in the future.
7. I acknowledge that the number of shares of Common Stock subject to the
Warrant is hereafter reduced by the number of shares of Common Stock represented
by the Shares and request that the Company reissue another Warrant for any
remaining shares (as applicable in the case where I have exercised the Warrant
for less than the full number of shares issuable on exercise).
8. I understand that there may be tax implications of my exercise of my
right to purchase shares of Common Stock pursuant to the exercise of this
Warrant. I also understand that it is my obligation to confer with my own tax
advisor with respect to such tax implications, and to the extent I felt it
necessary, I have done so prior to exercising this Warrant.
9. I understand that an investment in the Shares is inherently risky and
that I could lose all of the money I am investing in purchasing the Shares. I
would not be required to change my lifestyle in the event I was to lose all of
the money I am investing in purchasing the Shares.
10. I fully understand the implications of exercising this Warrant and have
consulted with any and all persons I deemed appropriate, including my attorney
and/or accountant, prior to determining to exercise the Warrant.
These agreements shall bind and inure to the benefit of my heirs, legal
representatives, successors and assigns.
My current address of record is:
--------------------------------------------------
--------------------------------------------------
<PAGE>
Warrant Exercise Agreement
U.S Wireless Data, Inc.
Page 8
and my Social Security Number is:
-----------------------------------------------
---------------------------------------------
(Signature)
---------------------------------------------
(Print or type name)
---------------------------------------------
---------------------------------------------
(Address)
NOTICE: The signature on this Exercise Agreement must correspond with the
name as written upon the face of the within Warrant, or upon the Assignment
thereof if applicable, in every particular, without alteration, enlargement, or
any change whatsoever, and must be Medallion guaranteed by a bank (other than a
savings bank), or by a firm having membership on a registered national
securities exchange.
SIGNATURE GUARANTEE
Authorized Signature:
-----------------------------------------------------------
Name of Bank or Firm:
-----------------------------------------------------------
Dated:
--------------------------------------------------------------------------
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE THIS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND CAN BE TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN
THE OPINION OF COUNSEL FOR THE COMPANY OR COUNSEL FOR THE REGISTERED HOLDER
(WHICH SHALL BE IN FORM AND FROM SUCH COUNSEL AS SHALL BE REASONABLY
SATISFACTORY TO THE COMPANY), SUCH REGISTRATION IS NOT THEN REQUIRED.
U.S. WIRELESS DATA, INC.
COMMON STOCK PURCHASE WARRANT
Dated May 4, 2000
1. Issuance; Exercisability. For good and valuable consideration, the
receipt of which is hereby acknowledged by U.S. Wireless Data, Inc., a Colorado
corporation (the "Company"), Cornell Consulting International, Inc., or
registered assigns (the "Holder") is hereby granted the right to purchase at any
time commencing on May 4, 2000 and continuing until 5:00 P.M., Eastern Time, on
May 3, 2005 (or the next regular business day thereafter if such day is not a
regular business day) (the "Expiration Date"), Twenty-Five Thousand (25,000)
fully paid and nonassessable shares of the Company's Common Stock, no par value
per share (the "Common Stock") at an exercise price of $3.1875 per share (the
"Exercise Price") subject to further adjustment as set forth in Section 7
hereof.
2. Exercise of Warrants; Cashless Exercise Option. This Warrant is
exercisable in whole or in part for whole shares of Common Stock at the Exercise
Price per share payable hereunder, payable in cash or by certified or official
bank check. In lieu of paying cash to exercise this Warrant, the Holder may, by
designating a "cashless" exercise on the Notice of Exercise Form, acquire a
number of whole shares of the Company's Common Stock equal to (a) the difference
between (i) the Market Value of the Company's Common Stock and (ii) the Exercise
Price, multiplied by (b) the number of shares of Common Stock purchasable under
the portion of the Warrant tendered to the Company, divided by (c) the Market
Value of the Company's Common Stock. Upon surrender of this Warrant Certificate
with the annexed Notice of Exercise Form duly executed, together with payment of
the Exercise Price for the shares of Common Stock purchased, the Holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased. For the purposes of this Section 2, "Market Value" shall be an
amount equal to: (a) the average last sale price on the principal exchange on
which the Common Stock is traded, for the five (5) business days immediately
preceding the Company's receipt of the duly executed Notice of Exercise Form; or
(b) if the Common Stock is not traded on an exchange, the average closing bid
price of a share of Common Stock on the OTC Bulletin Board or equivalent trading
market where the Common Stock is traded, for the five (5) business days
immediately preceding the Company's receipt of the duly executed Notice of
Exercise Form; or (c) if not publicly traded, an amount determined in good faith
by the Company's Chief Financial Officer.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
<PAGE>
6. Representations of Holder. In connection with the issuance of this
Warrant, Holder represents and warrants to the Company that:
a) Holder is acquiring the Warrant (and if applicable the Warrant
Shares) for investment only and has no intention to transfer, sell or otherwise
dispose of such Warrant, except as permitted pursuant to, and in compliance
with, applicable federal and state securities laws.
b) Holder, either alone or through the assistance of advisors not
affiliated with the Company, has such experience in business and financial
matters that Holder is fully capable of evaluating the merits and risks of
making an investment in the Company.
c) Holder is aware that the Company files reports with the United
States Securities and Exchange Commission under the Securities Exchange Act of
1934 pursuant to which it reports current information concerning the Company,
its business and financial condition. Holder has examined such reports to the
full extent necessary prior to determining to accept this Warrant. Holder also
has been given the opportunity to ask questions of, and has received
satisfactory answers to, all such questions from the Company's authorized
representatives. Holder is familiar with the business and financial condition of
the Company and that ownership of the Warrant is a speculative investment.
d) Holder acknowledges and understands that the Warrant and the
underlying Warrant Shares cannot be transferred unless they are currently or
subsequently registered under the Securities Act of 1933 (the "Securities Act")
and applicable state securities laws, or exemptions from such registration
requirements are available. Holder further acknowledges and understands that the
Company is under no obligation to register the Warrant or the Warrant Shares to
make any exemption from registration available and that in the absence of
registration or an available registration exemption, the Warrant and the Warrant
Shares may not be transferred to any other person without the consent of the
Company, which it may validly withhold if the Warrant and the Warrant Shares are
not registered or exempt from registration.
e) Holder understands that the certificate evidencing the Warrant and
the Warrant Shares may be imprinted with legends, and/or stop-transfer
instructions may be lodged with the Company's transfer agent, prohibiting the
transfer of the Warrant and the Warrant Shares unless they are registered, or
registration is not required in the opinion of counsel satisfactory to the
Company. Holder consents to the lodging of any such stop transfer instructions
and/or such legends being imprinted on the certificates evidencing the Warrant
and the Warrant Shares. Holder does not have any contract, agreement or
arrangement with any person to sell, transfer or grant participation of any sort
with respect to any of the Warrant or the Warrant Shares.
f) Holder is aware of the terms and conditions of Rule 144 adopted by
the United States Securities and Exchange Commission under the Securities Act,
which permits limited public resale of securities acquired in a non-public
offering, including the securities issued on exercise of the Warrant, subject to
the satisfaction of certain conditions. Those conditions include, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one year after the party has purchased and paid
for the securities to be sold, the sale's being through a broker in an
unsolicited "brokers' transaction," and the amount of securities being sold
during any three-month period not exceeding specified limitations (generally, 1%
of the total outstanding shares if the Company). Holder understands that unless
the Warrant and the Warrant Shares are registered for public resale that the
most likely method for resale of the Warrant Shares will be pursuant to SEC Rule
144. Holder understands and acknowledges that the Company has not made any
representations, guarantees or commitments about the availability of Rule 144 to
allow sales of the Warrant or the Warrant Shares in the future.
2
<PAGE>
g) Holder understands that there may be tax implications of the
acceptance of this Warrant and/or an exercise of the right to purchase shares of
Common Stock pursuant to the exercise of this Warrant. Holder also understands
that it is Holder's obligation to confer with its tax advisor with respect to
such tax implications, and to the extent Holder felt necessary, has done so
prior to accepting or exercising the Warrant.
h) Holder understands that an investment in the Warrant is inherently
risky and could result in the loss of all money invested in purchasing the
Warrant and/or the Warrant Shares. Holder would not be required to change
lifestyle in the event of a loss of all of the money invested in purchasing the
Warrant or the Warrant Shares.
i) Holder fully understands the implications of accepting the Warrant
and (if applicable) determining to exercise the Warrant, and has consulted with
any and all persons it deemed appropriate, including its attorney and/or
accountant, prior to determining to accept or exercise this Warrant.
7. Adjustments to Exercise Terms. If the Company at any time prior to the
full execution of this Warrant shall, by subdivision, combination, merger,
spin-off, re-classification or like capital adjustment of the securities, change
any of the securities to which purchase rights under this Warrant exist into the
same or different number of securities of any class or classes, this Warrant
shall thereafter entitle the Holder to acquire such number and kind of
securities as would have been issuable as a result of such change with respect
to the securities acquirable immediately prior to such transaction. If the
securities acquirable upon exercise of this Warrant are subdivided into a
greater number of securities (including pursuant to any stock dividend paid to
all holders of such securities), or if such securities are combined into a
lesser number of securities, then the purchase price for, and the number of
shares issuable upon, exercise of this Warrant shall be proportionately and
equitably adjusted.
8. Transfer to Comply with the Securities Act; No Registration Rights. This
Warrant has not been registered under the Securities Act of 1933, as amended,
(the "Act") and has been issued to the Holder for investment and not with a view
to the distribution of either the Warrant or the Warrant Shares. Neither this
Warrant nor any of the Warrant Shares or any other security issued or issuable
upon exercise of this Warrant may be sold, transferred, pledged or hypothecated
in the absence of an effective registration statement under the Act and
applicable state securities laws relating to such security, unless in the
opinion of counsel satisfactory to the Company, such registrations are not
required under the Act. Each certificate for the Warrant, the Warrant Shares and
any other security issued or issuable upon exercise of this Warrant shall
contain a legend on the face thereof, in form and substance satisfactory to
counsel for the Company, setting forth the restrictions on transfer contained in
this Section. The holder is not being granted any rights to have the Warrant or
the Warrant Shares registered under the Act or any state securities laws.
9. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
3
<PAGE>
(i) if the to Company, to:
U.S. Wireless Data, Inc.
ATTN: Chief Financial Officer
805 Third Avenue, 8th Floor
New York, NY 10022
Telecopier No.: (212) 750-7836
Telephone No.: (212) 750-7766
(ii) if to the Holder, to such address and facsimile number as
appears in the records of the Company.
A party shall give notice to the other in accordance with this Section to
change the address, facsimile number or person to whom notices shall be given.
10. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties hereto with
respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
11. Governing Law. This Warrant shall be deemed to be a contract made under
the laws of the State of Colorado and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
12. Descriptive Headings. Descriptive headings of the several Sections of
this Warrant are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant effective
as of the date first set forth above (the date agreement was reached by the
parties that this Warrant be issued and the date as of which all consideration
receivable by the Company from the Holder for issuance of this Warrant had been
received).
U.S. WIRELESS DATA, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
Attest:
Name:
---------------------------------
Title:
--------------------------------
HOLDER
Cornell Consulting International, Inc.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
Address:
------------------------------
--------------------------------------
Facsimile:
----------------------------
Telephone:
----------------------------
4
<PAGE>
WARRANT EXERCISE AGREEMENT
To: U.S. Wireless Data, Inc.
Attn: Finance
805 Third Ave, 8th Floor
New York, NY 10022
Dated:
THE UNDERSIGNED Registered Holder, pursuant to the provisions set forth in
the attached Common Stock Purchase Warrant dated ______________________, hereby
subscribes for and purchases _________________ shares of Common Stock covered by
such Warrant (the "Shares") and herewith elects to make:
[Check the box below that applies.]
( ) a Cashless Exercise at the Exercise Price provided by such Warrant.
( ) full cash payment of $ for the Shares
--------------------------------------
at the Exercise Price provided by such Warrant.
THE UNDERSIGNED Registered Holder, in order to induce the Company to issue
the Shares, represents that:
1. If I am a natural person, I am over eighteen (18) years of age. I am
acquiring the Shares for investment only and that I have no intention to
transfer, sell or otherwise dispose of such Shares, except as permitted pursuant
to, and in compliance with, applicable federal and state securities laws.
2. I represent and warrant that I, either alone or through the assistance
of advisors not affiliated with the Company, have such experience in business
and financial matters that I am fully capable of evaluating the merits and risks
of making an investment in the Company.
3. I am aware that the Company files reports with the United States
Securities and Exchange Commission under the Securities Exchange Act of 1934
pursuant to which it reports current information concerning the Company, its
business and financial condition. I have examined such reports to the full
extent I felt necessary prior to determining to exercise this Warrant. I have
also been given the opportunity to ask questions of, and have received
satisfactory answers to, all such questions from the Company's authorized
representatives. I am familiar with the business and financial condition of the
Company and that ownership of the Shares is a speculative investment.
4. I acknowledge and understand that the Shares must be held indefinitely
unless they are currently or subsequently registered under the Securities Act of
1933 (the "Securities Act") and applicable state securities laws, or exemptions
from such registration requirements are available. I further acknowledge and
understand that the Company is under no obligation to register the Shares or to
make any exemption from registration available to me and that in the absence of
registration or an available registration exemption, the Shares may not be
transferred to any other person without the consent of the Company, which it may
validly withhold if the Shares are not registered or exempt from registration.
<PAGE>
5. I understand that the certificate evidencing the Shares may be imprinted
with legends, and/or stop-transfer instructions may be lodged with the Company's
transfer agent, prohibiting the transfer of the Shares unless they are
registered, or registration is not required in the opinion of counsel
satisfactory to the Company. I consent to the lodging of any such stop transfer
instructions and/or such legends being imprinted on the certificates evidencing
the Shares. I do not have any contract, agreement or arrangement with any
persons to sell, transfer or grant participation of any sort to any third person
with respect to any of the Shares.
6. I am aware of the terms and conditions of Rule 144 adopted by the United
States Securities and Exchange Commission under the Securities Act, which
permits limited public resale of securities acquired in a non-public offering,
including the securities issued on exercise of the Warrant, subject to the
satisfaction of certain conditions. Those conditions include, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one year after the party has purchased and paid
for the securities to be sold, the sale's being through a broker in an
unsolicited "brokers' transaction," and the amount of securities being sold
during any three-month period not exceeding specified limitations (generally, 1%
of the total outstanding shares if the Company). I understand that unless the
Shares are registered for public resale that the most likely method for resale
will be pursuant to SEC Rule 144. I understand and acknowledge that the Company
has not made any representations, guarantees or commitments to me about the
availability of Rule 144 to allow sales of the Shares in the future.
7. I acknowledge that the number of shares of Common Stock subject to the
Warrant is hereafter reduced by the number of shares of Common Stock represented
by the Shares and request that the Company reissue another Warrant for any
remaining shares (as applicable in the case where I have exercised the Warrant
for less than the full number of shares issuable on exercise).
8. I understand that there may be tax implications of my exercise of my
right to purchase shares of Common Stock pursuant to the exercise of this
Warrant. I also understand that it is my obligation to confer with my own tax
advisor with respect to such tax implications, and to the extent I felt it
necessary, I have done so prior to exercising this Warrant.
9. I understand that an investment in the Shares is inherently risky and
that I could lose all of the money I am investing in purchasing the Shares. I
would not be required to change my lifestyle in the event I was to lose all of
the money I am investing in purchasing the Shares.
10. I fully understand the implications of exercising this Warrant and have
consulted with any and all persons I deemed appropriate, including my attorney
and/or accountant, prior to determining to exercise the Warrant.
These agreements shall bind and inure to the benefit of my heirs, legal
representatives, successors and assigns.
My current address of record is:
--------------------------------------------------
--------------------------------------------------
<PAGE>
and my Social Security Number is:
-----------------------------------------------
---------------------------------------------
(Signature)
---------------------------------------------
(Print or type name)
---------------------------------------------
---------------------------------------------
(Address)
NOTICE: The signature on this Exercise Agreement must correspond with the
name as written upon the face of the within Warrant, or upon the Assignment
thereof if applicable, in every particular, without alteration, enlargement, or
any change whatsoever, and must be Medallion guaranteed by a bank (other than a
savings bank), or by a firm having membership on a registered national
securities exchange.
SIGNATURE GUARANTEE
Authorized Signature:
-----------------------------------------------------------
Name of Bank or Firm:
-----------------------------------------------------------
Dated:
--------------------------------------------------------------------------
PURCHASE AGREEMENT
U.S. Wireless Data, Inc. (the "Company") and The Cuttyhunk Fund Limited
("Cuttyhunk") hereby agree as follows:
(1) Cuttyhunk represents and warrants to the Company that Cuttyhunk is the
record and beneficial owner of 90,941 shares of the Company's Series B
Convertible Preferred Stock (the "Securities").
(2) Cuttyhunk agrees to sell the Securities to the Company, and the Company
agrees to purchase such securities for $140,000 and warrants in the form
attached as Annex I hereto to purchase 10,000 shares of the Company's Common
Stock (the "Purchase Price").
(3) Within three business days of the date of this Agreement, Cuttyhunk
shall deliver to the Company by federal express at its address set forth in
Section 6 below certificates representing the Securities, duly endorsed for
transfer and free and clear of all Liens (as defined below). Within two business
days of receipt of such Securities duly endorsed, the Company shall deposit the
cash portion of the Purchase Price and the executed warrants in federal express
to the address set forth in Section 6 below.
(4) Cuttyhunk represents and warrants to the Company, and by delivering the
Securities to the Company at the closing shall be deemed to represent and
warrant to the Company as of the closing date, that:
(a) Cuttyhunk has good and valid title to the Securities, free and
clear of all liens, encumbrances, equities, claims, proxies or other voting
rights ("Liens"); and, upon delivery of such Securities and the consummation of
the sale pursuant hereto, the Company will receive good and valid title to such
Securities, free and clear of all Liens.
(b) All consents, approvals, authorizations and orders necessary for
the execution, delivery and performance by Cuttyhunk of this Agreement have been
obtained; and Cuttyhunk has full right, power and authority to execute, deliver
and perform this Agreement; and this Agreement is a valid and binding obligation
of Cuttyhunk, enforceable against Cuttyhunk in accordance with its terms.
(c) Upon receipt of the Purchase Price, Cuttyhunk will have no claims
against the Company with respect to the Securities or any convertible debentures
and the related agreements, including without limitation, any claims as to
registration rights (including a claim that the Company has been late in
registering any securities, including common stock underlying convertible
debentures) or any interest or penalties (whether related to the Securities or
convertible debentures).
(5) Each party, for itself and on behalf of all direct and indirect
partners, officers, directors, employees, affiliates (both persons and
entities), representatives, agents, representatives, servants, trustees,
beneficiaries, predecessors in interest, successors in interest, assigns,
nominees and insurers (collectively, the "Releasing Parties"), shall be deemed
to have released and forever discharged the other party and its officers,
directors, employees, affiliates (both persons and entities), agents,
<PAGE>
representatives, servants, trustees, beneficiaries, processors in interest,
successors in interest, assigns, nominees and insurer of each such party, of and
from any and all claims, demands, actions and causes of actions, whether known
or unknown, fixed or contingent, that any of the Releasing Parties may have had,
may now have or may hereafter acquire with respect to any matters whatsoever
arising under or in any way related to the purchase and sale of the Company's 6%
convertible debentures due July 21, 2000 and Series B Preferred Stock.
Notwithstanding anything to the contrary contained herein, the foregoing release
shall not release either party from claims arising from a breach of this
agreement or under the warrants delivered as part of the Purchase Price.
Each of the parties hereto represents, warrants and covenants that it
has not, and at the time this release becomes effective will not have, sold,
assigned, transferred or otherwise conveyed to any other person or entity all or
any portion of its rights, claims, demands, actions or causes of action herein
released.
Each of the parties hereto acknowledge that its is familiar with
Section 1542 of the Civil Code of the State of California, which provides as
follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
Each of the parities hereto hereby waives any and all rights and
benefits that it now has or in the future may have under Section 1542 of the
Civil Code (and under the comparable provisions of any other applicable law) and
agrees and acknowledges that this Agreement contains a full and final release
applying to unknown and unanticipated claims, injuries or damages arising out of
the subject matter hereof, as well as to those now known or disclosed.
(6) Notices. Each notice required hereunder shall be in writing, be
delivered by hand, mail, telegram, or facsimile transmission, postage prepaid,
and shall be deemed to have been duly given or made when received by the party
to which it was sent at its following address (or at such other address as may
hereafter be furnished by one party to the other in writing):
To the Company:
US Wireless Data, Inc.
805 Third Avenue - 8th Floor
New York, NY 10022
Attn: Dean Leavitt
To The Cuttyhunk Fund Limited
c/o Optima Management
1285 Avenue of the Americas
New York, New York 10019
Attn: Geoffrey Lewis
2
<PAGE>
(7) Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
IN WITNESS WHEREOF, the parties have has signed this Agreement as of this
_______ day of May 2000.
THE CUTTYHUNK FUND LIMITED
By:
----------------------------
Name:
----------------------
Title:
----------------------
U.S. WIRELESS DATA, INC.
By:
----------------------------
Name:
----------------------
Title:
----------------------
3
PURCHASE AGREEMENT
U.S. Wireless Data, Inc. (the "Company") and Tonga Partners, L.P. ("Tonga")
hereby agree as follows:
(1) Tonga represents and warrants to the Company that Tonga is the record
and beneficial owner of 136,411 shares of the Company's Series B Convertible
Preferred Stock (the "Securities").
(2) Tonga agrees to sell the Securities to the Company, and the Company
agrees to purchase such securities for $210,000 and warrants in the form
attached as Annex I hereto to purchase 15,000 shares of the Company's Common
Stock (the "Purchase Price").
(3) Within three business days of the date of this Agreement, Tonga shall
deliver to the Company by federal express at its address set forth in Section 6
below certificates representing the Securities, duly endorsed for transfer and
free and clear of all Liens (as defined below). Within two business days of
receipt of such Securities duly endorsed, the Company shall deposit the cash
portion of the Purchase Price and the executed warrants in federal express to
the address set forth in Section 6 below.
(4) Tonga represents and warrants to the Company, and by delivering the
Securities to the Company at the closing shall be deemed to represent and
warrant to the Company as of the closing date, that:
(a) Tonga has good and valid title to the Securities, free and clear
of all liens, encumbrances, equities, claims, proxies or other voting rights
("Liens"); and, upon delivery of such Securities and the consummation of the
sale pursuant hereto, the Company will receive good and valid title to such
Securities, free and clear of all Liens.
(b) All consents, approvals, authorizations and orders necessary for
the execution, delivery and performance by Tonga of this Agreement have been
obtained; and Tonga has full right, power and authority to execute, deliver and
perform this Agreement; and this Agreement is a valid and binding obligation of
Tonga, enforceable against Tonga in accordance with its terms.
(c) Upon receipt of the Purchase Price, Tonga will have no claims
against the Company with respect to the Securities or any converitble debentures
and the related agreements, including without limitation, any claims as to
registration rights (including a claim that the Company has been late in
registering any securities, including common stock underlying convertible
debentures) or any interest or penalties (whether related to the Securities or
convertible debentures).
(5) Each party, for itself and on behalf of all direct and indirect
partners, officers, directors, employees, affiliates (both persons and
entities), representatives, agents, representatives, servants, trustees,
beneficiaries, predecessors in interest, successors in interest, assigns,
nominees and insurers (collectively, the "Releasing Parties"), shall be deemed
to have released and forever discharged the other party and its officers,
directors, employees, affiliates (both persons and entities), agents,
representatives, servants, trustees, beneficiaries, processors in interest,
<PAGE>
successors in interest, assigns, nominees and insurer of each such party, of and
from any and all claims, demands, actions and causes of actions, whether known
or unknown, fixed or contingent, that any of the Releasing Parties may have had,
may now have or may hereafter acquire with respect to any matters whatsoever
arising under or in any way related to the purchase and sale of the Company's 6%
convertible debentures due July 21, 2000 and Series B Preferred Stock.
Notwithstanding anything to the contrary contained herein, the foregoing release
shall not release either party from claims arising from a breach of this
agreement or under the warrants delivered as part of the Purchase Price.
Each of the parties hereto represents, warrants and covenants that it
has not, and at the time this release becomes effective will not have, sold,
assigned, transferred or otherwise conveyed to any other person or entity all or
any portion of its rights, claims, demands, actions or causes of action herein
released.
Each of the parties hereto acknowledge that its is familiar with
Section 1542 of the Civil Code of the State of California, which provides as
follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have
materially affected his settlement with the debtor."
Each of the parities hereto hereby waives any and all rights and
benefits that it now has or in the future may have under Section 1542 of the
Civil Code (and under the comparable provisions of any other applicable law) and
agrees and acknowledges that this Agreement contains a full and final release
applying to unknown and unanticipated claims, injuries or damages arising out of
the subject matter hereof, as well as to those now known or disclosed.
(6) Notices. Each notice required hereunder shall be in writing, be
delivered by hand, mail, telegram, or facsimile transmission, postage prepaid,
and shall be deemed to have been duly given or made when received by the party
to which it was sent at its following address (or at such other address as may
hereafter be furnished by one party to the other in writing):
To the Company:
US Wireless Data, Inc.
805 Third Avenue - 8th Floor
New York, NY 10022
Attn: Dean Leavitt
To Tonga Partners, L.P.:
c/o Cannell Capital Management
600 California Street
San Francisco, California 94108
Attn: Linda Fung
3
<PAGE>
(7) Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
IN WITNESS WHEREOF, the parties have has signed this Agreement as of this
_______ day of May 2000.
THE CUTTYHUNK FUND LIMITED
By:
------------------------------
Name:
------------------------
Title:
------------------------
U.S. WIRELESS DATA, INC.
By:
------------------------------
Name:
------------------------
Title:
------------------------
4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this 11th day of February 2000 between
U.S. Wireless Data, Inc., a Colorado corporation (the "Company"), and Charles I.
Leone, an individual who presently resides at 11 Leon Court, Rockville Centre,
New York 11570 (the "Executive").
WHEREAS, the parties hereto wish to enter into an employment agreement to
document the employment of the Executive as Chief Financial Officer and Chief
Operating Officer of the Company, and to set forth certain additional agreements
between the Executive and the Company.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
representations contained herein, the parties hereto agree as follows:
1. TERM. The Company will employ the Executive, and the Executive will
serve the Company, under the terms of this Agreement for a term of two (2)
years, commencing on the date hereof, which term shall be subject to automatic
renewal for successive one-year terms unless either party notifies the other
party of its or his intent not to renew this Agreement (which non-renewal may be
for any or no reason by either party) at least ninety (90) days prior to the end
of the applicable term or renewal term. Notwithstanding the foregoing, the
Executives employment hereunder may be earlier terminated, as provided in
Section 4 hereof. The term of this Agreement, as in effect from time to time in
accordance with the foregoing, shall be referred to herein as the Term. The
period of time between the commencement and the termination of the Executives
employment hereunder shall be referred to herein as the Employment Period.
2. EMPLOYMENT.
a. EnhancedEnhancedPosition. The Company hereby employs the Executive
for the Employment Period as its Chief Financial Officer and Chief Operating
Officer on the terms and conditions set forth in this Agreement.
b. Authority and Duties. The Executive shall perform all duties and
functions and discharge all responsibilities as are customarily performed by the
Chief Financial Officer of a publicly-held company and, in addition, all duties,
functions and responsibilities specified by the Chief Executive Officer of the
Company to the extent such specifications are consistent with the Executives
position as Chief Financial Officer. The Executive shall report directly and be
responsible to the Chief Executive Officer of the Company. During the Employment
Period, the Executive shall devote his full business time, skill and efforts to
the business of the Company and use his best efforts in performing services for
the Company. The Executive shall work out of the Companys offices located in the
New York City metropolitan area; provided, however, the Executive shall be
required to travel in performing services under this Agreement and to provide
services to the Company from time to time at other locations to the extent
required by the Companys Board of Directors or Chief Executive Officer.
Executive will not be required to relocate his residence outside of the New York
City Metropolitan area.
<PAGE>
3. COMPENSATION AND BENEFITS.
a. Salary. During the Employment Period, the Company shall pay to the
Executive, as compensation for the performance of his duties and obligations
under this Agreement, a base salary at the rate of $175,000 per annum, payable
in arrears in accordance with the normal payroll practices of the Company in
effect from time to time. The present normal payroll practices of the Company
provide for base salary payments not less frequently than twice each month. Such
base salary shall be subject to annual review after each year worked with the
first such review to take place during the first calendar quarter of 2001 with
respect to services performed from the date of this Agreement through February
10, 2001. Each party agrees that there has been no promise or inducement to
Executive that his base salary will be increased.
b. Annual Bonus. During the Employment Period, the Executive shall
have the opportunity to earn an annual bonus. The Company, through its Chief
Executive Officer, acting on behalf of the Company, and the Executive, shall
endeavor to mutually establish from time to time certain corporate and/or
individual performance goals for Executive, it being understood and agreed by
both parties to this Agreement that the Company and its officers shall not have
any liability to the Executive for or in respect of a bonus or the failure to
pay a bonus if the parties fail to agree on said goals. Without in any way
limiting the discretion of the Chief Executive Officer of the Company to
determine whether to pay or not pay bonuses and to determine the amount of any
such bonuses, the Company has set a target bonus of $75,000 for Executive for
each full year (February 11 of any year through February 10 of the immediately
succeeding year) worked for the Company. Such bonuses, if and to the extent
payable, will be paid after the expiration of each calendar year by the end of
the first calendar quarter of the next year with the first such bonus payable
after February 11, 2001.
c. Equity Participation. The Companys Board of Directors has granted
the Executive an option to purchase shares of common stock of the Company, which
options will be subject to option agreements between the Company and the
Executive to be entered into and, if applicable, the Companys qualified stock
option plan.
d. Other Benefits. During the Employment Period, the Executive shall
be entitled to participate in all of the employee benefit plans, programs and
arrangements of the Company in effect during the Employment Period which are
generally available to senior executives of the Company, subject to and on a
basis consistent with the terms, conditions and overall administration of such
plans, programs and arrangements, as amended from time to time. In addition,
during the Employment Period, the Executive shall be entitled to fringe benefits
and perquisites comparable to those generally available to all other senior
executives of the Company, as amended from time to time.
e. Business Expenses. During the Employment Period, the Company shall
reimburse the Executive for all documented reasonable business expenses incurred
by the Executive in the performance of his duties under this Agreement, in
accordance with the Companys policies as in effect from time to time.
f. Indemnification. During the Employment Period, the Company shall
indemnify Executive for losses suffered by Executive arising out of third party
lawsuits relating directly to his employment by the Company to the extent such
indemnification is permitted by applicable Colorado law and consistent with and
in accordance with the Companys articles or certificate of incorporation and
by-laws; provided, however, Executive shall promptly notify Company of any such
lawsuit and cooperate with Company in connection therewith.
2
<PAGE>
4. TERMINATION OF EMPLOYMENT.
a. Termination for Cause. The Company may at any time terminate the
Executives employment hereunder for cause. For purposes of this Agreement and
subject to the Executives opportunity to cure to the extent provided in Section
4.c. hereof, the Company shall have cause to terminate the Executives employment
hereunder if such termination shall be the result of:
(1) Fraud in connection with the Executive's performance
hereunder;
(2) Dishonesty in connection with the Executive's performance
hereunder except to the extent the Executive proves such dishonesty
was both unintentional and covered only a matter which was de minimis;
(3) The failure by the Executive to perform his duties hereunder
or any other breach by Executive of this Agreement;
(4) The failure by the Executive to follow the lawful directions
of or policies established by the Board of Directors or the Chief
Executive Officer of the Company unless the tasks are of the type
which could not reasonably be required of Executive pursuant to this
Agreement;
(5) The conviction for, or plea of nolo contendere to, a charge
of commission of a felony or crime involving moral turpitude;
(6) The Executive's performance of any services under this
Agreement while under the influence of drugs, alcohol or any
controlled substance except, with respect to controlled substances
only, to the extent Executive proves (a) taking any controlled
substance was prescribed by a medical doctor to treat a medical
problem, (b) such controlled substance was used only in accordance
with said doctor's instructions, and (c) taking such controlled
substance does not and did not adversely affect Executive's job
performance during more than a de minimis period of time; or
(7) The Executive acting in a manner which damages or could
reasonably be expected to damage the business or reputation of the
Company.
The parties agree that each of the foregoing breaches, events, crimes,
behaviors, acts, inactions or occurrences constitutes independent grounds for
"cause" and the failure of any breach, event, crime, behavior, act, inaction or
occurrence to constitute "cause" under any paragraph of this Section 4.a. shall
not prevent that same breach, event, crime, behavior, act, inaction or
occurrence from constituting "cause" under a different paragraph of this Section
4.a.
3
<PAGE>
b. Termination for Good Reason. The Executive shall have the right at
any time to terminate his employment with the Company and for any reason upon
twenty (20) days prior written notice. For purposes of this Agreement and
subject to the Companys opportunity to cure as provided in Section 4.c. hereof,
the Executive shall have good reason to terminate his employment hereunder only
if such termination shall be the result of:
(1) A breach by the Company of the compensation and benefits
provisions set forth in Section 3 hereof; or
(2) A material breach by the Company of any other material term of
this Agreement.
c. Notice and Opportunity to Cure. It shall be a condition precedent
to the Companys right to terminate the Executives employment for cause and the
Executives right to terminate his employment for good reason that (1) the party
seeking the termination shall first have given the other party written notice
stating with reasonable specificity the reason for the termination (breach) and
(2) if such breach is susceptible of cure or remedy, a period of ten (10) days
from and after the giving of such notice shall have elapsed without the
breaching party having effectively cured or remedied such breach during such
10-day period, unless such breach cannot be cured or remedied within ten (10)
days, in which case the period for remedy or cure shall be extended for a
reasonable time (not to exceed an additional ten (10) days) provided the
breaching party has made and continues to make a diligent effort to effect such
remedy or cure. Notwithstanding anything contained in this Agreement, the
parties agree that any breach, event, crime, behavior, action, inaction or
occurrence constituting cause (or which would constitute cause after the giving
of notice) under Section 4.a.(1), (2), (5), (6) or (7) shall not under any
circumstances be susceptible or capable of cure or remedy under this Section
4.c.
d. Termination Upon Death or Permanent and Total Disability. The
Employment Period shall automatically without further action be terminated by
the death of the Executive. The Employment Period may be terminated by the
Company at any time if the Executive shall be rendered incapable of performing
his duties to the Company at the same level by reason of any medically
determined physical or mental impairment that (i) can reasonably be expected to
result in death or (ii) can reasonably be expected to last or has lasted for a
period of three (3) or more consecutive months or for a period of four (4) or
more months during any twelve (12) month period from the first date of the
Executives impairment or absence or projected absence due to the disability
(Disability). If the Employment Period is terminated by reason of a Disability
of the Executive, the Company shall give thirty (30) days advance written notice
to that effect to the Executive.
5. CONSEQUENCES OF TERMINATION.
a. Termination Without Cause or for Good Reason. In the event of
termination of the Executives employment hereunder by the Company without cause
(other than upon death or Disability or non-renewal) or by the Executive for
good reason (each as defined in Section 4 hereof), subject to Section 8 the
Executive shall be entitled to only the following pay and benefits:
4
<PAGE>
(1) Severance Pay. Executive shall receive severance payments for a
150-day period after the termination date (the "Severance Period") in
regular payroll increment payments with each such payment to be equal to
the base salary payments which would have been received under this
Agreement on each such date if Executive's employment had not been
terminated. Executive shall also receive, at the time bonuses are otherwise
payable under this Agreement, for services performed during the year of
termination, a prorated portion of the targeted annual bonus of $75,000,
with the prorated bonus being equal to (a) $75,000 multiplied by the number
of days worked during the year the Executive was terminated, divided by (b)
the actual number of days in the year. The parties agree that for purposes
of this Section 5.a.(1), any year shall commence on February 11 of the
applicable year and terminate on February 10 of the immediately succeeding
year; and
(2) Benefits Continuation. Continuation for the Severance Period of
coverage under the group medical care, disability and life insurance
benefit plans or arrangements in which the Executive is participating at
the time of termination; provided, however, that the Company's obligation
to provide such coverages shall be terminated if the Executive obtains
comparable substitute coverage from another employer at any time during the
Severance Period. The Executive shall be entitled, at the expiration of the
Severance Period, to elect continued medical coverage in accordance with
Section 4980B of the Internal Revenue Code of 1986, as amended (or any
successor provision thereto).
b. Other Terminations. In the event of termination of the Executives
employment hereunder for any reason other than (a) without cause or (b) for good
reason (i.e., termination for death, Disability, with cause or without good
reason), or if Executive makes the election provided for in Section 8, or if the
Term is not renewed, the Executive shall be paid base salary only through the
date of termination or non-renewal, and Executive shall not be entitled to any
severance, bonus or other pay, or any benefits continuation rights, except for
benefits continuation rights as may otherwise be provided (e.g., Cobra benefits)
under the applicable benefit plans relating to the Executive; provided, however,
that upon termination for death or Disability, the Company in its sole and
absolute discretion, may consider granting to Executive or his estate a pro
rated bonus of up to the amount provided in connection with a termination
without cause (but Company shall have no obligation to grant any such bonus).
6. CONFIDENTIALITY. The Executive agrees that he shall not at any time
during the Term hereof or at any time thereafter for any reason, in any fashion,
form or manner, either directly or indirectly, divulge, disclose or communicate
to any person, firm, corporation or other business entity, in any manner
whatsoever, any confidential information or trade secrets concerning the
business of the Company, including, without limiting the generality of the
foregoing, the techniques, methods or systems of its operation or management,
any information regarding its financial matters, or any other information
concerning the business of the Company, its manner of operation, its plans or
other data. The provisions of this Section 6 shall not apply to (i) information
that is public knowledge other than as a result of disclosure by the Executive
in breach of this Section 6; or (ii) information disclosed by Executive under a
requirement of law or as directed by applicable legal authority having
jurisdiction over the Executive.
7. INVENTIONS. The Executive is hereby retained in a capacity such that the
Executives responsibilities include the making of technical and managerial
contributions of value to the Company. The Executive hereby assigns to Company
all right, title and interest in such contributions and inventions made or
conceived by the Executive alone or jointly with others during the Employment
Period which relate to the business of the Company. This assignment shall
include, without limitation, (a) the right to file and prosecute patent
applications on such inventions in any and all countries, (b) the patent
applications filed and patents issuing thereon, and (c) the right to obtain
copyright, trademark or trade name protection for any such work product. The
Executive shall promptly and fully disclose all such contributions and
5
<PAGE>
inventions to the Company and assist the Company in obtaining and protecting the
rights therein (including patents thereon), in any and all countries; provided,
however, that said contributions and inventions will be the property of Company,
whether or not patented or registered for copyright, trademark or trade name
protection, as the case may be.
8. NON-COMPETITION. The Executive agrees that he shall not during the
Employment Period and, if applicable, the Severance Period, without the approval
of the Board of Directors of the Company, directly or indirectly, alone or as
partner, joint venturer, officer, director, employee, consultant, agent,
independent contractor, stockholder or otherwise (other than as provided below),
engage in any "Competitive Business" within the United States. For purposes of
the foregoing, the term "Competitive Business" shall mean any business involved
in development, marketing, sale or support of products or services (a) which can
reasonably be expected to cause customers not to use the Company's or any of its
subsidiaries' or affiliates' products or services or (b) which are similar to or
competitive with products or services provided or supplied by the Company or any
of its subsidiaries or affiliates. Notwithstanding the foregoing, the Executive
shall not be prohibited during the non-competition period applicable above from
acting as a passive investor by owning not more than one percent (1%) of the
issued and outstanding capital stock of any publicly-held company. The
Executive, at his option, may elect to eliminate the above restrictions in this
Section 8 only during the Severance Period but any such election shall, without
further action, be deemed an automatic and irrevocable relinquishment by
Executive and termination of all of his rights to pay and benefits under Section
5.a. During the Employment Period and the Severance Period, if applicable, and
for a period of one (1) year after the later of expiration of the Employment
Period and the Severance Period, the Executive shall not, without the prior
written consent of the Board of Directors of the Company, directly, or
indirectly, alone or as partner, joint venturer, officer, director, employee,
consultant, agent, independent contractor, stockholder or otherwise, (a) solicit
or induce any employee, independent contractor or consultant of the Company or
any current or future subsidiary or affiliate thereof to terminate or reduce his
or her employment or engagement with the Company or any current or future
subsidiary or affiliate thereof or (b) solicit the business of or any business
from any current or future customer or supplier to the Company or any current or
future subsidiary or affiliate thereof or induce any such customer or supplier
not to do business with or reduce its business transactions with the Company or
any subsidiary or affiliate thereof.
9. BREACH OF RESTRICTIVE COVENANTS; SEVERABILITY. The parties hereto intend
all provisions of this Agreement to be enforced to the fullest extent permitted
by law. The parties agree that Sections 6, 7 and 8 are reasonable and necessary
to protect the Companys interests and properties and that a breach or violation
of Sections 6, 7 or 8 hereof will result in immediate and irreparable injury and
harm to the innocent party, who shall have, in addition to any and all remedies
of law and other consequences under this Agreement, the right to an injunction,
specific performance or other equitable relief to prevent the violation of the
covenant or agreement hereunder. The parties agree that each of such covenants
and agreements is separate, distinct and severable not only from the other of
such covenants and agreements but also from the other and remaining provisions
of this Agreement; that the unenforceability of any such covenant or agreement
shall not affect the validity or enforceability of any other such covenants or
agreements or any other provision or provisions of this Agreement. Should a
6
<PAGE>
court of competent jurisdiction determine that the scope of any provision of
this Agreement is too broad to be enforced as written, the parties intend that
the court should reform the provision to such narrower scope as it determines to
be enforceable. If, however, any provision of this Agreement is held to be
illegal or unenforceable or by its severance, invalid or unenforceable under
present or future law, such provision shall be fully severable from this
Agreement, this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision were never a part hereof and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance.
10. NOTICE. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given within one business day of dispatch if
sent by hand delivery or reputable overnight courier, addressed as follows:
a. If to the Company, to:
U.S. Wireless Data, Inc.
805 Third Avenue
New York, New York 10022
Attention: Chief Executive Officer
b. If to the Executive, to:
Charles I. Leone
11 Leon Court
Rockville Centre, NY 11570
or to such other respective addresses as the parties hereto shall designate to
the other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
11. JURISDICTION; VENUE; LEGAL FEES; ETC.
a. Executive hereby irrevocably consents to the exclusive jurisdiction of any
State or federal court located within the SOUTHERN DISTRICT of New York OR NEW
YORK COUNTY in connection with any dispute or legal proceeding arising under
this Agreement. Executive hereby waives any objection that it may have to the
conduct of any action or proceeding in any such court based on improper venue or
forum non conveniens, waives personal service of any and all process upon it,
and consents that all service of process may be made by mail or courier service
directed to it at the address designated for it set forth in this Agreement and
that service so made shall be deemed to be completed upon the earlier of actual
receipt or ten (10) days after the same shall have been posted. Each of the
parties hereby waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any litigation directly or
indirectly arising out of, under or in connection with this Agreement. Each of
the parties certifies that no representative, agent or attorney of either party
has represented, expressly or otherwise, that the other would not, in the event
of litigation, seek to enforce the foregoing waivers.
b. The prevailing party in any proceeding brought under this Agreement shall be
reimbursed by the other party for all costs, fees and expenses, including
without limitation, attorneys fees and expenses, incurred by such prevailing
party in preparation for, in the investigation of, and/or otherwise directly or
indirectly in connection with any such proceeding.
7
<PAGE>
12. WAIVER OF BREACH. Any waiver of any breach of the Agreement shall not
be construed to be a continuing waiver or consent to any subsequent breach on
the part either of the Executive or of the Company.
13. NON-ASSIGNMENT; SUCCESSORS. Executive may not assign or in any way
transfer his rights or delegate or in any way transfer his duties or obligations
under this Agreement. This Agreement shall inure to the benefit of the
successors and assigns of the Company and this Agreement shall inure to the
benefit of and be binding upon the heirs, representatives, estate and successors
of the Executive.
14. WITHHOLDING OF TAXES. All payments required to be made by the Company
to the Executive under this Agreement shall be subject to the withholding of
such amounts, if any, relating to tax, and other payroll deductions as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation or as agreed to by Executive and Company.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
16. GOVERNING LAW. Except as set forth in Section 3.f., this Agreement
shall be construed, interpreted and enforced in accordance with the laws of the
State of New York, without giving effect to the conflict of law principles
thereof. The parties have selected a New York choice of law for this Agreement
because the Company is relocating its offices to New York.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement by
the Company and the Executive with respect to the subject matter hereof (except
with respect to the stock options referred to in Section 3.c. which shall not be
governed by this Agreement) and supersedes any and all prior agreements or
understandings between the Executive and the Company with respect to the subject
matter hereof, whether written or oral. This Agreement may be amended or
modified only by a written instrument executed by the Executive and the Company.
18. CAPTIONS. Paragraph captions contained in this Agreement are inserted
only as a matter of convenience and for reference and in no way define, limit or
extend or describe the scope of this Agreement or the intent of any provision
hereof.
19. LEGAL COUNSEL. Each party hereto has retained counsel in connection
with the drafting and negotiation of this Agreement . Each party hereby waives
any right, claim or defense he may have that any provision of this Agreement or
that any provision thereof is unenforceable, illegal, invalid or unconscionable
arising out of or relating to his failure to retain counsel in connection with
this transaction.
8
<PAGE>
20. AGREEMENT NOT TO BE CONSTRUED AGAINST DRAFTSPERSON. This Agreement
shall be construed without giving effect or regard to any principle that a
contract should be construed against its draftsperson.
IN WITNESS WHEREOF, the parties have executed this Agreement as of February
11, 2000.
U.S. WIRELESS DATA, INC.
By:
----------------------------------
Name: Dean Leavitt
Title: President
--------------------------------
Charles I. Leone
9
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<PERIOD-START> JAN-01-2000
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51,000
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