EXHIBIT 10.7
EXECUTION COPY
WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED PURSUANT
TO AN AVAILABLE EXEMPTION UNDER THE 1933 ACT IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
U.S. WIRELESS DATA, INC.
Warrant To Purchase Common Stock
Warrant No.: A-3
Number of Shares of Common Stock: 560,000
Date of Issuance: June 1, 2007 (“Issuance Date”)
     U.S. Wireless Data, Inc., a Delaware corporation (the “Company”), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Trinad Capital Master Fund, Ltd. the
registered holder hereof or its permitted assigns (the “Holder”), is entitled,
subject to the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, upon surrender of this Warrant
to Purchase Common Stock (including any Warrants to Purchase Common Stock issued
in exchange, transfer or replacement hereof, the “Warrant”), at any time or
times on or after the date hereof but not after 11:59 p.m., New York time, on
the Expiration Date (as defined below), Five Hundred Sixty Thousand (560,000)
fully paid nonassessable shares of Common Stock (as defined below) (the “Warrant
Shares”). Except as otherwise defined herein, capitalized terms in this Warrant
shall have the meanings set forth in Section 16. This Warrant is issued pursuant
to that certain securities purchase agreement, dated as of June 1, 2007 (the
“Subscription Date”), between the Company, its wholly owned subsidiary, StarVox
Communications, Inc. (“StarVox”), and the investors (the “Buyers”) referred to
therein (the “Securities Purchase Agreement”).
     1. EXERCISE OF WARRANT.
          (a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any day on or after the date hereof,
in whole or in part, by (i) delivery of a written notice, in the form attached
hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to
exercise this Warrant and (ii) (A) payment to the Company of an amount

 

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

 

equal to the applicable Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the “Aggregate Exercise
Price”) in cash or wire transfer of immediately available funds, or (B) by
notifying the Company that this Warrant is being exercised pursuant to a
Cashless Exercise (as defined in Section 1(d)). This Warrant shall be
automatically exercised upon the repayment in full of the outstanding principal
and accrued but unpaid interest under the Debentures (as defined in the
Securities Purchase Agreement) and that Aggregate Exercise Price shall be
deducted from the repayment amount of the Debentures (a “Debenture Repayment
Withholding Exercise”). The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder. Execution and delivery of the
Exercise Notice with respect to fewer than all of the Warrant Shares shall have
the same effect as cancellation of the original Warrant and issuance of a new
Warrant evidencing the right to purchase the remaining number of Warrant Shares.
On or before the second Business Day following the date on which the Company has
received each of the Exercise Notice and the Aggregate Exercise Price (or notice
of a Cashless Exercise or a Debenture Repayment Withholding Exercise) (the
“Exercise Delivery Documents”), the Company shall transmit by facsimile an
acknowledgment of confirmation of receipt of the Exercise Delivery Documents to
the Holder and the Company. On or before the third Business Day following the
date on which the Company has received all of the Exercise Delivery Documents
(the “Share Delivery Date”), the Company shall (X) provided that the Company’s
transfer agent is participating in The Depository Trust Company (“DTC”) Fast
Automated Securities Transfer Program, upon the request of the Holder, credit
such aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Company’s transfer agent is not participating in the DTC Fast Automated
Securities Transfer Program, transfer and dispatch by overnight courier to the
address as specified in the Exercise Notice, certificates for the number of
shares of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon proper and valid delivery of the Exercise Notice and Aggregate
Exercise Price by the record holder of this Warrant as referred to in clause
(ii)(A) above or notification to the Company of a Cashless Exercise referred to
in Section 1(d) or a Debenture Repayment Withholding Exercise referred to in
clause (ii)(C) above, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than five Business
Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional shares of Common Stock are to be transferred upon the
exercise of this Warrant, but rather the number of shares of Common Stock to be
transferred shall be rounded up to the nearest whole number. The Company shall
pay any and all transfer taxes which may be payable with respect to the issuance
and delivery of Warrant Shares upon exercise of this Warrant.

- 2 -

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

 

          (b) Exercise Price. For purposes of this Warrant, “Exercise Price”
means $0.01 subject to adjustment as provided herein.
          (c) Company’s Failure Timely to Deliver Securities. In addition to the
foregoing, if within three (3) Trading Days after the Company’s receipt of the
facsimile copy of an exercise notice the Company shall fail to transfer the
Warrant Shares to the Holder, and if on or after such third Trading Day the
Holder is required to purchase (in an open market transaction or otherwise on
reasonable terms) shares of Common Stock in order to deliver in satisfaction of
a sale initiated by the Holder in anticipation of receiving from the Company the
shares of Common Stock issuable upon such exercise (a “Buy-In”), then the
Company shall upon receipt of reasonably satisfactory documentation evidencing
the Buy-In terms, within three (3) Business Days after the Holder’s request and
in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal
to the Holder’s total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate (and to issue such shares
of Common Stock) resulting from such exercise shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such shares of Common Stock and pay cash to the holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Closing Sale Price on the date
of exercise. Nothing herein shall limit the holder’s right to pursue actual
damages for the Company’s failure to maintain a sufficient number of authorized
shares of Common Stock or to otherwise issue shares of Common Stock upon
exercise of this Warrant in accordance with the terms hereof, and the holder
shall have the right to pursue all remedies available at law or in equity
(including a decree of specific performance and/or injunctive relief).
          (d) Cashless Exercise. Notwithstanding anything contained herein to
the contrary, if a Registration Statement (as defined in the Registration Rights
Agreement) covering the Warrant Shares that are the subject of the Exercise
Notice (the “Unavailable Warrant Shares”) is not available for the resale of
such Unavailable Warrant Shares, the Holder may, in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (a “Cashless Exercise”):
(EQUATION) [f30951f3095101.gif]
For purposes of the foregoing formula:
A= the total number of Warrant Shares with respect to which this Warrant is then
being exercised.
B= the average of the Closing Sale Price of the shares of Common Stock (as
reported by Bloomberg) on the five Trading Days immediately preceding the date
of the Exercise Notice.

- 3 -

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

 

C= the Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.
          (e) Disputes. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly transfer to the Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 12.
          (f) (i) Limitations on Exercises; Beneficial Ownership. The Company
shall not effect the exercise of this Warrant, and the Holder shall not have the
right to exercise this Warrant, to the extent that after giving effect to such
exercise, such Person (together with such Person’s affiliates) would
beneficially own (directly or indirectly through Warrant Shares or otherwise) in
excess of 4.99% of the shares of Common Stock outstanding immediately after
giving effect to such exercise. For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned (directly or
indirectly through Warrant Shares or otherwise) by such Person and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for
purposes of this subsection, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form
10-Q, Current Report on Form 8-K or other public filing with the Securities and
Exchange Commission, as the case may be, (2) a more recent public announcement
by the Company or (3) any other notice by the Company or the Company’s transfer
agent setting forth the number of shares of Common Stock outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the exercise of securities of the Company, including the
Warrants, by the Holder and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. By written notice to
the Company, the Holder may increase or decrease the Maximum Percentage to any
other percentage not in excess of 9.99% specified in such notice; provided that
(i) any such increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of Warrants.
               (ii) Principal Market Regulation. The Company shall not be
obligated to issue any shares of Common Stock upon exercise of this Warrant if
the issuance of such shares of Common Stock would exceed the aggregate number of
shares of Common Stock which the Company may issue upon exercise of the Warrants
without breaching the Company’s obligations under the rules or regulations of
the Principal Market (the “Exchange Cap”), except that such limitation shall not
apply in the event that the Company (A) obtains the approval of its

- 4 -

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

 

stockholders as required by the applicable rules of the Principal Market for
issuances of Common Stock in excess of such amount or (B) obtains a written
opinion from outside counsel to the Company that such approval is not required,
which opinion shall be reasonably satisfactory to the Required Holders.
     Notwithstanding anything in this Warrant to the contrary, the Company shall
be entitled to treat the registered holder of this Warrant as such appears in
its records, as the owner of this Warrant for all purposes; provided that such
records are kept current using a reasonably satisfactory and customary method
intended for such purpose.
     2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows:
          (a) Adjustment upon Subdivision or Combination of shares of Common
Stock. If the Company at any time on or after the Subscription Date subdivides
(by any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision will
be proportionately reduced and the number of Warrant Shares will be
proportionately increased. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
will be proportionately decreased. Any adjustment under this Section 2(a) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
          (b) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 2(b) but not expressly provided for by such
provisions (including, without limitation, the granting of share appreciation
rights, phantom share rights or other rights with equity features, then the
Company’s Board of Directors will make an appropriate adjustment in the Exercise
Price so as to protect the rights of the Holders; provided that no such
adjustment will increase the Exercise Price as otherwise determined pursuant to
this Section 2(b).
     3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make
any dividend or other distribution of its assets (or rights to acquire its
assets) to Holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities not addressed by Section 2, property or options not addressed
by Section 2 by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a
“Distribution”), at any time after the issuance of this Warrant, then, in each
such case:
          (a) any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution shall be reduced, effective as
of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall
be the Closing Bid Price of a share of Common Stock on the trading day

- 5 -

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

 

immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company’s Board of Directors) applicable to one
share of Common Stock, and (ii) the denominator shall be the Closing Bid Price
of the shares of Common Stock on the trading day immediately preceding such
record date; and
          (b) the number of Warrant Shares shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable by the record
holder of this Warrant immediately prior to the close of business on the record
date fixed for the determination of holders of shares of Common Stock entitled
to receive the Distribution multiplied by the reciprocal of the fraction set
forth in the immediately preceding paragraph (a); provided that in the event
that the Distribution is of shares of Common Stock (or common stock) (“Other
Shares of Common Stock”) of a company whose common shares are traded on a
national securities exchange or a national automated quotation system, then the
Holder may elect to receive a warrant to purchase Other Shares of Common Stock
in lieu of an increase in the number of Warrant Shares, the terms of which shall
be identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Stock that would
have been payable to the Holder pursuant to the Distribution had the Holder
exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).
     4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
          (a) Purchase Rights. In addition to any adjustments pursuant to
Section 2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the “Purchase Rights”), then, upon exercise of this Warrant, the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the proportionate number of shares of Common Stock acquirable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
          (b) Fundamental Transactions. If the Company enters into or is party
to a Fundamental Transaction, then the Holder shall have the right either
(A) purchase and receive upon the basis and upon the terms and conditions herein
specified and in lieu of the Warrant Shares immediately theretofore issuable
upon exercise of the Warrant, such shares of stock, securities or assets
(including cash) as would have been issuable or payable with respect to or in
exchange for a number of Warrant Shares equal to the number of Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, had such
Fundamental Transaction not taken place or (B) require the repurchase of this
Warrant for a purchase price, payable in cash within five (5) business days
after such request, equal to the Black Scholes Value of the remaining
unexercised portion of this Warrant on the date of such request. The terms of
any agreement

- 6 -

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

 

pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity and Holder to comply with the
provisions of this Section 4(b). The provisions of this Section shall apply
similarly and equally to successive Fundamental Transactions and shall be
applied without regard to any limitations on the exercise of this Warrant.
     5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action that is required hereunder to
protect the rights of the holder. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally have the Common
Stock fully paid and nonassessable shares of Common Stock transferred to the
Holder upon the exercise of this Warrant, and (iii) shall, so long as any of the
Default Warrants are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued shares of Common Stock, solely for
the purpose of effecting the exercise of the Default Warrants, 120% (or such
lesser amount limited by the SEC) of the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the Default
Warrants then outstanding (without regard to any limitations on exercise).
     6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such person’s capacity as a
Holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the Holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such person’s capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant shares which such
person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company. Notwithstanding this
Section 6, the Company shall provide the Holder with copies of the same notices
and other information given to the shareholders of the Company generally,
contemporaneously with the giving thereof to its shareholders.
     7. REISSUANCE OF WARRANTS.
          (a) Transfer of Warrant. If this Warrant is to be transferred, the
Holder shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being

- 7 -

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

 

transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.
          (b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary
form and, in the case of mutilation, upon surrender and cancellation of this
Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.
          (c) Exchangeable for Multiple Warrants. This Warrant is exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for a new Warrant or Warrants (in accordance with Section 7(d)) representing in
the aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional shares of
Common Stock shall be given.
          (d) Issuance of New Warrants. Whenever the Company is required to
issue a new Warrant pursuant to the terms of this Warrant, such new Warrant
(i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated
on the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of Warrant Shares then underlying this Warrant), (iii) shall have an issuance
date, as indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
     8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder promptly after any adjustment of the exercise
price, setting forth in reasonable detail, and certifying, the calculation of
such adjustment and (ii) at least ten days prior to the date on which the
Company closes its books or takes a record (a) with respect to any dividend or
distribution upon the shares of Common Stock, (b) with respect to any grants,
issuances or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to Holders of shares of Common
Stock or (c) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holder.

- 8 -

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

 

     9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any
Warrant or decrease the number of shares of stock obtainable upon exercise of
any Warrant without the written consent of the Holder. No such amendment shall
be effective to the extent that it applies to fewer than all of the Holders of
the Warrants then outstanding.
     10. SEVERABILITY. If any provision of this Warrant or the application
thereof becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of the terms of this Warrant will
continue in full force and effect.
     11. GOVERNING LAW. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
     12. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
     13. DISPUTE RESOLUTION. In the case of a dispute as to the determination of
the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within three Business Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two Business Days, submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Holder (which approval shall not be
unreasonably withheld) or (b) the disputed arithmetic calculation of the Warrant
Shares to the Company’s independent, outside accountant. The Company shall
cause, at the expense of the losing party, the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than ten Business
Days from the time it receives the disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.
     14. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company

- 9 -

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

 

to comply with the terms of this Warrant. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Holder and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
Holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
     15. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company, except as may otherwise be required
by Section 2(f) of the Securities Purchase Agreement.
     16. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
          (a) “Black-Scholes Value” means the value of this Warrant based on the
Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg
determined as of the day immediately following the public announcement of the
applicable Fundamental Transaction and reflecting (i) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of this Warrant as of such date of request and (ii) an expected volatility equal
to the greater of 60% and the 100-day volatility obtained from the HVT function
on Bloomberg.
          (b) “Bloomberg” means Bloomberg Financial Markets.
          (c) “Business Day” means any day other than Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or required
by law to remain closed.
          (d) “Closing Bid Price” and “Closing Sale Price” means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 5:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant

- 10 -

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

 

to Section 12. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
          (e) “Common Stock” means (i) the Company’s shares of Common Stock,
$0.01 par value per share, and (ii) any share capital into which such Common
Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.
          (f) “Convertible Securities” means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
at the option of the holder thereof for shares of Common Stock.
          (g) “Expiration Date” means the date five (5) years after the Issuance
Date or, if such date falls on a day other than a Business Day or on which
trading does not take place on the Principal Market (a “Holiday”), the next date
that is not a Holiday.
          (h) “Fundamental Transaction” means that (i) the Company shall,
directly or indirectly, in one or more related transactions, (A) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person, or (B) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the Company to another
Person, or (C) allow another Person to make a purchase, tender or exchange offer
that is accepted by such number of holders of outstanding shares of Common Stock
resulting in such Person (together with any affiliates of such Person) holding
more than the 50% of the outstanding Common Stock of the Company following such
purchase, tender or exchange offer, or (D) consummate a stock purchase agreement
or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person
resulting in such other Person (together with any affiliates of such person)
holding more than the 50% of the outstanding Common Stock of the Company
following such stock purchase agreement or other business combination, or (E)
reorganize, recapitalize or reclassify its Common Stock or (ii) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of 50% of the issued and outstanding Common
Stock or the aggregate ordinary voting power represented by issued and
outstanding Common Stock other than current stockholders of the Company.
          (i) “Options” means any rights, warrants or options to subscribe for
or purchase shares of Common Stock or Convertible Securities.
          (j) “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
          (k) “Principal Market” means the principal national securities
exchange or the NASD OTC Bulletin Board upon which the Company’s Common Stock is
then listed or traded.

- 11 -

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

 

          (l) “Registration Rights Agreement” means that certain registration
rights agreement by and among the Company and the Buyers.
          (m) “Required Holders” means the holders of the Warrants representing
at least a majority of shares of Common Stock underlying the Warrants then
outstanding.
[Signature Page Follows]

- 12 -

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

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Stock to be duly executed as of the Issuance Date set out above.

            U.S. WIRELESS DATA, INC.
      By:   /s/ Jay Wolf       Name:  Jay Wolf      Title:  Acting Chief
Executive Officer     

 

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

 

EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
U.S. WIRELESS DATA, INC.
     The undersigned holder hereby exercises the right to purchase
                                         of the shares of Common Stock (“Warrant
Shares”) of U.S. Wireless Data, Inc., a Delaware corporation (the “Company”),
evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
     1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:

         
 
      a “Cash Exercise” with respect to                      Warrant Shares;
and/or
 
       
 
       
 
      a “Cashless Exercise” with respect to                      Warrant Shares;
and/or
 
       

     2. Notwithstanding anything to the contrary contained herein, this Exercise
Notice shall constitute a representation by the Holder of the Warrant submitting
this Exercise Notice that, after giving effect to the exercise provided for in
this Exercise Notice, such Holder (together with its affiliates) will not have
beneficial ownership (together with the beneficial ownership of such Person’s
affiliates) of a number of shares of Common Stock which exceeds the maximum
percentage of the total outstanding shares of Common Stock as determined
pursuant to the provisions of Section 1(f)(i) of the Warrant.
     3. Payment of Exercise Price. In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be
transferred pursuant hereto, the holder shall pay the Aggregate Exercise Price
in the sum of $                                         to the Company in
accordance with the terms of the Warrant.
     4. Delivery of Warrant Shares. The Company shall deliver to the holder
                     Warrant Shares in accordance with the terms of the Warrant.
Date:                                                              ,           
          

                  Name of Registered Holder    
 
       
By:
       
 
 
 
     Name:    
 
       Title: