exv10w5



 





EXHIBIT 10.5

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-1

Number of Shares of Common Stock: 1,400,000

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, DKR
Soundshore Oasis Holding 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), One Million Four Hundred Thousand
(1,400,000) 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.




          (b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.01
subject to adjustment as provided herein.




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          (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”):









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.




C= the Exercise Price then in effect for the applicable Warrant Shares at
the time of such exercise.



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          (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 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.



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     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 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




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          (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 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.




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     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 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

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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.



     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.



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     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 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.



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     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 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.




- 10 -









 








          (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.




          (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]




- 11 -









 





     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/ Thomas Rowley
 	 
	 	Name: 	Thomas Rowley 	 
	 	Title: 	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: