WARRANT AGREEMENT
WARRANT AGREEMENT dated as of _________, 2003, between
Intelli-Check, Inc., a Delaware corporation (the "Company"), and The Shemano
Group, Inc. (the "Underwriter").
W I T N E S S E T H:
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WHEREAS, the Company proposes to issue to the Underwriter
warrants ("Warrants") to purchase up to an aggregate of 100,000 shares (the
"Shares") of common stock of the Company, par value $.001 per share (the "Common
Stock"); and
WHEREAS, the Underwriter has agreed pursuant to the
underwriting agreement (the "Underwriting Agreement") dated _________, 2003
between the Underwriter and the Company, to act as the underwriter in connection
with the Company's proposed public offering (the "Public Offering") of 1,000,000
shares of Common Stock at an initial public offering price of [$___ per share],
with an option to purchase up to an additional 150,000 shares of Common Stock
for the purpose of covering over-allotments; and
WHEREAS, the Warrants issued pursuant to this Agreement are
being issued by the Company to the Underwriter or its officers, directors or
partners and members of the selling group (the "Selling Group") and/or their
officers, directors or partners, in consideration for, and as part of the
Underwriter's compensation in connection with, the Underwriter acting as the
underwriter pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the foregoing premises,
the payment by the Underwriter to the Company of an aggregate of One Hundred
Dollars and No Cents ($100.00), the agreements herein set forth and other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant. The Underwriter, and/or its designees who are
officers or partners of the Underwriter or members of the Selling Group in
connection with the Public Offering, are hereby granted the right to purchase,
at any time from ________, 2004 until 5:00 P.M., New York City time, on _______,
2008 (the "Warrant Exercise Term"), up to an aggregate of 100,000 Shares at an
initial exercise price (subject to adjustment as provided in Article 8 hereof)
of [$___ per Share] [120% of the public offering price of the Shares].
Notwithstanding the foregoing, the Warrants shall become immediately exercisable
upon a change in control of the Company. Except as set forth herein, the Shares
issuable upon exercise of the Warrants are in all respects identical to the
shares of Common Stock being purchased by the Underwriter for resale to the
public pursuant to the terms and provisions of the Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth as Exhibit A
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attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions and other variations as required or permitted by this
Agreement.
3. Exercise of Warrants.
3.1 Cash Exercise. The Warrants initially are exercisable at a
price of [$___ per Share], payable in cash or by check to the order of the
Company, or any combination of cash or check, subject to adjustment as provided
in Article 8 hereof. Upon surrender of the Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the Shares purchased at the
Company's principal offices, currently located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the Shares so purchased. The purchase rights represented by
each Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Common Stock underlying
the Warrants). In the case of the purchase of less than all the Shares
purchasable under any Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Shares purchasable
thereunder.
3.2 Cashless Exercise. At any time during the Warrant Exercise
Term, the Holder may, at its option, exchange this Warrant, in whole or in part
(a "Warrant Exchange"), into the number of Shares determined in accordance with
this Section 3.2, by surrendering this Warrant at the principal office of the
Company or at the office of its transfer agent, accompanied by a notice stating
(i) such Holder's intent to effect such exchange, (ii) the number of Shares to
be exchanged and (iii) the date on which the Holder requests that such Warrant
Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall take place
on the date specified in the Notice of Exchange or, if later, the date the
Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the Shares issuable upon such Warrant Exchange and, if
applicable, a new Warrant of like tenor evidencing the balance of the Shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within five (5) business days following the Exchange
Date. In connection with any Warrant Exchange, this Warrant shall represent the
right to subscribe for and acquire the number of Shares (rounded to the next
highest integer) equal to (i) the number of Shares specified by the Holder in
its Notice of Exchange (the "Total Number") less (ii) the number of Shares equal
to the quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price (as hereinafter defined) by (B) the current market value
of a share of Common Stock. For purposes of this Section 3.2, the term "current
market value" shall mean the (i) last reported sale price on the last trading
day or, in case no such reported sale takes place on such day, the average last
reported sale price for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or by the Nasdaq National Market or
SmallCap Market (referred to hereinafter as "NASDAQ") if the Common Stock is not
listed or admitted to trading on any national securities exchange but is listed
or quoted upon NASDAQ, or (ii) if the Common Stock is not traded on a national
securities exchange or NASDAQ, the closing bid price on the last trading day,
or, in case no such reported bid takes place on such day, the average closing
bid price for the last three (3) trading days, as furnished by NASDAQ or similar
organization if NASDAQ is no longer reporting such information, or (iii) if the
Common Stock is not listed upon a principal exchange or quoted on NASDAQ, but
quotes for the Common Stock are
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available in the OTC Bulletin Board, or any successor organization, or "pink
sheets" the closing bid price on the last trading day, or, in case no such bid
takes place on such day, the average closing bid price for the last three (3)
trading days as furnished on the OTC Bulletin Board, or any successor
organization, or (iv) in the event the Common Stock is not traded upon a
principal exchange and not listed on NASDAQ and quotes are not available on the
OTC Bulletin Board, or any successor organization, the price as determined in
good faith by resolution of the Board of Directors of the Company, based on the
best information available to it.
4. Issuance of Certificates.
4.1 Issuance. Upon the exercise of the Warrants, the issuance
of certificates for the Shares shall be made forthwith (and in any event within
five (5) business days thereafter) without any charge to the Holder thereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions of
Article 5 hereof) be issued in the name of, or in such names as may be directed
by, the Holder thereof; provided however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of the
Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
4.2 Form of Certificates. The Warrant Certificates and
certificates representing the Shares shall be executed on behalf of the Company
by the manual or facsimile signature of the then present Chairman or Vice
Chairman of the Board of Directors or President or Vice President of the Company
under its corporate seal reproduced thereon, attested to by the manual or
facsimile signature of the then present Secretary or Assistant Secretary of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer. The
Warrant Certificates and, upon exercise of the Warrants, in part or in whole,
certificates representing the Shares shall bear a legend substantially similar
to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel to the Company, stating that an exemption from
registration under such Act is available. "
5. Restriction on Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof, and that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of one
(1) year from the date hereof, pursuant to Corporate Financing Rule 2710, except
to officers or partners (but not directors) of the Underwriter and to any member
of the Selling Group participating in the distribution to the public of the
Common Stock and/or their respective officers or partners (each of
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which is hereinafter referred to as a "Transferee"), in which case such
Transferee shall be entitled to receive a replacement Warrant Certificate in
accordance with Section 9 hereof upon presentment of a properly executed Form of
Assignment in the form set forth on Exhibit A attached hereto and made a part
hereof.
In connection with the transfer or exercise of Warrants, the
Transferee and Holder agree to execute any documents which may be reasonably
required by counsel to the Company to comply with the provisions of the Act (as
defined below) and applicable state securities laws.
6. Price.
6.1 Initial and Adjusted Exercise Price. The initial exercise
price of each Warrant shall be [$____ per Share]. The adjusted exercise price
shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Article 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. The
Warrants and the Shares have not been registered for purposes of public
distribution under the Securities Act of 1933, as amended (the "Act").
7.2 Registrable Securities. As used herein the term
"Registrable Security" means each of the Shares and any shares of Common Stock
issued upon any stock split or stock dividend in respect of such Shares;
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date of
determination, (i) it has been effectively registered under the Act and disposed
of pursuant thereto, (ii) registration under the Act is no longer required for
the immediate public distribution of all or any portion of such security or
(iii) it has ceased to be outstanding. The term "Registrable Securities" means
any and/or all of the securities falling within the foregoing definition of a
"Registrable Security." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure affecting
the Common Stock, such adjustment shall be made in the definition of
"Registrable Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Article 7.
7.3 Piggyback Registration. If, at any time during the seven
years following the date of this Agreement, the Company proposes to prepare and
file any new registration statement or post-effective amendments thereto
covering equity or debt securities of the Company, or any such securities of the
Company held by its shareholders (other than pursuant to a Form S-4 or pursuant
to a Form S-8 or comparable forms) (for purposes of this Article 7,
collectively, a "Registration Statement"), it will, with respect to each such
registration statement and amendment, give written notice of its intention to do
so by registered mail ("Notice"), at least thirty (30) days prior to the filing
of each such Registration Statement, to all holders of the Registrable
Securities. Upon the written request of such a holder (a "Requesting Holder"),
made within twenty (20) days after receipt of the Notice, that the Company
include any of the Requesting Holder's
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Registrable Securities in the proposed Registration Statement, the Company
shall, as to each such Requesting Holder, use its best efforts to effect the
registration under the Act of the Registrable Securities which it has been so
requested to register ("Piggyback Registration"), at the Company's sole cost and
expense and at no cost or expense to the Requesting Holders (other than
underwriting discounts and commissions applicable to the sale of such
Registrable Securities and the fees and disbursements, if any, of counsel or any
advisor to the Requesting Holders), provided that, if such Registration
Statement relates to an underwritten public offering and the managing
underwriter advises the Company and the Requesting Holders that the number of
Registrable Securities which can be included in such offering must be limited,
priority will be given to any securities proposed to be offered and sold by the
Company, and, thereafter, the Requesting Holders will agree to reduce the number
of Registrable Securities included in such Registration Statement on a pro rata
basis with any other selling security holder on whose behalf other securities of
the Company may be included therein for registration. Notwithstanding the
provisions of this Section 7.3, the Company shall have the right at any time
after it shall have given written notice pursuant to this Section 7.3
(irrespective of whether any written request for inclusion of Registrable
Securities shall have already been made) to elect not to file any such proposed
Registration Statement, or to withdraw the same after the filing but prior to
the effective date thereof.
7.4 Covenants of the Company With Respect to Registration. The
Company covenants and agrees as follows:
(a) The Company shall pay all costs, fees and expenses in
connection with all Registration Statements filed pursuant to Sections 7.3
hereof (excluding any underwriting discounts and commissions which may be
incurred in connection with the sale of any Registrable Securities and fees of
counsel or any advisor to the Holders of Registrable Securities) including,
without limitation, the Company's legal and accounting fees, printing expenses,
blue sky fees and expenses and the reasonable fees and expenses (not to exceed
$______ ) of one counsel to the Holders of Registrable Securities.
(b) The Company shall take all reasonably necessary action
which may be required in qualifying or registering the Registrable Securities
included in a Registration Statement for offering and sale under the securities
or blue sky laws of such states as are reasonably requested by the holders of
such securities, provided that the Company shall not be obligated to execute or
file any general consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(c) The Company shall indemnify any holder of the Registrable
Securities to be sold pursuant to any Registration Statement and any underwriter
or person deemed to be an underwriter under the Act and each person, if any, who
controls such holder or underwriter or person deemed to be an underwriter within
the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from such Registration Statement to the same extent and with the same effect as
the provisions pursuant to which the Company has agreed to indemnify the
Underwriter in Section 5 of the Underwriting Agreement and to provide for just
and equitable contribution as set forth in Section 6 of the Underwriting
Agreement.
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(d) Any holder of Registrable Securities to be sold pursuant
to a Registration Statement, and its successors and assigns, shall severally,
and not jointly, indemnify, the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished in writing by or on behalf of such holder, or its
successors or assigns, for specific inclusion in such Registration Statement to
the same extent and with the same effect as the provisions contained in Section
5 of the Underwriting Agreement pursuant to which the Underwriter has agreed to
indemnify the Company and to provide for just and equitable contribution as set
forth in Section 6 of the Underwriting Agreement.
(e) Nothing contained in this Agreement shall be construed as
requiring any Holder to exercise his Warrants prior to the initial filing of any
Registration Statement or the effectiveness thereof.
(f) The Company shall deliver promptly to each holder of
Registrable Securities participating in the offering copies of all
correspondence between the Securities and Exchange Commission (the "Commission")
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the Registration
Statement and permit each holder of Registrable Securities and underwriter to do
such investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the Registration Statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"); provided that each such holder
of Registrable Securities agrees not to disclose such information without the
prior consent of the Company. Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such holder of Registrable Securities
or underwriter shall reasonably request.
(g) If required by the underwriters in connection with an
underwritten offering which includes Registrable Securities pursuant to Article
7, the Company shall enter into an underwriting agreement with one or more
underwriters selected for such underwriting, such agreement shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the underwriters.
If required by the underwriters, the holders of Registrable Securities shall be
parties to any underwriting agreement relating to an underwritten sale of their
Registrable Securities and may, at their option, require that any or all the
representations and warranties of the Company to or for the benefit of such
underwriters shall, to the extent that they may be applicable, also be made to
and for the benefit of such holders of Registrable Securities. Such holders of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters except as they
may relate to such holders of Registrable Securities and their intended methods
of distribution.
(h) In connection with any Registration Statement filed
pursuant to Sections 7.3 hereof, the Company shall furnish, or cause to be
furnished, to each Holder
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participating in any underwritten offering and to each underwriter, a signed
counterpart, addressed to such Holder or underwriter, of (i) an opinion of
counsel to the Company, dated the effective date of such Registration Statement
(and, if such registration includes an underwritten public offering, an opinion
dated the date of the closing under the underwriting agreement), and (ii) a
"cold comfort" letter, dated the effective date of such Registration Statement
(and, if such registration includes an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement), signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such Registration Statement, in each case
covering substantially the same matters with respect to such Registration
Statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(i) The Company shall promptly notify each Holder of
Registrable Securities covered by such Registration Statement, at any time when
a prospectus relating thereto is required to be delivered under the Act, upon
the Company's discovery that, or upon the happening of any event as a result of
which, the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and upon receipt of such notice each Holder shall not effect any sale of
Shares and shall immediately cease utilizing or distributing such prospectus. At
the request of any such Holder, the Company shall promptly prepare and furnish
to such Holder and each underwriter, if any, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made.
8. Adjustments of Exercise Price and Number of Shares.
8.1 Computation of Adjusted Price. In case the Company shall
at any time after the date hereof pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock, then upon such dividend or
distribution the Exercise Price in effect immediately prior to such dividend or
distribution shall forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
multiplied by the Exercise Price in effect immediately prior to such dividend or
distribution, by
(b) the total number of shares of Common Stock
outstanding immediately after such issuance or sale. For the purposes of any
computation to be made in accordance with the provisions of this Section 8.1,
the following provisions shall be applicable: Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the date following
the date fixed for the determination of stockholders entitled to receive such
dividend or other distribution.
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8.2 Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.3 Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Article 8, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full Share, by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
8.4 Reclassification, Consolidation, Merger, etc. In case of
any reclassification or change of the outstanding shares of Common Stock (other
than a change in par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holders shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holders were the owners of the shares of
Common Stock underlying the Warrants immediately prior to any such events at a
price equal to the product of (x) the number of shares issuable upon exercise of
the Warrants and (y) the Exercise Price in effect immediately prior to the
record date for such reclassification, change, consolidation, merger, sale or
conveyance as if such Holders had exercised the Warrants.
8.5 Determination of Outstanding Shares of Common Stock. The
number of shares of Common Stock at any one time outstanding shall include the
aggregate number of shares issued or issuable upon the exercise of options,
rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities (excluding shares issuable upon the exercise of options
and warrants outstanding on the date hereof).
8.6 Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time prior to
the exercise of all Warrants declare a dividend (other than a dividend
consisting solely of shares of Common Stock or a cash dividend or distribution
payable out of current or retained earnings) or otherwise distribute to its
shareholders any monies, assets, property, rights, evidences of indebtedness,
securities (other than shares of Common Stock), whether issued by the Company or
by another person or entity, or any other thing of value, the Holder or Holders
of the unexercised Warrants shall thereafter be entitled to receive, upon the
exercise of such Warrants, in addition to the shares of Common Stock or other
securities receivable upon the exercise thereof, the same monies, property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution. At the time of any such dividend or distribution, the Company
shall make appropriate reserves to ensure the timely performance of the
provisions of this Section 8.6.
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8.7 Subscription Rights for Shares of Common Stock or Other
Securities. In the case the Company or an affiliate of the Company shall at any
time after the date hereof and prior to the exercise of all the Warrants issue
any rights to subscribe for shares of Common Stock or any other securities of
the Company or of such affiliate to all the shareholders of the Company, the
Holders of the unexercised Warrants shall be entitled, in addition to the shares
of Common Stock or other securities receivable upon the exercise of the
Warrants, to receive such rights at the time such rights are distributed to the
other shareholders of the Company.
9. Exchange and Replacement of Warrant Certificates.
9.1 Exchange. Each Warrant Certificate is exchangeable without
expense, upon the surrender hereof by the registered Holder at the principal
executive office of the Company, for a new Warrant Certificate of like tenor and
date representing in the aggregate the right to purchase the same number of
Shares in such denominations as shall be designated by the Holder thereof at the
time of such surrender.
9.2 Replacement. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
any Warrant Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of the Warrants, if mutilated, the Company will make and deliver a
new Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock and shall not be required to issue scrip or pay cash in lieu of fractional
interests, it being the intent of the parties that all fractional interests
shall be eliminated by rounding any fraction up to the nearest whole number of
shares of Common Stock.
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price thereof, all shares of Common Stock issuable
upon such exercise shall be duly and validly issued, fully paid, non-assessable
and not subject to the preemptive rights of any shareholder. As long as the
Warrants shall be outstanding, the Company shall use its best efforts to cause
all shares of Common Stock issuable upon the exercise of the Warrants to be
listed on or quoted by the exchange upon which the Company's Common Stock is
then listed or quoted.
12. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holder or Holders the right
to vote or to consent or to receive notice as a shareholder in respect of any
meetings of shareholders for the election of directors or any other matter, or
as having any rights whatsoever as a shareholder of the Company. If, however, at
any time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable
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otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of current or retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an entirety
shall be proposed; or
(d) a change in control of the Company occurs;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up, sale or change of
control. Such notice shall specify such record date or the date of closing of
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up, sale
or change of control.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, telecopied or mailed by registered or certified mail,
return receipt requested:
(a) If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 3 of this Agreement or to such other address as the Company may
designate by notice to the Holders.
14. Supplements and Amendments. The Company and the Underwriter may
from time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem not to
adversely affect the interests of the Holders of Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company and the Holders inure to the benefit of
their respective successors and assigns hereunder.
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16. Termination. This Agreement shall terminate at the close of
business on _________, 2008. Notwithstanding the foregoing, this Agreement will
terminate on any earlier date when all Warrants have been exercised and all the
Shares issuable upon exercise of the Warrants have been resold to the public;
provided, however, that the provisions of Section 7.4 shall survive such
termination until the close of business on _________, 20__.
17. Governing Law. This Agreement and each Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York with respect to contracts made and to be wholly performed in
said State and for all purposes shall be construed in accordance with the laws
of said State. The Company, the Underwriter and any other registered holder or
holders of the Warrant Certificates (i) agree that any legal Suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (ii) waive
any objection which the they may have now or hereafter to the venue of any such
suit, action or proceeding, and (iii) irrevocably consent to the jurisdiction of
the New York State Supreme Court, County of New York and the United States
District Court for the Southern District of New York in any such suit, action or
procedure. The Company, the Underwriter and any other registered holder or
holders of the Warrant Certificates, Warrants or the Shares further agree to
accept and acknowledge service of any and all process which may be served in any
suit, action or proceeding in the New York State Supreme Court, County of New
York and the United States District Court for the Southern District of New York,
and agree that service of process upon them mailed by certified mail to their
respective addresses shall be deemed in every respect effective service of
process upon them in any such suit, action or proceeding. In the event of
litigation between the parties arising hereunder, the prevailing party shall be
entitled to costs and reasonable attorney's fees.
18. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation, other than the Company and the
Underwriter and any other registered holder or holders of the Warrant
Certificates, Warrants or the Shares, any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Underwriter and any other holder or
holders of the Warrant Certificates, Warrants or the Shares.
19. Preservation of Rights. The Company will not, by amendment of
its articles of incorporation or through any consolidation, merger,
reorganization, transfer of assets, 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 Agreement or the Warrants or the rights represented
hereby or thereby, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such actions as may be necessary
or appropriate in order to protect the rights of the Holders of the Warrants
against dilution or other impairment.
20. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
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[SEAL] INTELLI-CHECK, INC.
By:
------------------------------------------------
Name:
Title:
Attest:
Name:
Title: THE SHEMANO GROUP, INC.
By:
------------------------------------------------
Name:
Title:
118952.00102/11245297v3
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EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, ______________, 2008
No. W- ________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that The Shemano Group, Inc. or
registered assigns is the registered holder of __________ ( ______ ) Warrants to
purchase, at any time from _________, 2004 until 5:00 P.M. New York City time on
_________, 2008 ("Expiration Date") up to ____________ ( ) shares ("Shares") of
fully-paid and nonassessable common stock, par value $.001 per share ("Common
Stock"), of Intelli-Check, Inc., a Delaware corporation (the "Company"), at the
initial exercise price, subject to adjustment in certain events (the "Exercise
Price"), of $ ____ per Share upon surrender of this Warrant Certificate and
payment of the Exercise Price or notice of cashless exchange at an office or
agency of the Company, but subject to the conditions set forth herein and in the
warrant agreement dated as of __________, 2003 ("Warrant Agreement") between the
Company and The Shemano Group, Inc. Payment of the Exercise Price may be made in
cash, by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination of cash or check, or in
shares of Common Stock pursuant to a Notice of Exchange in accordance with
Section 3 of the Warrant Agreement.
No Warrant may be exercised after 5:00 P.M., New York City time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to
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in a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events, the Exercise Price and/or number of the Company's securities issuable
thereupon may, subject to certain conditions, be adjusted. In such event, the
Company will, at the request of the holder, issue a new Warrant Certificate
evidencing the adjustment in the Exercise Price and the number and/or type of
securities issuable upon the exercise of the Warrants; provided, however, that
the failure of the Company to issue such new Warrant Certificates shall not in
any way change, alter, or otherwise impair, the rights of the holder as set
forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed under its corporate seal.
Dated: __________, 2003 INTELLI-CHECK, INC.
By:
------------------------------------------
Name:
Title:
[SEAL]
Attest:
----------------------------------------
Name:
Title:
[FORM OF ELECTION TO PURCHASE]
The undersigned registered owner of this Warrant hereby irrevocably
elects to exercise the right, represented by this Warrant Certificate, to
purchase _______ Shares and herewith tenders in payment for such Shares cash or
a certified or official bank check payable in New York Clearing House Funds to
the order of _____________________ in the amount of $_______ all in accordance
with the terms this Warrant.
The undersigned requests that a certificate for such Shares be
registered in the name of ____________________, whose address is
_____________________ and that such Certificate be delivered to _____________,
whose address is__________________________________________________.
| | The Undersigned hereby elects to exercise the Warrants held by it in
accordance with Section ___ of the Warrant Agreement dated __________, 2003.
Dated: ----------------------------------------------------
Name of Registered Owner
\
----------------------------------------------------
Signature of Registered Owner
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant
Certificate.)
----------------------------------------------------
Street Address
----------------------------------------------------
City, State, Zip
----------------------------------------------------
IRS Identification Number/Social Security Number
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights, title and interest therein of the undersigned under the within
Underwriter's Warrant, with respect to the number of shares of Common stock set
forth below:
NAME OF ASSIGNEE ADDRESS NUMBER OF SHARES
---------------- ------- ----------------
and does hereby irrevocably constitute and appoint __________________________,
Attorney, to transfer the within Warrant Certificate on the books of
Intelli-Check, Inc., maintained for the purpose, with full power of substitution
in the premises. The undersigned understand that compliance with the provisions
of the Underwriter's Warrant is necessary to effect any assignment or transfer.
Dated:
------------------------------------------------------
Signature of Registered Owner
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
------------------------------------------------------
Name of Registered Owner
------------------------------------------------------
IRS Identification Number/Social Security Number