Exhibit 10.1
This Form of Purchase Agreement is Representative of the Purchase Agreement
under which the Selling Security Holders Purchased their Shares of Common Stock
in the Private Placement. See Schedule A attached hereto for a list of the
number of shares purchased by, and warrants issued to, each purchaser.]
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 8th day of July 2005 by and between
Intelli-Check, Inc. (the "Company"), a corporation organized under the laws of
the State of Delaware, with its principal offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and the purchaser whose name and address is set forth
on the signature page hereof (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:
SECTION 1. Authorization of Sale of the Securities. Subject to
the terms and conditions of this Agreement, the Company has authorized the
issuance and sale of up to (i) 275,000 shares (the "Shares") of common stock,
par value $0.001 per share (the "Common Stock"), of the Company and (ii)
warrants (the "Warrants") to purchase up to 110,00 shares of common stock (the
"Warrant Shares") at an initial exercise price of $5.40 per share, subject to
adjustment. The Company reserves the right to increase or decrease the number of
Shares or Warrant Shares sold in this private placement prior to the Closing
Date. The Shares and the Warrants are hereinafter sometimes referred to together
as the "Securities."
SECTION 2. Agreement to Sell and Purchase the Securities. At
the Closing (as defined in Section 3), the Company will issue and sell to the
Purchaser, and the Purchaser will buy from the Company, upon the terms and
conditions hereinafter set forth, the Securities (at the purchase price) shown
below:
Price Per Share
Shares to be Warrant Shares And Warrant Aggregate
Purchased to be Purchased In Dollars Price
------------ --------------- --------------- ---------
61,875 24,750 $4.00 $247,500
The Company proposes to enter into the same form of purchase agreement
with certain other investors (the "Other Purchasers") and expects to complete
sales of the Securities to them. The Purchaser and the Other Purchasers are
hereinafter sometimes collectively referred to as the "Purchasers," and this
Agreement and the agreements executed by the Other Purchasers are hereinafter
sometimes collectively referred to as the "Agreements." The term "Placement
Agent" shall mean JMP Securities LLC.
SECTION 3. Delivery of the Securities at the Closing. The
completion of the purchase and sale of the Securities (the "Closing") shall
occur at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ as soon as practicable and as agreed to by the parties
hereto, within three business days following the execution of the Agreements, or
on such later date or at such different location as the parties shall agree in
writing, but not prior to the date that the conditions for Closing set forth
below have been satisfied or waived by the appropriate party (the "Closing
Date").
At the Closing, the Company shall deliver to the Purchaser one or more
stock certificates representing the number of Shares set forth in Section 2
above and one or more Warrant certificates representing the number of Warrant
Shares set forth in Section 2 above, each registered in the name of the
Purchaser, or, if so indicated on the Securities Certificate Questionnaire
attached hereto as Appendix I, in such nominee name(s) as designated by the
Purchaser, and bearing an appropriate legend referring to the fact that the
Securities were sold in reliance upon the exemption from registration under the
Securities Act of 1933, as amended (the "Securities Act") provided by Section
4(2) thereof and Rule 506 thereunder. The name(s) in which the stock
certificates and the Warrant certificates are to be registered are set forth in
the Securities Certificate Questionnaire attached hereto as Appendix I. The
Company's obligation to complete the purchase and sale of the Securities and
deliver such stock certificate(s) and Warrant certificate(s) to the Purchaser at
the Closing shall be subject to the following conditions, any one or more of
which may be waived by the Company: (a) receipt by the Company of same-day funds
in the full amount of the purchase price for the Securities being purchased
hereunder; (b) completion of the purchases and sales under the Agreements with
the Purchasers; and (c) the accuracy in all material respects of the
representations and warranties made by the Purchasers (as if such
representations and warranties were made on the Closing Date) and the
fulfillment of those undertakings of the Purchasers to be fulfilled prior to the
Closing. The Purchaser's obligation to accept delivery of such stock
certificate(s) and Warrant certificate(s) and to pay for the Securities
evidenced thereby shall be subject to the following conditions, any one or more
of which may be waived by the Purchaser: (a) each of the representations and
warranties of the Company made herein shall be accurate as of the Closing Date;
(b) the delivery to the Purchaser by counsel to the Company of a legal opinion
in a form reasonably satisfactory to counsel to the Placement Agent; and (c) the
fulfillment in all material respects of those undertakings of the Company to be
fulfilled prior to Closing. The Purchaser's obligations hereunder are expressly
not conditioned on the purchase by any or all of the Other Purchasers of the
Securities that they have agreed to purchase from the Company.
SECTION 4. Representations, Warranties and Covenants of the
Company. The Company hereby represents and warrants to, and covenants with, the
Purchaser as follows:
4.1 Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and the Company is qualified to do business as a
foreign corporation in each jurisdiction in which qualification is required,
except where failure to so qualify would not reasonably be expected to have a
Material Adverse Effect (as defined herein). The Company has no subsidiaries.
For purposes of this Agreement, the term "Material Adverse Effect" shall mean a
material adverse effect upon the business, financial condition, properties or
results of operations of the Company.
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4.2 Authorized Capital Stock. Except as disclosed in or
contemplated by the Confidential Private Placement Memorandum, dated June 13,
2005 prepared by the Company, including all exhibits, supplements and amendments
thereto (the "Private Placement Memorandum"), the Company had outstanding the
capital stock set forth under the heading "Capitalization" in the Private
Placement Memorandum as of the date set forth therein; the issued and
outstanding shares of the Company's Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities, and conform in all material respects to the description thereof
contained in the Private Placement Memorandum. Except as disclosed in the
Private Placement Memorandum, the Company does not have outstanding any options
to purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the Company's
stock, stock bonus and other stock plans or arrangements and the options or
other rights granted and exercised thereunder, set forth in the Private
Placement Memorandum accurately and fairly presents all material information
with respect to such plans, arrangements, options and rights.
4.3 Issuance, Sale and Delivery of the Securities. The
Securities and the Warrant Shares have been duly authorized and, when issued,
delivered and paid for in the manner set forth in this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and free and clear of
all pledges, liens, restrictions and encumbrances (other than restrictions on
transfer under state and/or federal securities laws), and will conform in all
material respects to the description thereof set forth in the Private Placement
Memorandum as of the dates set forth therein. No preemptive rights or other
rights to subscribe for or purchase exist with respect to the issuance and sale
of the Securities or the Warrant Shares by the Company pursuant to this
Agreement. No stockholder of the Company has any right (which has not been
waived or has not expired by reason of lapse of time following notification of
the Company's intent to file the registration statement to be filed by it
pursuant to Section 7.1 (the "Registration Statement")) to require the Company
to register the sale of any shares owned by such stockholder under the
Securities Act of 1933, as amended (the "Securities Act") in the Registration
Statement. No further approval or authority of the stockholders or the Board of
Directors of the Company will be required for the issuance and sale of the
Securities or the Warrant Shares to be sold by the Company as contemplated
herein. The Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable pursuant to the Warrants.
4.4 Due Execution, Delivery and Performance of this Agreement.
The Company has full legal right, corporate power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company. The execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions herein contemplated will not violate any provision of the
certificate of incorporation or bylaws of the Company and will not result in the
creation of any lien, charge, security interest or encumbrance upon any assets
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of the Company pursuant to the terms or provisions of, and will not (i) conflict
with, result in the breach or violation of, or constitute, either by itself or
upon notice or the passage of time or both, a default under (A) any agreement,
lease, franchise, license, permit or other instrument to which the Company is a
party or by which the Company or any of its properties may be bound or affected
and in each case which would have a Material Adverse Effect, or (B) to the
Company's knowledge, any statute or any judgment, decree, order, rule or
regulation of any court or any regulatory body, administrative agency or other
governmental body applicable to the Company or any of its properties where such
conflict, breach, violation or default is likely to result in a Material Adverse
Effect. No consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body is required
for the execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement, except for compliance with the blue
sky laws and federal securities laws applicable to the offering of the
Securities. Upon the execution and delivery of this Agreement and the Warrants,
and assuming the valid execution thereof by the Purchaser, this Agreement and
the Warrants will constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Company in
Section 7.3 hereof may be limited by federal or state securities laws or the
public policy underlying such laws.
4.5 Accountants. Each of the firms of Amper, Politziner &
▇▇▇▇▇▇, P.C. and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, each of which has expressed its opinion
with respect to the consolidated financial statements to be included or
incorporated by reference in the Registration Statement and the prospectus which
forms a part thereof (the "Prospectus"), is an independent accountant as
required by the Securities Act and the rules and regulations promulgated
thereunder (the "Rules and Regulations").
4.6 No Defaults. Except as disclosed in the Private Placement
Memorandum, the Company is not in violation or default of any provision of its
certificate of incorporation or bylaws, or in breach of or default with respect
to any provision of any agreement, judgment, decree, order, lease, franchise,
license, permit or other instrument to which it is a party or by which it or any
of its properties are bound which could reasonably be expected to have a
Material Adverse Effect and there does not exist any state of facts which, with
notice or lapse of time or both, would constitute an event of default on the
part of the Company as defined in such documents and which would have a Material
Adverse Effect.
4.7 Contracts. Except as disclosed in the Private Placement
Memorandum, the Company has no material contracts. Any contracts described in
the Private Placement Memorandum that are material to the Company are in full
force and effect on the date hereof; and neither the Company nor, to the
Company's knowledge, is any other party in breach of or default under any of
such contracts which would have a Material Adverse Effect.
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4.8 No Actions. Except as disclosed in the Private Placement
Memorandum, (1) there are no legal or governmental actions, suits or proceedings
pending and (2) to the Company's knowledge, there are no inquiries or
investigations, nor are there any legal or governmental actions, suits, or
proceedings threatened to which the Company is or may be a party or of which
property owned or leased by the Company is or may be the subject, or related to
environmental or discrimination matters, which actions, suits or proceedings,
individually or in the aggregate, might reasonably be expected to have a
Material Adverse Effect; and no labor disturbance by the employees of the
Company exists or, to the Company's knowledge, is imminent which might
reasonably be expected to have a Material Adverse Effect. The Company is not
party to or subject to the provisions of any injunction, judgment, decree or
order of any court, regulatory body, administrative agency or other governmental
body which might reasonably be expected to have a Material Adverse Effect.
4.9 Properties. The Company has good and marketable title to
all properties and assets reflected as owned in the financial statements
included in the Private Placement Memorandum, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except (i) those, if any, reflected in
the financial statements included in the Private Placement Memorandum or
otherwise in the Private Placement Memorandum, or (ii) those which are not
material in amount and do not adversely affect the use of such property by the
Company. The Company holds its leased properties under valid and binding leases,
with such exceptions as are not materially significant in relation to its
business taken as a whole. Except as disclosed in the Private Placement
Memorandum, the Company leases all such properties as are necessary to its
operations as now conducted.
4.10 No Material Change. Since December 31, 2004, and except
as described in the Private Placement Memorandum (i) the Company has not
incurred any material liabilities or obligations, indirect, or contingent, or
entered into any material oral or written agreement or other transaction which
is not in the ordinary course of business or which could reasonably be expected
to result in a material reduction in the future earnings of the Company; (ii)
the Company has not sustained any material loss or interference with its
businesses or properties from fire, flood, windstorm, accident or other calamity
not covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock and the
Company is not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the capital
stock of the Company other than the sale of the Securities hereunder, shares or
options issued pursuant to employee equity incentive plans or purchase plans
approved by the Company's Board of Directors and repurchases of shares or
options pursuant to repurchase plans already approved by the Company's Board of
Directors, or indebtedness not incurred in the ordinary course of business that
is material to the Company; and (v) there has not been any other event which has
caused a Material Adverse Effect.
4.11 Intellectual Property. Except as disclosed in the Private
Placement Memorandum: (i) the Company owns or has obtained valid and enforceable
licenses or options for the inventions, patent applications, patents, trademarks
(both registered and unregistered), trade names, copyrights and trade secrets
necessary for the conduct of the Company's business as currently conducted
(collectively, the "Intellectual Property"); and (ii) (a) there are no third
5
parties who have any ownership rights to any Intellectual Property that is owned
by, or has been licensed to, the Company for the products described in the
Private Placement Memorandum that would preclude the Company from conducting its
business as currently conducted and have a Material Adverse Effect, except for
the ownership rights of the owners of the Intellectual Property licensed or
optioned by the Company; (b) there is no pending or, to the Company's knowledge,
threatened action, suit, proceeding or claim by others challenging the rights of
the Company in or to any Intellectual Property owned, licensed or optioned by
the Company, other than claims which would not reasonably be expected to have a
Material Adverse Effect; (c) there is no pending or, to the Company's knowledge,
threatened action, suit, proceeding or claim by others challenging the validity
or scope of any Intellectual Property owned, licensed or optioned by the
Company, other than non-material actions, suits, proceedings and claims; and (d)
there is no pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others that the Company infringes or otherwise violates
any patent, trademark, copyright, trade secret or other proprietary right of
others, other than non-material actions, suits, proceedings and claims.
4.12 Compliance. The Company has not been advised, nor does
the Company have reason to believe, that it is not conducting its business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting its business, including, without limitation, all
applicable local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not have a Material Adverse Effect.
4.13 Taxes. The Company has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been or might be asserted or threatened against it which might reasonably be
expected to have a Material Adverse Effect.
4.14 Transfer Taxes. On the Closing Date, all stock transfer
or other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to the
Purchaser hereunder will be, or will have been, fully paid or provided for by
the Company and all laws imposing such taxes will be or will have been complied
with.
4.15 Investment Company. The Company is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for an investment company, within the meaning of the Investment Company Act of
1940, as amended.
4.16 Offering Materials. The Company has not distributed and
will not distribute prior to the Closing Date any offering material in
connection with the offering and sale of the Securities other than the Private
Placement Memorandum or any amendment or supplement thereto. Neither the Company
nor any person acting on its behalf has in the past or will hereafter take any
action independent of the Placement Agent to sell, offer for sale or solicit
offers to buy any securities of the Company which would subject the offer,
issuance or sale of the Securities, as contemplated by this Agreement, to the
registration requirements of Section 5 of the Securities Act.
6
4.17 Insurance. The Company maintains insurance of the types
and in the amounts that the Company reasonably believes is adequate for its
business, including, but not limited to, insurance covering all real and
personal property leased by the Company against theft, damage, destruction, acts
of vandalism and all other risks customarily insured against by similarly
situated companies, all of which insurance is in full force and effect.
4.18 Additional Information. The information contained in the
following documents, which the Placement Agent has furnished to the Purchaser,
or will furnish prior to the Closing, does not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading, as of their respective final dates:
(a) the Company's Annual Report on Form 10-K for the year
ended December 31, 2004;
(b) the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005;
(c) the Company's Definitive Proxy Statement on Schedule 14A
filed on May 13, 2005;
(d) the Private Placement Memorandum, including all addenda
and exhibits thereto (other than the Purchase Agreement and the Appendices); and
(e) all other documents, if any, filed by the Company with the
Commission since December 31, 2004 pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
4.19 Price of Common Stock. The Company has not taken, and
will not take, directly or indirectly, any action designed to cause or result
in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of the
Common Stock to facilitate the sale or resale of the Securities.
4.20 Corporate Legal Opinion. As a condition to the
Purchasers' obligation to purchase the Securities, legal counsel to the Company
will deliver one or more legal opinions to the Placement Agent in a form
reasonably satisfactory to the Placement Agent and its counsel. Such opinions
also shall state that each of the Purchasers may rely thereon as though it were
addressed directly to such Purchaser.
4.21 Certificate. At the Closing, the Company will deliver to
Purchaser a certificate executed by the chief executive officer and the chief
financial or accounting officer of the Company, dated as of the Closing Date, in
form and substance reasonably satisfactory to the Purchasers, to the effect that
the representations and warranties of the Company set forth in this Section 4
are true and correct as of the date of this Agreement and as of the Closing Date
and that the Company has complied with all the agreements and satisfied all the
conditions herein on its part to be performed or satisfied on or prior to such
Closing Date.
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4.22 Reporting Company; Form S-3. The Company is subject to
the reporting requirements of the Exchange Act and has filed all reports
required thereby. The Company is eligible to register the Shares and the Warrant
Shares for resale by the Purchaser on a registration statement on Form S-3 under
the Securities Act. There exist no facts or circumstances (including without
limitation any required approvals or waivers or any circumstances that may delay
or prevent the obtaining of accountant's consents) that reasonably could be
expected to prohibit or delay the preparation and filing of a registration
statement on Form S-3 that will be available for the resale of the Shares and
the Warrant Shares by the Purchaser.
4.23 Use of Proceeds. The Company shall use the proceeds from
the sale of the Securities as described under "Use of Proceeds" in the Private
Placement Memorandum.
4.24 Non-Public Information. Neither the Company nor, to the
Company's knowledge, any person acting on behalf of the Company, has provided
the Purchaser with any information that the Company believes constitutes
material, non-public information, unless the Purchaser had first executed a
written non-disclosure agreement. On the Closing Date, the Company shall issue
the press release described in Section 7.1(h) hereof. On or before 9:00 a.m.,
New York City time, on the first business day after the Closing Date, the
Company shall file a Current Report on Form 8-K describing the material terms of
the transactions contemplated by this Agreement, and attaching as an exhibit to
such Form 8-K a form of this Agreement and a form of Warrant (including such
exhibits, the "8-K Filing"). The Company shall not, and shall use its best
efforts to cause each of its officers, directors, employees and agents not to,
provide the Purchaser with any material nonpublic information regarding the
Company from and after the filing of the 8-K Filing without the express written
consent of the Purchaser. The Company understands and confirms that the
Purchaser will rely on the representations and covenants set forth in this
section in effecting transactions in securities of the Company.
4.25 Use of Purchaser Name. Except as may be required by
applicable law or regulation, the Company shall not use the Purchaser's name or
the name of any of its affiliates in any advertisement, announcement, press
release or other similar public communication unless it has received the prior
written consent of the Purchaser for the specific use contemplated or as
otherwise required by applicable law or regulation.
4.26 Related Party Transactions. No transaction has occurred
between or among the Company and its affiliates, officers or directors or any
affiliate or affiliates of any such officer or director that is required to have
been described under applicable securities laws in its Exchange Act filings and
is not so described in such filings.
8
4.27 Off-Balance Sheet Arrangements. There is no transaction,
arrangement or other relationship between the Company and an unconsolidated or
other off-balance sheet entity that is required to be disclosed by the Company
in its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect. There are no such
transactions, arrangements or other relationships with the Company that may
create contingencies or liabilities that are not otherwise disclosed by the
Company in its Exchange Act filings.
4.28 Governmental Permits, Etc. The Company has all
franchises, licenses, certificates and other authorizations from such federal,
state or local government or governmental agency, department or body that are
currently required for the operation of the business of the Company as currently
conducted, except where the failure to posses currently such franchises,
licenses, certificates and other authorizations is not reasonably expected to
have a Material Adverse Effect. The Company has not received any notice of
proceedings relating to the revocation or modification of any such permit which,
if the subject of an unfavorable decision, ruling or finding, could reasonably
be expected to have a Material Adverse Effect.
4.29 Financial Statements. The financial statements of the
Company and the related notes contained in its Exchange Act filings present
fairly, in accordance with generally accepted accounting principles, the
financial position of the Company as of the dates indicated, and the results of
its operations, cash flows and the changes in stockholders' equity for the
periods therein specified, subject, in the case of unaudited financial
statements for interim periods, to normal year-end audit adjustments. Such
financial statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified, except that unaudited financial
statements may not contain all footnotes required by generally accepted
accounting principles.
4.30 Listing. The Company has not, in the two years preceding
the date hereof, received any written notice from the American Stock Exchange,
any stock exchange, market or trading facility on which the Common Stock is or
has been listed (or on which it has been quoted) to the effect that the Company
is not in compliance with the listing or maintenance requirements of such
exchange, market or trading facility. The Company shall comply with all
requirements of the American Stock Exchange with respect to the issuance of the
Shares and the Warrant Shares and shall use its best efforts to have the Shares
and the Warrant Shares listed on the American Stock Exchange on or before the
first date that the Registration Statement is declared effective by the
Commission. The Common Stock is presently listed on the American Stock Exchange.
4.31 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act; Accounting Controls. The Company is,
and at the Closing Date will be, in material compliance with all provisions of
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 which are applicable to it. The Company maintains
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
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4.32 ERISA Compliance. Each material employee benefit plan,
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), that is maintained, administered or
contributed to by the Company or any of its affiliates for employees or former
employees of the Company has been maintained in material compliance with its
terms and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Internal Revenue Code of
1986, as amended (the "Code"); no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred which would
result in a material liability to the Company with respect to any such plan
excluding transactions effected pursuant to a statutory or administrative
exemption; and for each such plan that is subject to the funding rules of
Section 412 of the Code or Section 302 of ERISA, no "accumulated funding
deficiency" as defined in Section 412 of the Code has been incurred, whether or
not waived, and the fair market value of the assets of each such plan (excluding
for these purposes accrued but unpaid contributions) exceeds the present value
of all benefits accrued under such plan determined using reasonable actuarial
assumptions.
4.33 Foreign Corrupt Practices. Neither the Company nor, to
the knowledge of the Company, any director, officer, agent, employee or other
Person acting on behalf of the Company has, in the course of its actions for, or
on behalf of, the Company (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
4.34 Employee Relations. (a) The Company is not a party to any
collective bargaining agreement or employs any member of a union. The Company
believes that its relations with its employees are good. No executive officer of
the Company (as defined in Rule 501(f) of the Securities Act) has notified the
Company that such officer intends to leave the Company or otherwise terminate
such officer's employment with the Company. No executive officer of the Company,
to the knowledge of the Company, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company to any liability
with respect to any of the foregoing matters.
4.35 Environmental Matters. There has been no storage,
disposal, generation, manufacture, transportation, handling or treatment of
toxic wastes, hazardous wastes or hazardous substances by the Company (or, to
the knowledge of the Company, any of its predecessors in interest) at, upon or
from any of the property now or previously owned or leased by the Company in
violation of any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action under any applicable
law, ordinance, rule, regulation, order, judgment, decree or permit; there has
been no material spill, discharge, leak, emission, injection, escape, dumping or
release of any kind into such property or into the environment surrounding such
property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or
hazardous substances due to or caused by the Company or with respect to which
the Company has knowledge; the terms "hazardous wastes", "toxic wastes",
"hazardous substances", and "medical wastes" shall have the meanings specified
in any applicable local, state, federal and foreign laws or regulations with
respect to environmental protection.
10
4.36 Equal Treatment of Purchasers. Each Purchaser has entered
into the Agreement on materially equivalent terms. No consideration shall be
offered or paid to any person to amend or consent to a waiver or modification of
any provision of any of this Agreement or the Warrant unless the same
consideration is also offered to all of the parties to the Agreements. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
SECTION 5. Representations, Warranties and Covenants of the
Purchaser. (a) The Purchaser represents and warrants to, and covenants with, the
Company that: (i) the Purchaser is knowledgeable, sophisticated and experienced
in making, and is qualified to make, decisions with respect to investments in
shares representing an investment decision like that involved in the purchase of
the Securities, including investments in securities issued by the Company and
comparable entities, and has had the opportunity to request, receive, review and
consider all information it deems relevant in making an informed decision to
purchase the Securities; (ii) the Purchaser is acquiring the Securities set
forth in Section 2 above in the ordinary course of its business and for its own
account for investment only and with no present intention of distributing any of
such Securities or any arrangement or understanding with any other persons
regarding the distribution of such Securities (this representation and warranty
not limiting the Purchaser's right to sell pursuant to the Registration
Statement or in compliance with the Securities Act and the Rules and
Regulations, or, other than with respect to any claims arising out of a breach
of this representation and warranty, the Purchaser's right to indemnification
under Section 7.3); (iii) the Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Securities, nor
will the Purchaser engage in any short sale that results in a disposition of any
of the Securities by the Purchaser, except in compliance with the Securities Act
and the Rules and Regulations and any applicable state securities laws; (iv) the
Purchaser has completed or caused to be completed the Registration Statement
Questionnaire attached hereto as part of Appendix I, for use in preparation of
the Registration Statement, and the answers thereto are true and correct as of
the date hereof and will be true and correct as of the effective date of the
Registration Statement and the Purchaser will notify the Company immediately of
any material change in any such information provided in the Registration
Statement Questionnaire until such time as the Purchaser has sold all of its
Shares and Warrant Shares or until the Company is no longer required to keep the
Registration Statement effective; (v) the Purchaser has, in connection with its
decision to purchase the Securities set forth in Section 2 above, relied solely
upon the Private Placement Memorandum and the documents included therein or
incorporated by reference and the representations and warranties of the Company
contained herein; (vi) the Purchaser has had an opportunity to discuss this
investment with representatives of the Company and ask questions of them; (vii)
the Purchaser is an "accredited investor" within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act ; and (vii) the Purchaser
agrees to notify the Company immediately of any change in any of the foregoing
information until such time as the Purchaser has sold all of its Shares and
Warrant Shares or the Company is no longer required to keep the Registration
Statement effective.
11
(b) The Purchaser understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of the Securities Act, the Rules and Regulations and
state securities laws and that the Company is relying upon the truth and
accuracy of, and the Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Securities.
(c) For the benefit of the Company, the Purchaser previously
agreed orally or in writing with the Placement Agent to keep confidential all
information concerning this private placement. The Purchaser understands that
the information contained in the Private Placement Memorandum is strictly
confidential and proprietary to the Company and has been prepared from the
Company's publicly available documents and other information and is being
submitted to the Purchaser solely for such Purchaser's confidential use. The
Purchaser agrees to use the information contained in the Private Placement
Memorandum for the sole purpose of evaluating a possible investment in the
Securities and the Purchaser hereby acknowledges that it is prohibited from
reproducing or distributing the Private Placement Memorandum, this Agreement, or
any other offering materials or other information provided by the Company in
connection with the Purchaser's consideration of its investment in the Company,
in whole or in part, or divulging or discussing any of their contents, except to
its financial, investment or legal advisors in connection with its proposed
investment in the Securities. Further, the Purchaser understands that the
existence and nature of all conversations and presentations, if any, regarding
the Company and this offering must be kept strictly confidential. The Purchaser
understands that the federal securities laws impose restrictions on trading
based on information regarding this offering. In addition, the Purchaser hereby
acknowledges that unauthorized disclosure of information regarding this offering
may result in a violation of Regulation FD. This obligation will terminate upon
the filing by the Company of a press release or press releases or a Current
Report on Form 8-K describing this offering. In addition to the above, the
Purchaser shall maintain in confidence the receipt and content of any notice of
a Suspension (as defined in Section 5(h) below). The foregoing agreements shall
not apply to any information that is or becomes publicly available through no
fault of the Purchaser, or that the Purchaser is legally required to disclose;
provided, however, that if the Purchaser is requested or ordered to disclose any
such information pursuant to any court or other government order or any other
applicable legal procedure, it shall provide the Company with prompt notice of
any such request or order in time sufficient to enable the Company to seek an
appropriate protective order.
12
(d) The Purchaser understands that its investment in the
Securities involves a significant degree of risk, including a risk of total loss
of the Purchaser's investment, and the Purchaser has full cognizance of and
understands all of the risk factors related to the Purchaser's purchase of the
Securities, including, but not limited to, those set forth under the caption
"Risk Factors" in the Private Placement Memorandum. The Purchaser understands
that the market price of the Common Stock has been volatile and that no
representation is being made as to the future value of the Common Stock. The
Purchaser has the knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of an investment in the
Securities and has the ability to bear the economic risks of an investment in
the Securities.
(e) The Purchaser understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.
(f) The Purchaser understands that, (i) at all times the
Warrants and (ii) until such time as the Registration Statement has been
declared effective and the Shares and the Warrant Shares may be sold pursuant to
subsection (h) below or pursuant to Rule 144 under the Securities Act without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, the Securities and the Warrant Shares will bear a
restrictive legend in substantially the following form:
"The securities evidenced by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or the securities laws
of any state or other jurisdiction. The Shares may not
be offered, sold, pledged or otherwise transferred
except (1) pursuant to an exemption from registration
under the Securities Act or (2) pursuant to an effective
registration statement under the Securities Act, in each
case in accordance with all applicable securities laws
of the states and other jurisdictions, and in the case
of a transaction exempt from registration, unless the
Company has received an opinion of counsel reasonably
satisfactory to it that such transaction does not
require registration under the Securities Act and such
other applicable laws."
(g) The Purchaser's principal executive offices are in the
jurisdiction set forth immediately below the Purchaser's name on the signature
pages hereto.
(h) The Purchaser hereby covenants with the Company not to
make any sale of the Shares or the Warrant Shares under the Registration
Statement without complying with the provisions of this Agreement and without
effectively causing the prospectus delivery requirement under the Securities Act
to be satisfied, and the Purchaser acknowledges and agrees that such Shares and
Warrant Shares are not transferable on the books of the Company without
13
registration unless the Company has received an opinion of counsel reasonably
satisfactory to it that such transaction does not require registration under the
Securities Act and such other applicable laws or the certificate submitted to
the transfer agent evidencing the Shares or the Warrant Shares is accompanied by
a separate Purchaser's Certificate of Subsequent Sale: (i) in the form of
Appendix II hereto, (ii) executed by an officer of, or other authorized person
designated by, the Purchaser, and (iii) to the effect that (A) the Shares or the
Warrant Shares have been sold in accordance with the Registration Statement, the
Securities Act and any applicable state securities or blue sky laws and (B) the
requirement of delivering a current prospectus has been satisfied. The Purchaser
will notify the Company promptly after the sale of all of its Shares and Warrant
Shares. The Purchaser acknowledges that there may occasionally be times when the
Company must suspend the use of the Prospectus forming a part of the
Registration Statement (a "Suspension") until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. The Purchaser hereby
covenants that it will not sell any Shares or Warrant Shares pursuant to said
Prospectus during the period commencing at the time at which the Company gives
the Purchaser written notice of the Suspension of the use of said Prospectus and
ending at the time the Company gives the Purchaser written notice that the
Purchaser may thereafter effect sales pursuant to said Prospectus.
Notwithstanding the foregoing, the Company agrees that no Suspension shall be
for a period of longer than 30 consecutive days, and no Suspension shall be for
a period of an aggregate in any 365-day period of longer than 45 days. In the
event that a Suspension is for a period of longer than 30 consecutive days or
for a period of an aggregate in any 365-day period of longer than 60 days, the
Company shall pay to each Purchaser an amount, as liquidated damages and not as
a penalty, equal to one half of one percent (0.5%) per month (pro rata on a 30
day basis) for the first thirty (30) days, and thereafter, one percent (1.5%)
per month (pro rata on a 30 day basis), of the aggregate purchase price paid by
such Purchaser pursuant to this Agreement for any Securities then held by such
Purchaser until the Suspension is cured. Such liquidated damages shall be
payable monthly in cash.
(i) The Purchaser further represents and warrants to, and
covenants with, the Company that (i) the Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, (ii) the making and
performance of this Agreement by the Purchaser and the consummation of the
transactions herein contemplated will not violate any provision of the
organizational documents of the Purchaser or conflict with, result in the breach
or violation of, or constitute, either by itself or upon notice or the passage
of time or both, a default under any material agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument to which
the Purchaser is a party, or any statute or any authorization, judgment, decree,
order, rule or regulation of any court or any regulatory body, administrative
agency or other governmental body applicable to the Purchaser, (iii) no consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required on the part of the
Purchaser for the execution and delivery of this Agreement or the consummation
of the transactions contemplated by this Agreement, (iv) upon the execution and
delivery of this Agreement, this Agreement shall constitute a legal, valid and
binding obligation of the Purchaser, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except to the extent enforcement of the
indemnification provisions, set forth in Section 7.3 of this Agreement, may be
limited by federal or state securities laws or the public policy underlying such
laws, and (v) there is not in effect any order enjoining or restraining the
Purchaser from entering into or engaging in any of the transactions contemplated
by this Agreement.
14
SECTION 6. Survival of Representations, Warranties and
Agreements. Notwithstanding any investigation made by any party to this
Agreement or by the Placement Agent, all covenants, agreements, representations
and warranties made by the Company and the Purchaser herein and in the
certificates for the Securities delivered pursuant hereto shall survive the
execution of this Agreement, the delivery to the Purchaser of the Securities
being purchased and the payment therefore.
SECTION 7. Registration of the Shares and the Warrant Shares;
Compliance with the Securities Act.
7.1 Registration Procedures and Expenses. The Company shall:
(a) as soon as reasonably practicable, but in no event later
than ten (10) days following the Closing Date, prepare and file with the
Commission the Registration Statement on Form S-3 relating to the sale of the
Shares and the Warrant Shares by the Purchaser and the Other Purchasers from
time to time on the American Stock Exchange or the facilities of any national
securities exchange on which the Common Stock is then traded or in
privately-negotiated transactions;
(b) use its best efforts, subject to receipt of necessary
information from the Purchasers, to cause the Commission to declare the
Registration Statement effective within forty-five (45) days after the Closing
Date or, in the event of a review of the Registration Statement by the
Commission, within sixty (60) days after the Closing Date;
(c) use its best efforts to promptly prepare and file with the
Commission such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary to keep the
Registration Statement effective until the earliest of (i) two years after the
effective date of the Registration Statement, or (ii) such time as the Shares
and the Warrant Shares become eligible for resale by non-affiliates pursuant to
Rule 144(k) under the Securities Act of 1933, as amended;
(d) furnish to the Purchaser with respect to the Shares and
the Warrant Shares registered under the Registration Statement (and to each
underwriter, if any, of such Shares or Warrant Shares) such number of copies of
prospectuses and such other documents as the Purchaser may reasonably request,
in order to facilitate the public sale or other disposition of all or any of the
Shares and the Warrant Shares by the Purchaser;
(e) file documents required of the Company for normal Blue Sky
clearance in states specified in writing by the Purchaser; provided, however,
that the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;
15
(f) bear all expenses in connection with the procedures in
paragraphs (a) through (e) of this Section 7.1 and the registration of the
Shares and the Warrant Shares pursuant to the Registration Statement, other than
fees and expenses, if any, of counsel or other advisers to the Purchaser or the
Other Purchasers or underwriting discounts, brokerage fees and commissions
incurred by the Purchaser or the Other Purchasers, if any;
(g) file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to the Purchaser promptly after
filing;
(h) issue a press release describing the transactions
contemplated by this Agreement on the Closing Date; and
(i) make available, while the Registration Statement is
effective and available for resale, its Chief Executive Officer, Chief Financial
Officer, and Chief Operating Officer for questions regarding information which
the Purchaser may reasonably request in order to fulfill any due diligence
obligation on its part.
The Company understands that the Purchaser disclaims being an underwriter,
but the Purchaser being deemed an underwriter shall not relieve the Company of
any obligations it has hereunder. A questionnaire related thereto to be
completed by the Purchaser is attached hereto as Appendix I.
7.2 Transfer of Shares and Warrant Shares After Registration.
The Purchaser agrees that it will not effect any disposition of the Securities
or the Warrant Shares or its right to purchase the Securities or the Warrant
Shares that would constitute a sale within the meaning of the Securities Act or
any applicable state securities laws, except as contemplated in the Registration
Statement referred to in Section 7.1 or as otherwise permitted by law, and that
it will promptly notify the Company of any changes in the information set forth
in the Registration Statement regarding the Purchaser or its plan of
distribution.
7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term "Purchaser/Affiliate" shall mean any affiliate of
the Purchaser, including a transferee who is an affiliate of
the Purchaser, and any person who controls the Purchaser or
any affiliate of the Purchaser within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act;
and
(ii) the term "Registration Statement" shall include any
preliminary prospectus, final prospectus, exhibit, supplement
or amendment included in or relating to, and any document
incorporated by reference in, the Registration Statement
referred to in Section 7.1.
(a) The Company agrees to indemnify and hold harmless each
Purchaser and each Purchaser/Affiliate against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Purchaser or
Purchaser/Affiliate may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law
16
or otherwise (including in settlement of any litigation, if such settlement is
effected with the prior written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, including the Prospectus, financial statements and schedules, and all
other documents filed as a part thereof, as amended at the time of effectiveness
of the Registration Statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A,
or pursuant to Rule 434, of the Rules and Regulations, or the Prospectus, in the
form first filed with the Commission pursuant to Rule 424(b) of the Regulations,
or filed as part of the Registration Statement at the time of effectiveness if
no Rule 424(b) filing is required, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state in any
of them a material fact required to be stated therein or necessary to make the
statements in any of them, in light of the circumstances under which they were
made, not misleading, or arise out of or are based in whole or in part on any
inaccuracy in the representations or warranties of the Company contained in this
Agreement, or any failure of the Company to perform its obligations hereunder or
under law, and will promptly reimburse each such Purchaser and each such
Purchaser/Affiliate for any legal and other expenses as such expenses are
reasonably incurred by such Purchaser or such Purchaser/Affiliate in connection
with investigating, defending or preparing to defend, settling, compromising or
paying any such loss, claim, damage, liability, expense or action not to exceed
the proceeds from the purchase and sale of the Securities paid by such
Purchaser; provided, however, that the Company will not be liable in any such
case to the extent, but only to the extent, that any such loss, claim, damage,
liability or expense arises out of or is based upon (i) an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Purchaser expressly for use therein, or (ii) the
failure of such Purchaser to comply with the covenants and agreements contained
in Sections 5 or 7.2, or (iii) the inaccuracy of any representation or warranty
made by such Purchaser herein or (iv) any statement or omission in any
Prospectus that is corrected in any subsequent Prospectus that was delivered to
the Purchaser prior to the pertinent sale or sales by the Purchaser.
(b) Each Purchaser will severally indemnify and hold harmless
the Company, each of its directors, each of its executive officers, including
such officers who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, against any losses, claims, damages,
liabilities or expenses to which the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (i) any failure to comply with the covenants and agreements
contained in Sections 5 or 7.2 hereof, or (ii) the inaccuracy of any
representation or warranty made by such Purchaser herein, or (iii) any untrue or
alleged untrue statement of any material fact contained in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
17
omission was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Purchaser expressly
for use therein, and will reimburse the Company, each of its directors, each of
its officers who signed the Registration Statement or controlling person for any
legal and other expense reasonably incurred by the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. Notwithstanding anything hereon contained to the contrary, in no event
shall the liability of any Purchaser be greater in amount than the dollar amount
of the net proceeds received by such Purchaser upon the sale of the Shares
giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party under this
Section 7.3 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 7.3, promptly notify the indemnifying
party in writing thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party for contribution or otherwise under the indemnity agreement contained in
this Section 7.3 to the extent it is not prejudiced as a result of such failure.
In case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying party,
the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded, based on an opinion of
counsel reasonably satisfactory to the indemnifying party, that there may be a
conflict of interest between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election to assume
the defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 7.3 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, reasonably
satisfactory to such indemnifying party, representing all of the indemnified
parties who are parties to such action) or (ii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the reasonable fees and expenses
of counsel shall be at the expense of the indemnifying party. In no event shall
any indemnifying party be liable in respect of any amounts paid in settlement of
any action unless the indemnifying party shall have approved in writing the
terms of such settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnification could have been sought hereunder by such indemnified party from
all liability on claims that are the subject matter of such proceeding.
18
(d) If the indemnification provided for in this Section 7.3 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) of this Section 7.3 in respect to any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred to
herein (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Purchaser from the private placement of Common
Stock hereunder or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but the relative
fault of the Company and the Purchaser in connection with the statements or
omissions or inaccuracies in the representations and warranties in this
Agreement and/or the Registration Statement which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company on the one hand and each Purchaser on the other shall be deemed to be in
the same proportion as the amount paid by such Purchaser to the Company pursuant
to this Agreement for the Securities purchased by such Purchaser that were sold
pursuant to the Registration Statement bears to the difference (the
"Difference") between the amount such Purchaser paid for the Shares that were
sold pursuant to the Registration Statement and the amount received by such
Purchaser from such sale. The relative fault of the Company, on the one hand,
and each Purchaser on the other shall be determined by reference to, among other
things, whether the untrue or alleged statement of a material fact or the
omission or alleged omission to state a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by such Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in paragraph (c) of this
Section 7.3, any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim. The
provisions set forth in paragraph (c) of this Section 7.3 with respect to the
notice of the threat or commencement of any threat or action shall apply if a
claim for contribution is to be made under this paragraph (d); provided,
however, that no additional notice shall be required with respect to any threat
or action for which notice has been given under paragraph (c) for purposes of
indemnification. The Company and each Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 7.3 were determined
solely by pro rata allocation (even if the Purchaser were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 7.3, no Purchaser shall be
required to contribute any amount in excess of the amount by which the
Difference exceeds the amount of any damages that such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchasers' obligations to contribute pursuant to this
Section 7.3 are several and not joint.
19
7.4 Termination of Conditions and Obligations. The
restrictions imposed by Section 5 or this Section 7 upon the transferability of
the Securities and the Warrant Shares shall cease and terminate as to any
particular number of the Shares or Warrant Shares upon the passage of two years
from the effective date of the Registration Statement covering such Shares and
Warrant Shares or at such time as an opinion of counsel satisfactory in form and
substance to the Company shall have been rendered to the effect that such
conditions are not necessary in order to comply with the Securities Act.
7.5 Information Available. So long as the Registration
Statement is effective covering the resale of Shares and Warrant Shares owned by
the Purchaser, the Company will furnish to the Purchaser:
(a) other than any such reports or communications filed with
the Commission pursuant to the Commission's ▇▇▇▇▇ system, as soon as practicable
after available (but in the case of the Annual Report to the Stockholders,
within 150 days after the end of each fiscal year of the Company), one copy of
(i) its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles by a national firm of certified public accountants), (ii) if not
included in substance in the Annual Report to Stockholders, upon the request of
Purchaser, its Annual Report on Form 10-K, (iii) upon request of Purchaser, its
quarterly reports on Form 10-Q, and (iv) a full copy of the particular
Registration Statement covering the Shares and the Warrant Shares (the
foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of the Purchaser, a reasonable
number of copies of the Prospectuses, and any supplements thereto, to supply to
any other party requiring such Prospectuses;
and the Company, upon the reasonable request of the Purchaser and with prior
notice, will be available to the Purchaser or a representative thereof at the
Company's headquarters to discuss information relevant for disclosure in the
Registration Statement covering the Shares and the Warrant Shares and will
otherwise cooperate with any Purchaser conducting an investigation for the
purpose of reducing or eliminating such Purchaser's exposure to liability under
the Securities Act, including the reasonable production of information at the
Company's headquarters, subject to appropriate confidentiality limitations.
7.6 Liquidated Damages. In the event the Registration
Statement is not declared effective within forty-five (45) days following the
Closing Date, or in the event of a review of the Registration Statement by the
Commission, within sixty (60) days after the Closing Date, the Company shall pay
to each Purchaser an amount, as liquidated damages and not as a penalty, equal
to one half of one percent (0.5%) per month (pro rata on a 30 day basis) for the
first thirty (30) days, and thereafter, one percent (1.5%) per month (pro rata
on a 30 day basis), of the aggregate purchase price paid by such Purchaser
pursuant to this Agreement for any Securities then held by such Purchaser until
the Registration Statement is declared effective. Such liquidated damages shall
be payable monthly in cash.
20
SECTION 8. Right of First Offer.
8.1 Subject to the terms and conditions specified in this
Section 8, the Company hereby grants to each Purchaser, for the 365 day period
following the Closing Date, a right of first offer with respect to future sales
by the Company of shares of any class of its capital stock, or any securities
convertible or exercisable therefor ("First Offer Shares").
8.2 Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any First Offer Shares, the
Company shall first make an offer of such First Offer Shares to each Purchaser
in accordance with the following provisions:
(a) The Company shall deliver a notice (the "Notice") to each
Purchaser stating (A) its bona fide intention to offer such First Offer Shares,
(B) the number of such First Offer Shares to be offered and (C) the price and
terms, if any, upon which it proposes to offer such First Offer Shares.
(b) Within seven (7) days after receipt of the Notice, each
Purchaser may elect to purchase or obtain, at the price and on the terms
specified in the Notice, that portion of such First Offer Shares which equals
the proportion that the number of shares of Common Stock issued and held by such
Purchaser bears to the total number of shares of Common Stock of the Company
(assuming full conversion and exercise of all convertible or exercisable
securities) then held by all of the shareholders of the Company. The Company
shall promptly, in writing, inform each Purchaser which purchases all the shares
available to it (a "Fully-Exercising Purchaser") of any other Purchaser's
failure to do likewise. During the seven (7) day period commencing after receipt
of such information, each Fully-Exercising Purchaser shall be entitled to obtain
that portion of the Shares not subscribed for by the Purchaser equal to the
proportion that the number of shares of Common Stock issued and held by such
Fully-Exercising Purchaser bears to the total number of shares of Common Stock
issued and held by all Fully-Exercising Purchasers who wish to purchase some of
the unsubscribed First Offer Shares.
(c) If all of the First Offer Shares are not elected to be
obtained as provided in subsection 8.2(b), the Company may, during the fourteen
(14) day period following the expiration of the period provided in subsection
8.2(b) hereof, offer the remaining unsubscribed portion of such First Offer
Shares to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the First Offer Shares within such
period, or if such agreement is not consummated within fourteen (14) days of the
execution thereof, the right provided hereunder shall be deemed to be revived
and such First Offer Shares shall not be offered unless first reoffered to the
Purchasers in accordance herewith.
(d) The right of first offer in this Section 8 shall not be
applicable (i) to the issuance of sale of shares of Common Stock (or options
therefor) to directors, officers, employees or consultants of the Company for
the primary purpose of soliciting or retaining their services (or for similar
compensatory purposes) or (ii) to or after consummation of a bona fide, firmly
underwritten public offering of the Company under the Securities Act, pursuant
to a registration statement on Form S-1, or (iii) the issuance of securities
pursuant to the conversion or exercise of then-outstanding convertible or
exercisable securities.
21
SECTION 9. Broker's Fee. The Purchaser acknowledges that the
Company intends to pay to the Placement Agent a fee in respect of the sale of
the Securities to the Purchaser. The Purchaser and the Company hereby agree that
the Purchaser shall not be responsible for such fee and that the Company will
indemnify and hold harmless the Purchaser and each Purchaser/Affiliate against
any losses, claims, damages, liabilities or expenses, joint or several, to which
such Purchaser or Purchaser/Affiliate may become subject with respect to such
fee. Each of the parties hereto hereby represents that, on the basis of any
actions and agreements by it, there are no other brokers or finders entitled to
compensation in connection with the sale of the Securities to the Purchaser.
SECTION 10. Notices. All notices required or permitted
hereunder shall be in writing and shall be deemed effectively given: (i) upon
delivery to the party to be notified; (ii) when received by confirmed facsimile
or (iii) one (1) business day after deposit with a nationally recognized
overnight carrier, specifying next business day delivery, with written
verification of receipt. All communications shall be sent to the Company and the
Purchaser as follows or at such other addresses as the Company or the Purchaser
may designate upon ten (10) days' advance written notice to the other party:
(a) if to the Company, to:
Intelli-Check, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Loeb & Loeb LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Purchaser, at its address as set forth at the
end of this Agreement.
SECTION 11. Changes. This Agreement may not be modified or
amended except pursuant to an instrument in writing signed by the Company and
the Purchaser. No provision hereunder may be waived other than in a written
instrument executed by the waiving party.
22
SECTION 12. Headings. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
SECTION 13. Severability. In case any provision contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 14. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York and the
federal law of the United States of America.
SECTION 15. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered (including by facsimile) to the other parties.
SECTION 16. Entire Agreement. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser
makes any representation, warranty, covenant or undertaking with respect to such
matters.
SECTION 17. Assignment. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the parties hereto and their respective permitted successors, assigns,
heirs, executors and administrators. This Agreement and the rights of the
Purchaser hereunder may be assigned by the Purchaser with the prior written
consent of the Company, except such consent shall not be required in cases of
assignments by an investment adviser to a fund for which it is the adviser or by
or among funds that are under common control, provided that such assignee agrees
to be bound by the terms of this Agreement.
SECTION 18. Further Assurances. Each party agrees to cooperate
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurance as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
SECTION 19. Independent Nature of Purchasers' Obligations and
Rights. The obligations of the Purchaser under this Agreement are several and
not joint with the obligations of any Other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any Other
Purchaser under the Agreements. The decision of each Purchaser to purchase
Securities pursuant to the Agreements has been made by such Purchaser
independently of any other Purchaser. Nothing contained in the Agreements, and
no action taken by any Purchaser pursuant thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Agreements. Each Purchaser acknowledges that no
other Purchaser has acted as agent for such Purchaser in connection with making
its investment hereunder and that no Purchaser will be acting as agent of such
Purchaser in connection with monitoring its investment in the Securities or
enforcing its rights under this Agreement. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
INTELLI-CHECK, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
NAME OF PURCHASER:
PRESIDIO PARTNERS
By ▇▇▇▇▇▇▇ ▇▇▇▇▇, its General Partner
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------------
See also SCHEDULE A attached hereto.
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire Purchase Agreement
which this follows)
A. Complete the following items on BOTH Purchase Agreements (Please sign
two originals):
1. Page 24 - Signature:
(i) Name of Purchaser (Individual or Institution)
(ii) Name of Individual representing Purchaser (if an Institution)
(iii) Title of Individual representing Purchaser (if an Institution)
(iv) Signature of Individual Purchaser or Individual representing
Purchaser
2. Appendix I - Securities Certificate Questionnaire/Registration Statement
Questionnaire:
Provide the information requested by the Securities Certificate
Questionnaire and the Registration Statement Questionnaire.
3. Return BOTH properly completed and signed Purchase Agreements including
the properly completed Appendix I to (initially by facsimile with hand
copy by overnight delivery):
JMP Securities LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
B. Instructions regarding the transfer of funds for the purchase of the
Securities will be sent by facsimile to the Purchaser by the Placement
Agent at a later date.
C. Upon the resale of the Shares or the Warrant Shares by the Purchasers
after the Registration Statement covering the Shares and the Warrant
Shares is effective, as described in the Purchase Agreement, the
Purchaser:
(i) must deliver a current prospectus of the Company to the buyer
(prospectuses must be obtained from the Company at the Purchaser's
request); and
(ii) must send a letter in the form of Appendix II to the Company so that
the Shares or the Warrant Shares may be properly transferred.
Appendix I
INTELLI-CHECK, INC.
SECURITIES CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the
following information:
1. The exact name that your
Securities are to be registered in
(this is the name that will appear
on your stock certificate(s)). You
may use a nominee name if
appropriate: __________________________________
2. The relationship between the
Purchaser of the Securities and
the Registered Holder listed in
response to item 1 above: __________________________________
3. The mailing address of the
Registered Holder listed in
response to item 1 above: __________________________________
4. The Social Security Number or Tax
Identification Number of the
Registered Holder listed in
response to item 1 above: __________________________________
Appendix I
INTELLI-CHECK, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
Intelli-Check, Inc. ("Company")
SELLING STOCKHOLDER QUESTIONNAIRE
The following information is requested for use in connection with the
preparation of a registration statement registering shares of our common stock
(the "Shares") and shares of our common stock issuable upon exercise of warrants
(the "Warrant Shares") for resale by you as a selling stockholder. The Shares
and Warrant Shares, which you acquired in connection with the Company's private
placement (the "Private Placement"), will be included in a Registration
Statement on Form S-3 filed under the Securities Act of 1933 (the "Act").
Please complete and sign one copy of this questionnaire, and return it to
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., Loeb & Loeb LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ at your earliest opportunity.
Kindly note that while some of the information requested herein may be
deemed not material and therefore not required to be disclosed in the
registration statement relating to the proposed public offering, you should
provide all the information requested.
ITEM 1. DEFINITIONS
Before you complete this Questionnaire, please give consideration to the
following definitions of various terms used in this Questionnaire.
"Associate", as used throughout this questionnaire, means (a) any
corporation or organization (other than the Company or any of its subsidiaries)
of which you are an officer, director or partner or of which you are, directly
or indirectly, the beneficial owner of 5% or more of any class of equity
securities, (b) any trust or other estate in which you have a substantial
beneficial interest or as to which you serve as trustee or in a similar
capacity, (c) your spouse, (d) any relative of your spouse or any relative of
yours who has the same home as you or who is a director or officer of key
executive of the Company or any of its subsidiaries, (e) any partner, syndicate
member or person with whom you have agreed to act in concert with respect to the
acquisition, holding, voting or disposition of shares of the Company's
securities.
"Beneficially", when used in connection with the ownership of
securities, means (a) any interest in a security which entitled you to any of
the rights or benefits of ownership even though you may not be the owner of
record or (b) securities owned by you directly or indirectly, including those
held by you for your own benefit (regardless of how registered), and securities
held by others for your benefit (regardless of how registered), such as by
custodians, brokers, nominees, pledgees, etc., and including securities held by
an estate or trust in which you have an interest as legatee or beneficiary,
securities owned by a partnership of which you are a partner, securities held by
a personal holding company of which you are a stockholder, etc., and securities
held in the name of your spouse, minor children and any relative (sharing the
same home). A "beneficial owner" of a security includes any person who, directly
or indirectly, through any contract, arrangement, understanding, relationship or
other wise has or shares:
(1) voting power which includes the power to vote, or to direct
the voting of, such security; and/or
(2) investment power which includes the power to dispose, or to
direct the disposition, of such security.
In addition to being beneficial owner of securities over which you have, or
share, voting or investment power, you are deemed to be the beneficial owner of
a security if you have a right, within sixty days, to acquire beneficial
ownership of (i.e., the right to obtain or share voting or investment power
over) such security. Examples of such rights would include the right to acquire:
(i) through the exercise of any option, warrant or similar right; (ii) through
conversion of any security; or (iii) pursuant to the power to revoke, or the
provision for automatic termination of, a trust, discretionary account or
options, convertible securities or power to revoke such a trust with the
"purpose or effect" or changing or influencing control underlying securities
upon such acquisition, without regard to the sixty day rule state above.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
A "Control Person" of a specified person is a person that directly,
or indirectly through one or more intermediaries, controls the person specified.
"Material", when used in this questionnaire to qualify a requirement
for the furnishing of information as to any subject, limits the information
required to those matters as to which an average prudent investor ought
reasonable to be informed before purchasing the securities of the Company.
"Material Relationship" has not been defined by the Securities and
Exchange Commission. However, the Commission has indicated that it will probably
construe as a "material relationship" any relationship which tends to prevent
armslength bargaining in dealings with a company, whether arising from a close
business connection or family relationship, a relationship of control or
otherwise. It seems prudent, therefore, to consider that you would have such a
relationship, for example, with any organization of which you are an officer,
director, trustee or partner or in which you own, directly or indirectly, 10% or
more of the outstanding voting stock, or in which you have some other
substantial interest, and with any person or organization with whom you have, or
with whom any relative or spouse (or any other person or organization as to
which you have any of the foregoing other relationships) has, a contractual
relationship.
The National Association of Securities Dealers, Inc. ("NASD")
defines a "Member" as being either any broker or dealer admitted to a membership
in the NASD or any officer or partner of such a member, or the executive
representative of such a member or the substitute for such a representative.
The NASD defines a "Person Associated with a Member" as being every
sole proprietor, partner, officer, director or branch manager of any member, or
any natural person occupying a similar status or performing similar functions,
or any natural person engaged in the investment banking or securities business
who is directly or indirectly controlling or controlled by such member (for
example, any employee), whether or not any such person is registered or exempt
from registration with the NASD.
The NASD defines an "Underwriter or a Related Person" with respect
to a proposed offering as being underwriters, underwriters' counsel, financial
consultants and advisors, finders, members of the selling or distribution group,
and any and all other persons associated with or related to any of such persons.
ITEM 2. Please complete the following:
If you need more space to respond to or clarify your response to a
question, use the "Additional Information" page at the end of this
Questionnaire.
1. Print name of stockholder _________________________________________
_________________________________________
2. Print correct address _________________________________________
_________________________________________
_________________________________________
3. List all positions or offices which stockholder or any of its directors,
officers or partners have had since January 1, 1997, with the Company or
any of its affiliates:
4. Describe below any pending legal proceedings in which either stockholder
or any of its associates has an interest adverse to the Company:
5. Describe below any material relationship stockholder or any of its
directors, officers or partners have had with the Company or any of its
officers or directors:
6. Describe below any information known to stockholder, and if none state
"none", pertaining to underwriting compensation and arrangements or any
dealings between any underwriter or related person, member of the NASD or
a person associated with a member of the NASD, and the Company or any
controlling stockholder thereof since January 1, 1993:
7. State below whether stockholder or any of its associates are a member of
NASD, a controlling shareholder of a member, a person associated or
affiliated with a member or an underwriter or related person with respect
to the proposed offering. If you respond "yes", describe such
relationship:
Yes |_| No |_|
(IF THE RESPONSE TO 7 WAS "NO", DO NOT RESPOND TO 8-10)
8. Describe below information as to all purchases and acquisitions (including
contracts to purchase or to acquire) of securities of the Company by
stockholder during the last twenty months, and all proposed purchases and
acquisitions which are to be consummated in whole or in part within the
next twelve months:
Seller or Amount and Price or Other
Prospective Seller Nature of Securities Consideration Date
------------------ -------------------- -------------- --------
9. Describe below all information as to all sales and dispositions (including
contracts to sell or to dispose) of securities of the Company during the
last twenty months by stockholder to any "member" of the NASD or any
"person associated with a member" with respect to the proposed public
offering, as well as to all proposed sales and dispositions by stockholder
which are to be consummated in whole or in part within the next twelve
months.
Seller or Amount and Price or Other
Prospective Seller Nature of Securities Consideration Date
------------------ -------------------- -------------- --------
10. If stockholder has had during the last twenty months, or is to have within
the next twelve months, any transaction of the character referred to in
either Item 8 or 9 above, describe briefly below the relationship,
affiliation or association of both stockholder and, if known, the other
party or parties to any such transaction with an underwriter or other "in
the stream of distribution" with respect to the proposed offering. In any
case, where the purchaser (whether you or any such party) is known by you
to be a member of a "private investment group", such as a hedge fund or
other group of purchasers, list, if known, the names of all persons
comprising the "group" and their "association with" or "relationship to"
any broker-dealer.
11. Describe any arrangement known to you made or to be made by any person, or
any transaction already effected and if no such arrangement or transaction
is known to you, state "none":
(i) to limited or restrict the sale of the Common Stock during the
period of the offering of the securities registered under the
Registration Statement;
(ii) to stabilize the market for the Common Stock; or
(iii) to withhold commissions or otherwise to hold each underwriter or
dealer responsible for the distribution of his participation in the
offering.
12. Specify below the information required as to Shares, Warrant Shares and
all other securities beneficially owned by you (including any options or
warrants) as of the date of this Questionnaire. [Please refer to the
attached definition of "Beneficially."]
Remarks (specify
voting or investment
power you have, in
Number of Warrant Registered in Beneficially what capacity you
Number of Shares Shares the Name of: Owned by*: have such power)
---------------- ----------------- ------------- ------------ --------------------
13. Specify below the number of Shares and Warrant Shares acquired by you in
the Private Placement which you wish to include in the Registration
Statement pursuant to your registration right (if left blank, all such
Shares will be included):
Remarks (specify
voting or investment
power you have, in
Registered in Beneficially what capacity you
Number of Shares the Name of: Owned by*: have such power)
---------------- ------------- ------------ --------------------
14. State below whether stockholder or any of its associates are a
market-maker in, or in any other way involved in the trading of, any
security of the Company. If you respond "yes", describe such
relationship:
Yes |_| No |_|
15. State below whether stockholder is selling the Shares or the Warrant
Shares to be sold pursuant to the registration statement for the purposes
of raising funds or diversifying your investment portfolio. If you respond
"no", describe the purpose of your sale:
Yes |_| No |_|
16. State whether stockholder may sell the Shares or the Warrant Shares in any
method of distribution, in negotiated transactions, through the writing of
options or a combination of such methods of sale. If you respond "yes",
describe such method:
Yes |_| No |_|
17. State whether stockholder may sell the Shares or the Warrant Shares to or
through broker-dealers.
Yes |_| No |_|
Please note that the selling stockholders and any broker-dealers or agents
who participate in the distribution of the Shares or the Warrant Shares
pursuant to the registration statement may be deemed to be "underwriters"
as that term is defined in the Act, and any commissions received by them
and profit on any resale of the Shares or the Warrant Shares as principal
might be deemed to be underwriting discounts and commissions under the
Act.
ITEM 3. SIGNATURE
I understand that the information that I am furnishing you herein will be used
by Intelli-Check, Inc. in the preparation of a registration statement under the
Securities Act of 1933, as amended. The responses supplied in this questionnaire
are accurate and complete to the best knowledge of the undersigned. If, at any
time after the date of signing this Questionnaire by the undersigned and prior
to the date of registration of our securities, any change occurs which would
render any of the undersigned's statements in this Questionnaire inaccurate,
misleading or incomplete in any respect, the undersigned will immediately advise
Loeb & Loeb LLP of such changes and the details thereof.
Signature: ____________________________________________
Name (please print): __________________________________
Title: ________________________________________________
Telephone No: _________________________________________
Fax No: _______________________________________________
Business Address: _____________________________________
_____________________________________
Date: _________________________________________________
ADDITIONAL INFORMATION
APPENDIX II
[Transfer Agent]
[Address]
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
_____________________________________________________________ hereby certifies
[fill in official name of individual or institution]
that he/she [said institution] is the Purchaser of the shares evidenced by the
attached certificate, and as such, sold such shares on _______________ in
[date]
accordance with the terms of the Purchase Agreement and in accordance with
Registration Statement number ____________________________________________
[fill in the number of or otherwise identify
________________________ or otherwise in accordance with the Securities Act
Registration Statement]
of 1933, as amended, and, in the case of a transfer pursuant to the Registration
Statement, the requirement of delivering a current prospectus by the Company has
been complied with in connection with such sale.
Print or Type:
Name of Purchaser
(Individual or Institution): ______________________
Name of Individual
representing Purchaser
(if an Institution) ______________________
Title of Individual
representing Purchaser
(if an Institution): ______________________
Signature by:
Individual Purchaser
or Individual
representing Purchaser: ______________________
SCHEDULE A
SCHEDULE OF PURCHASERS
Other than in the following amounts of common stock purchased, each of the
securities purchase agreements under which each investor purchased their shares
of common stock in the private placement were identical in all material
respects.
Number of Shares of Common
Stock Purchased in the Number of Warrants Issued
Security Holders Private Placement in the Private Placement
--------------------------------------- -------------------------- -------------------------
WPG Software Fund, L.P. 275,000 110,000
SRG Capital, LLC 70,000 28,000
Enable Opportunity Partners, L.P. 25,000 10,000
Enable Growth Partners, L.P. 75,000 30,000
Smithfield Fiduciary LLC 125,000 50,000
Iroquois Master Fund Ltd. 125,000 50,000
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ International 18,000 7,200
▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust 25,000 10,000
RHP Master Fund, Ltd. 125,000 50,000
Nite Capital L.P. 65,000 26,000
Lagunitas Partners L.P. 82,000 32,800
Presidio Partners 61,875 24,750
▇▇▇▇▇ Partners 48,625 19,450
▇▇▇▇▇ Fund L.P. 14,500 5,800
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 25,000 10,000
▇▇▇▇ ▇▇▇▇▇ 10,000 4,000
H. ▇▇▇▇ ▇▇▇▇▇▇▇, M.D. 20,000 8,000
H. ▇▇▇▇ ▇▇▇▇▇▇▇, M.D., ▇▇▇ Rollover 20,000 8,000
▇▇▇ ▇▇▇▇▇▇▇▇ 40,000 16,000