RIGHTS AGENT AGREEMENT
This RIGHTS AGREEMENT ("Agreement") is made and entered into as of April
___, 2001, by and between Intelli-Check, Inc., a Delaware corporation (the
"Company") and Continental Stock Transfer & Trust Company (the "Rights Agent").
RECITALS
A. The Company has (i) declared a dividend of rights (each a "Right") to
purchase shares of common stock, $.001 par value per share ("Common Stock")
payable to stockholders of record on the close of business on March 30, 2001
(the "Record Date") and (ii) attached Rights to the shares of Common Stock
underlying any options and warrants outstanding as of the Record Date.
B. The Company will file with the Securities and Exchange Commission (the
"SEC"), under the Securities Act of 1933, as amended (the "Act"), a Registration
Statement on Form S-3 relating to the Common Stock to be issued on the exercise
of the Rights.
C. Each Right distributed to holders of record on the Record Date will
entitle the holder thereof to purchase, subject to section 4.2 hereof, one share
of Common Stock for $8.50 per share (the "Exercise Price").
D. The Company wishes the Rights Agent to act on its behalf in connection
with the rights offering (the "Rights Offering") as set forth herein, and the
Rights Agent is willing so to act.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent in accordance with the instructions set forth in this
Agreement, and the Rights Agent hereby accepts such appointment and agrees to
take such actions as may be necessary to effectuate the terms of this Agreement.
The Company may from time to time appoint such co-rights agents as it may deem
necessary or desirable.
2. DISTRIBUTION OF RIGHTS CERTIFICATES.
2.1. Each Right Certificate, in substantially the form attached as
Exhibit A hereto, subject to such changes as the parties deem necessary ("Rights
Certificates"), shall evidence the holder of Rights (each a "Rightsholder")
therein named to purchase shares of Common Stock upon the terms and conditions
therein and herein set forth.
2.2. Upon the written authorization of the Company, signed by any of
its duly authorized officers, as to the Record Date, the Rights Agent shall,
from a list of the Rightsholders of Common Stock to be prepared by the Rights
Agent in its capacity as Transfer Agent of the Company, prepare and record Right
Certificates in the names of the Rightsholders, setting forth the number of
Rights to purchase shares of Common Stock calculated on the basis of 0.1 Rights
for each share of Common Stock recorded on the books in the name of each such
Rightsholder. The number of Rights distributed to each Rightsholder shall be
rounded down to the nearest whole number. No fractional Rights will be issued
upon exchange of a Rights Certificate, and any requests to exchange a Rights
Certificate that would result in the issuance of fractional Rights will be
rejected.
-2-
2.3. Upon the written authorization of the Company, signed by any of
its duly authorized officers, as to the exercise of outstanding warrants or
options, the Rights Agent shall issue Rights Certificates to the holders of such
options and warrants as the Company may direct.
2.4. Upon the written advice from counsel to the Company as to the
effective date of the Registration Statement, the Rights Agent shall promptly
deliver the Rights Certificates, together with a copy of the Prospectus, and any
other document as the Company deems necessary or appropriate, to all
stockholders with record addresses in the United States (including its
territories and possessions and the District of Columbia).
3. RIGHTSHOLDERS.
3.1. The Rights Certificate will be prepared by the Rights Agent,
and the Rights Agent shall affix such identifying information as it deems
necessary to identify each Rightsholder. No Rights Certificate shall be valid
for any purpose unless so executed.
3.2. The Rights Agent will keep or cause to be kept, at its
principal offices, books for registration of Rights. Such books will show the
names and addresses of the respective Rightsholders and the number of Rights
that have been granted or are held.
3.3. Rights may not be transferred, assigned, pledged or encumbered
by the Rightsholder or a beneficial owner of such Rightsholder.
3.4. Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
and/or security satisfactory to them, in their sole discretion, and
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Rights
Certificate, if mutilated, the Rights Agent will make and deliver a new Rights
Certificate of like tenor to the registered
-3-
Rightsholder, in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated. If required by the Company or the Rights Agent, an indemnity bond
must be sufficient in the judgment of each party to protect the Company, the
Rights Agent or any agent thereof from any loss that any of them may suffer if a
lost, stolen, destroyed or mutilated Rights Certificate is replaced.
3.5. The Rights will expire one (1) year after the effective date of
the Registration Statement (the "Expiration Date").
4. EXERCISE OF RIGHTS.
4.1. Subject to Section 4.2, a Rightsholder may exercise his or her
Right(s) by completing, signing and delivering or mailing the Rights Certificate
(with any required signature guarantee(s) as required by the form of Rights
Certificate), together with payment in full of the Exercise Price for each Right
for which he or she is exercising as follows: by mail, hand or overnight
delivery to Continental Stock Transfer & Trust Company, 2 Broadway, New York,
New York 10004. In order for a Rightsholder to exercise his or her Right(s), the
completed Rights Certificate and payment must be received by the Rights Agent by
5:00 p.m. New York Time on or before the Expiration Date. Checks or money orders
should be made payable to "Continental Stock Transfer & Trust Company as Agent
for Intelli-Check, Inc." in United States Dollars.
4.2. A Rightsholder may exercise his or her Rights only to the
extent such Rightsholder maintains continuous ownership (of record or
beneficially) of the shares of Common Stock to which the Rights relate from the
Record Date through the date on which the Rights are exercised. If the
Rightsholder is both the record and beneficial owner of the shares, then the
Rightsholder shall certify continued ownership as part of the executed Rights
Certificate. If the Rightsholder is exercising Rights on behalf of a beneficial
owner of the shares of Common Stock
-4-
to which the Rights relate, then the Rightsholder shall certify as to such
beneficial owner's continued ownership of shares of Common Stock at and through
the applicable dates. Rights will become unexercisable to the extent that
beneficial ownership of the shares to which they relate are transferred between
the Record Date and the date of exercise.
4.3. The Exercise Price will be payable in United States dollars by
check drawn upon a U.S. bank or postal, telegraphic or express money order or
wire transfer of funds to the account maintained by the Rights Agent for such
purpose payable to the order of Continental Stock Transfer & Trust Company as
Agent for Intelli-Check, Inc. The Exercise Price will be deemed to have been
received by the Rights Agent only upon (i) clearance of any uncertified check,
(ii) receipt by the Rights Agent of any certified check drawn upon a United
States bank or of any postal, telegraphic or express money order or (iii)
receipt of good funds in the Rights Agent's account.
5. REDEMPTION OF RIGHTS.
5.1. The Company may, at its option, redeem all but not less than
all of the then outstanding Rights, at a redemption price of $.01 per Right (the
"Redemption Price"), appropriately adjusted to reflect any stock split, stock
dividend or recapitalization, if (i) the last sale price of the Company's Common
Stock as reported on the American Stock Exchange (or the principal exchange on
which the Common Stock is then listed) exceeds $10.50 per share for 20
consecutive trading days or (ii) upon a "Change is Control." A "Change in
Control" means any event where: (i) any "person" or "group" (as such terms are
used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act)
of shares representing more than 50% of the combined voting power of the
then-outstanding securities entitled to vote generally in elections of directors
of the Company
-5-
("Voting Stock"), (ii) the Company consolidates with or merges
into any other corporation, or any other person merges into the Company, and, in
the case of any such transaction, the outstanding Common Stock of the Company is
reclassified into or exchanged for any other property or security, unless the
stockholders of the Company immediately before such transaction own, directly or
indirectly immediately following such transaction, at least a majority of the
combined voting power of the outstanding voting securities of the corporation
resulting from such transaction in substantially the same proportion as their
ownership of the Voting Stock immediately before such transaction, (iii) the
Company conveys, transfers or leases all or substantially all of its assets to
any person (other than to one or more wholly-owned subsidiaries of the Company)
or (iv) any time the Continuing Directors do not constitute a majority of the
Board of Directors of the Company (or, if applicable, a successor corporation to
the Company). "Continuing Directors" means as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Agreement or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such board at the time of such
nomination or election.
5.2. Promptly upon action by the Board of Directors of the Company
ordering the redemption of the Rights, the Company and Rights Agent shall give
30 days written notice ("Notice Period") of the redemption of the Rights. The
Rights Agent shall give notice of such redemption to the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
address appearing upon the registry books of the Rights Agent. Any notice that
is mailed in the manner provided herein shall be deemed given, whether or not
the holder receives the notice. Upon expiration of the Notice Period, the right
to exercise the Rights will
-6-
terminate and the only right thereafter of the Rightsholders shall be to receive
the Redemption Price.
6. DELIVERY OF SECURITIES. The Rights Agent, in its capacity as the
Transfer Agent, shall issue certificates for Common Stock upon the instructions
of the Company, according to the executed Rights Certificates that have been
accepted by the Company. The Company shall inform the Rights Agent in writing as
to the acceptance of payment and the date for actual issuance of Common Stock to
each Rightsholder. Shares of Common Stock to be issued pursuant to the exercise
of Rights are to be registered in the name of the registered holder of the
Rights Certificate. Delivery of the stock certificates are to be to the
registered holder of the Rights Certificate.
7. FRACTIONAL RIGHTS AND SHARES. No fractional Rights or cash in lieu
thereof will be issued or paid. The number of Rights distributed to each
Rightsholder or beneficial owner holding through a Qualified Financial
Institution that complies with the procedures set forth in Section 2.2 above
will be rounded down to the next whole number. All questions as to the validity
and eligibility of any rounding of fractional Rights will be determined by the
Company in its sole discretion, and its determination will be final and binding.
8. REPORTS. The Rights Agent will notify the Company and its designated
representatives by telephone each commencing on the distribution date and ending
at the Expiration Date, which notice will thereafter be confirmed in writing, of
(i) the number of Rights exercised each week and (ii) the number of Rights for
which a defective Rights Certificate has been received and (iii) cumulative
totals with respect to the information set forth in each of the clauses (i) and
(ii) above. The Rights Agent will also maintain and update a listing of
Rightsholders who have fully or partially exercised their Rights and
Rightsholders who have not
-7-
exercised their Rights. The Rights Agent will provide the Company and its
respective designated representatives with the information compiled pursuant to
this Section 8 and any Rights Certificates or other documents or date from which
such information is derived, as any of them may request. The Rights Agent hereby
represents and warrants that the information contained in each notification
referred to in this Section 8 will be accurate in all material respects.
9. AMENDMENTS AND WAIVERS; TERMINATION. The Company reserves the right to
alter the Expiration Date upon 30 days notice to Rightsholders, and to amend the
terms and conditions of the Rights, whether the amended terms are more or less
favorable to Rightsholders. All questions as to the timeliness, validity, form
and eligibility (including time of receipt and record ownership) of any exercise
of Rights will be determined by the Company, whose determinations will be final
and binding, and the Company reserves the right to reject any exercise of a
Right if such exercise is not in proper form, or if the acceptance thereof or
the issuance of Common Stock thereto could be deemed unlawful. The Company also
reserves the right to waive any defect or irregularity or permit a defect or
irregularity to be corrected within such time as it may determine. An exercise
of Rights will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Company
determines in its sole discretion. Neither the Company nor the Rights Agent will
be under any duty to give notification of any defect or irregularity in
connection with the submission of Rights Certificates or incur any liability for
failure to give such notification. Any exercise as to which no notice of any
defect or irregularity has been given by the Company or the Rights Agent and no
notice of rejection has been given prior to the Expiration Date, shall be deemed
accepted by the Company.
-8-
10. INSTRUCTIONS. The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chief Executive Officer or the Chief Financial Officer of the Company, or
any other person designated by any of them, and to apply to such officers for
advice or instructions in connection with its duties, and the Rights Agent will
not be liable for any action taken by it in good faith in accordance with the
instructions of any such officer.
11. FEES OF THE RIGHTS AGENT; INDEMNIFICATION.
11.1. The Company agrees to pay the Rights Agent compensation in
accordance with the fee schedule attached hereto as Exhibit B for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses and other disbursements incurred in the administration
and execution of this Agreement.
11.2. The Company hereby covenants and agrees to indemnify and to
hold the Rights Agent (the "Indemnified Party") harmless against any losses,
claims, damages, liabilities, costs and expenses (including reasonable fees and
disbursements of legal counsel) that the Indemnified Party may incur or become
subject to arising from or out of any claim or liability resulting from actions
taken as Rights Agent pursuant to this Agreement; PROVIDED, HOWEVER, that such
covenant and agreement does not extend to, and the Indemnified Party will not be
indemnified or held harmless with respect to, such losses, claims, damages,
liabilities, costs and expenses incurred or suffered by the Indemnified Party as
a result, or arising out of, the breach of this Agreement. In connection
therewith, (i) in no case will the Company be liable with respect to any claim
against the Indemnified Party unless the Indemnified Party notifies the Company
in writing of the assertion of a claim against it or of any action commenced
against it, as soon as practicable after it has notice of any such assertion of
a claim or has been served with the
-9-
summons or other first legal process giving information as to the nature and
basis of the claim (but in any event at least ten days prior to the date on
which an answer or other pleading must be served in order to prevent a judgment
by default in favor of the person asserting such claim), (ii) the Company will
be entitled to participate at its own expense in the defense of any suit brought
to enforce any such claim, and if the Company so elects, it may assume the
defense of any such suit, in which event the Company will not thereafter be
liable for the fees and expenses of any additional counsel that the Indemnified
Party may retain, so long as the Company retains counsel satisfactory to the
party to be indemnified, in the exercise of the party's reasonable judgment, to
defend such suit, and (iii) the Indemnified Party agrees not to settle any
litigation in connection with any claim or liability with respect to which
either or both of them may seek indemnification from the Company without the
prior written consent of the Company.
11.3. The Indemnified Party will be protected and will incur no
liability for or with respect to any action taken, suffered or omitted by it
without negligence and in good faith in connection with its administration of
this Agreement in reliance upon any Rights Certificate, power of attorney,
endorsement, affidavit letter, notice, direction, consent, certificate,
statement or other paper or document reasonably believed by it to be genuine and
to be signed, executed and, where necessary, verified or acknowledged by the
proper person or persons.
11.4. Anything in this Agreement to the contrary notwithstanding, in
no event will the Indemnified Party be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Indemnified Party has been advised of the
likelihood of such loss or damage and regardless of the form of action.
12. MERGER OR CONSOLIDATION. Any corporation into which the Rights Agent
or Company or any successor Rights Agent or Company may be merged or with which
it may be
-10-
consolidated, or any corporation resulting from any merger or
consolidation to which any of them may be a party, or any corporation succeeding
to their respective businesses, or any successor, will be the successors to the
Rights Agent, or Company, respectively, under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
13. CONCERNING THE RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions:
13.1. The Rights Agent may consult with legal counsel acceptable to
the Company (who may be, but is not required to be, legal counsel for the
Company), and the opinion of such counsel will be full and complete
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.
13.2. Whenever in the performance of its duties under this Agreement
the Rights Agent may deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chief Executive Officer or the Chief
Financial Officer of the Company and delivered to the Rights Agent, and such
certificate will be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
13.3. Nothing herein precludes the Rights Agent from acting in any
other capacity for the Company.
-11-
14. GENERAL PROVISIONS.
14.1. NOTICES. Unless otherwise specifically permitted by this
Agreement, all notices or other communications required or permitted under this
Agreement shall be in writing, and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or sent
by telecopy, provided that the telecopy cover sheet contains a notation of the
date and time of transmission, and shall be deemed received: (i) if personally
delivered, upon the date of delivery to the address of the person to receive
such notice, (ii) if mailed in accordance with the provisions of this paragraph,
two (2) business days after the date placed in the United States mail, (iii) if
mailed other than in accordance with the provisions of this paragraph or mailed
from outside the United States, upon the date of delivery to the address of the
person to receive such notice, or (iv) if given by telecopy, when sent. Notices
shall be given at the following address:
If to the Company: Intelli-Check, Inc.
246 Crossways Park West
Woodbury, NY 11797
If to the Rights Agent: Continental Stock Transfer Trust Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
14.2. COMPLETE AGREEMENT; MODIFICATION. This Agreement and written
agreements, if any, entered into concurrently herewith (i) constitute the
parties' entire agreement, including all terms, conditions, definitions,
warranties, representations, and covenants, with respect to the subject
-12-
matter hereof, (ii) merge all prior discussions and negotiations between or
among any or all of them as to the subject matter hereof, and (iii) supersede
and replace all terms, conditions, definitions, warranties, representations,
covenants, agreements, promises and understandings, whether oral or written,
with respect to the subject matter hereof. This Agreement may not be amended,
altered or modified except by a writing signed by the party to be bound. With
regard to such amendments, alterations, or modifications, telecopied signatures
shall be effective as original signatures. Any amendment, alteration, or
modification requiring the signature of more than one party may be signed in
counterparts.
14.3. FURTHER ACTION. Each party agrees to perform any further acts and
execute and deliver any further documents reasonably necessary to carry out the
provisions of this Agreement.
14.4. ASSIGNMENT. No party may assign its rights under this Agreement
without the prior written consent of the other parties hereto.
14.5. SUCCESSORS AND ASSIGNS. Except as explicitly provided herein to the
contrary, this Agreement shall be binding upon and inure to the benefit of the
parties, their respective successors and permitted assigns.
14.6. SEVERABILITY. If any portion of this Agreement shall be held by a
court of competent jurisdiction to be invalid, void, or otherwise unenforceable,
the remaining provisions shall remain enforceable to the fullest extent
permitted by law if enforcement would not frustrate the overall intent of the
parties (as such intent is manifested by all provisions of this Agreement,
including such invalid, void, or otherwise unenforceable portion).
14.7. EXTENSION NOT A WAIVER. No delay or omission in the exercise of any
power, remedy, or right herein provided or otherwise available to any party
shall impair or affect the right of such party thereafter to exercise the same.
Any extension of time or other indulgence granted to a party hereunder shall not
otherwise alter or affect any power, remedy or right of any other party, or the
obligations of the party to whom such extension or indulgence is granted except
as specifically waived.
-13-
14.8. TIME OF ESSENCE. Time is of the essence of each and every term,
condition, obligation and provision hereof.
14.9. NO THIRD PARTY BENEFICIARIES. This Agreement and each and every
provision hereof is for the exclusive benefit of the parties hereto and not for
the benefit of any other party.
14.10. HEADINGS. The headings in this Agreement are inserted only as a
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular provision hereof.
14.11. REFERENCES. A reference to a particular paragraph of this Agreement
shall be deemed to include references to all subordinate paragraphs, if any.
14.12. GENDER, NUMBER, AND TENSE. Throughout this Agreement, unless the
context otherwise requires:
(i) the masculine, feminine, and neuter genders each includes the
other;
(ii) the singular includes the plural, and the plural includes the
singular; and
(iii) the past tense includes the present, and the present tense
includes the past.
14.13. COUNTERPARTS. This Agreement may be signed in multiple counterparts
with the same force and effect as if all original signatures appeared on one
copy; and in the event this Agreement is signed in counterparts, each
counterpart shall be deemed an original and all of the counterparts shall be
deemed to be one agreement.
14.14. DRAFTER. The parties acknowledge that each party has received and
approved this Agreement and the normal rules of construction to the effect that
any ambiguities
-14-
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
14.15. APPLICABLE LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of New York.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed as of the date first above written.
INTELLI-CHECK, INC.
a Delaware Corporation
By:____________________________________
Frank Mandelbaum
Chairman and Chief Executive Officer
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By:____________________________________
-15-