NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR UNDER ANY STATE SECURITIES LAW. HOLDER WILL NOT TRANSFER THIS WARRANT, OR ANY
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE, UNLESS (I) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT COVERING THIS WARRANT OR SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, (II) IT FIRST
RECEIVES AN OPINION FROM COUNSEL TO THE COMPANY, STATING THAT THE PROPOSED
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND UNDER ALL APPLICABLE
STATE SECURITIES LAWS, OR (III) THE TRANSFER IS MADE PURSUANT TO RULE 144
PROMULGATED UNDER THE ACT.
Intelli-Check, Inc.
Warrant for the Purchase of Shares of Common Stock,
par value $0.001 per Share
No. W-001 113,636 Shares
THIS CERTIFIES that, for value received, Gryphon Master Fund, L.P., whose
address is 500 Crescent Court, Suite 270, Dallas, Texas 75201 (the "Holder"), is
entitled to subscribe for and purchase from Intelli-Check, Inc., a Delaware
corporation (the "Company"), upon the terms and conditions set forth herein,
113,636 shares of the Company's Common Stock, par value $0.001 per share
("Common Stock"), at a price of $6.78 per share (the "Exercise Price"). As used
herein the term "this Warrant" shall mean and include this Warrant and any
Common Stock or Warrants hereafter issued as a consequence of the exercise or
transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth. The Warrant Shares are entitled to the benefits, and
subject to the obligations, set forth in the Registration Rights Agreement
between the Company and the Holder dated concurrently herewith.
1. Exercise Price and Exercise Period. This Warrant may be exercised at any
time or from time to time during the period commencing at 5:00 P.M. Eastern time
on March 27, 2003 and ending at 5:00 P.M. Eastern time on March 27, 2008 (the
"Exercise Period").
1
2. Procedure for Exercise; Effect of Exercise.
(a) Cash Exercise. Subject to the conditions and terms set forth herein,
this Warrant may be exercised, in whole or in part, by the Holder during normal
business hours on any business day during the Exercise Period by (i) the
presentation and surrender of this Warrant to the Company at its principal
office along with a duly executed Notice of Exercise (in the form attached to
this Agreement duly executed by the Holder) specifying the number of Warrant
Shares to be purchased, and (ii) delivery of payment to the Company of the
Exercise Price for the number of Warrant Shares specified in the Notice of
Exercise by cash, wire transfer of immediately available funds to a bank account
specified by the Company, or by certified or bank cashier's check.
(b) Effect of Exercise. Upon receipt by the Company of this Warrant and a
Notice of Exercise, together with proper payment of the Exercise Price, as
provided in this Section 2, the Company agrees that such Warrant Shares shall be
deemed to be issued to the Holder as the record holder of such Warrant Shares as
of the close of business on the date on which this Warrant has been surrendered
and payment has been made for such Warrant Shares in accordance with this
Agreement and the Holder shall be deemed to be the holder of record of the
Warrant Shares, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Warrant Shares shall
not then be actually delivered to the Holder. A stock certificate or
certificates for the Warrant Shares specified in the Notice of Exercise shall be
delivered to the Holder as promptly as practicable. The stock certificate(s) so
delivered shall be in any such denominations as may be reasonably specified by
the Holder in the Notice of Exercise. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the Warrant Shares subject to purchase hereunder.
3. Registration of Warrants; Transfer of Warrants. Any Warrants issued upon
the transfer or exercise in part of this Warrant shall be numbered and shall be
registered in a Warrant Register as they are issued. The Company shall be
entitled to treat the registered holder of any Warrant on the Warrant Register
as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. This Warrant shall be transferable
only on the books of the Company upon delivery thereof duly endorsed by the
Holder or by its duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment, or authority to transfer. In all
cases of transfer by an attorney, executor, administrator, guardian, or other
legal representative, duly authenticated evidence of his or its authority shall
be produced. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto. This Warrant may be
exchanged, at the option of the Holder thereof, for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares, upon surrender
to the Company or its duly authorized agent.
2
4. Restrictions on Transfer. (a) The Holder, as of the date of issuance
hereof, represents to the Company that such Holder is acquiring the Warrants for
its own account for investment purposes and not with a view to the distribution
thereof or of the Warrant Shares. Notwithstanding any provisions contained in
this Warrant to the contrary, this Warrant and the related Warrant Shares shall
not be transferable except pursuant to the proviso contained in the following
sentence or upon the conditions specified in this Section 4, which conditions
are intended, among other things, to insure compliance with the provisions of
the Securities Act of 1933, as amended (the "Securities Act"), and applicable
state law in respect of the transfer of this Warrant or such Warrant Shares. The
Holder by acceptance of this Warrant agrees that the Holder will not transfer
this Warrant or the related Warrant Shares prior to delivery to the Company of
an opinion of the Holder's counsel (as such opinion and such counsel are
described in Section 4(b) hereof) or until registration of such Warrant Shares
under the Securities Act has become effective or after a sale of such Warrant or
Warrant Shares has been consummated pursuant to Rule 144 or Rule 144A under the
Securities Act; provided, however, that the Holder may freely transfer this
Warrant or such Warrant Shares (without delivery to the Company of an opinion of
Counsel) (i) to one of its nominees, affiliates or a nominee thereof, (ii) to a
pension or profit-sharing fund established and maintained for its employees or
for the employees of any affiliate, (iii) from a nominee to any of the
aforementioned persons as beneficial owner of this Warrant or such Warrant
Shares, or (iv) to a qualified institutional buyer, so long as such transfer is
effected in compliance with Rule 144A under the Securities Act.
(b) The Holder, by its acceptance hereof, agrees that prior to any transfer
of this Warrant or of the related Warrant Shares (other than as permitted by
Section 4(a) hereof or pursuant to a registration under the Securities Act), the
Holder will give written notice to the Company of its intention to effect such
transfer, together with an opinion of such counsel for the Holder as shall be
reasonably acceptable to the Company, to the effect that the proposed transfer
of this Warrant and/or such Warrant Shares may be effected without registration
under the Securities Act. Upon delivery of such notice and opinion to the
Company, the Holder shall be entitled to transfer this Warrant and/or such
Warrant Shares in accordance with the intended method of disposition specified
in the notice to the Company.
(c) Each stock certificate representing Warrant Shares issued upon exercise
or exchange of this Warrant shall bear the following legend unless the opinion
of counsel referred to in Section 4(b) states such legend is not required:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED EXCEPT UPON
DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY IN FORM
AND SUBSTANCE TO IT THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT
OF 1933, AS AMENDED."
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The Holder understands that the Company may place, and may instruct any transfer
agent or depository for the Warrant Shares to place, a stop transfer notation in
the securities records in respect of the Warrant Shares.
5. Reservation of Shares. The Company shall at all times during the
Exercise Period reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of providing for the exercise of the rights
to purchase all Warrant Shares granted pursuant to the Warrants, such number of
shares of Common Stock as shall, from time to time, be sufficient therefor. The
Company covenants that all shares of Common Stock issuable upon exercise of this
Warrant, upon receipt by the Company of the full Exercise Price therefor, and
all shares of Common Stock issuable upon conversion of this Warrant, shall be
validly issued, fully paid, non-assessable, and free of preemptive rights.
6. Exercise Price Adjustments. The Exercise Price shall be subject to
adjustment from time to time as follows:
(a) (i) In the event that the Company shall (A) pay a dividend or make
a distribution, in shares of Common Stock, on any class of capital stock of
the Company or any subsidiary which is not directly or indirectly wholly
owned by the Company, (B) split or subdivide its outstanding Common Stock
or reverse split into a greater number of shares, or (C) combine its
outstanding Common Stock into a smaller number of shares, then in each such
case the Exercise Price in effect immediately prior thereto shall be
adjusted so that the Holder of a Warrant thereafter surrendered for
Exercise shall be entitled to receive the number of shares of Common Stock
that such Holder would have owned or have been entitled to receive after
the occurrence of any of the events described above had such Warrant been
exercised immediately prior to the occurrence of such event. An adjustment
made pursuant to this Section 6(a)(i) shall become effective immediately
after the close of business on the record date in the case of a dividend or
distribution (except as provided in Section 6(e) below) and shall become
effective immediately after the close of business on the effective date in
the case of such subdivision, split or combination, as the case may be. Any
shares of Common Stock issuable in payment of a dividend shall be deemed to
have been issued immediately prior to the close of business on the record
date for such dividend for purposes of calculating the number of
outstanding shares of Common Stock under clauses (ii) and (iii) below.
(ii) In the event that the Company shall commit to issue or distribute
Common Stock or issue rights, warrants, options or convertible or
exchangeable securities entitling the holder thereof to subscribe for or
purchase, convert into or exchange for Common Stock, in any such case at a
price per share less than the Current Market Price per share on the
earliest of (i) the date the Company shall enter into a firm contract for
such issuance or distribution, (ii) the record date for the determination
of stockholders entitled to receive any such rights, warrants, options or
convertible or exchangeable securities, if applicable, or (iii) the date of
actual issuance or distribution of any such Common Stock or rights,
warrants, options or convertible or exchangeable securities (provided that
4
the issuance of Common Stock upon the exercise of rights, warrants, options
or convertible or exchangeable securities will not cause an adjustment in
the Exercise Price if no such adjustment would have been required at the
time such right, warrant, option or convertible or exchangeable security
was issued), then the Exercise Price in effect immediately prior to such
earliest date shall be adjusted so that the Exercise Price shall equal the
price determined by multiplying the Exercise Price in effect immediately
prior to such earliest date by the fraction:
(x) whose numerator shall be the number of shares of Common Stock
outstanding on such date plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase
at such Current Market Price (such amount, with respect to any such
rights, warrants, options or convertible or exchangeable securities,
determined by multiplying the total number of shares subject thereto
by the exercise price of such rights, warrants, options or convertible
or exchangeable securities and dividing the product so obtained by the
Current Market Price), and
(y) whose denominator shall be the number of shares of Common Stock
outstanding on such date plus the number of additional shares of
Common Stock to be issued or distributed or receivable upon exercise
of any such right, warrant, option or convertible or exchangeable
security.
Such adjustment shall be made successively whenever any such Common Stock,
rights, warrants, options or convertible or exchangeable securities are
issued or distributed. In determining whether any rights, warrants or
options entitle the holders to subscribe for or purchase shares of Common
Stock at less than such Current Market Price, and in determining the
aggregate offering price of shares of Common Stock so issued or
distributed, there shall be taken into account any consideration received
by the Company for such Common Stock, rights, warrants, options, or
convertible or exchangeable securities, the value of such consideration, if
other than cash, to be determined by the Board of Directors, whose
determination shall be conclusive and described in a certificate filed with
the records of corporate proceedings of the Company. If any right, warrant,
option or convertible or exchangeable security to purchase or acquire
Common Stock, the issuance of which resulted in an adjustment in the
Exercise Price pursuant to this subsection (ii) shall expire and shall not
have been exercised, the Exercise Price shall immediately upon such
expiration be recomputed to the Exercise Price which would have been in
effect had the adjustment of the Exercise Price made upon the issuance of
such right, warrant, option or convertible or exchangeable security been
made on the basis of offering for subscription, purchase or issuance, as
the case may be, only of that number of shares of Common Stock actually
purchased or issued upon the actual exercise of such right, warrant, option
or convertible or exchangeable securities.
(iii) No adjustment in the Exercise Price shall be required unless the
adjustment would require an increase or decrease of at least 1% in the
Exercise Price then in effect; provided, however, that any adjustments that
by reason of this Section 6(a) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 6(a) shall be made to the nearest cent or
nearest 1/100th of a share.
5
(iv) Notwithstanding anything to the contrary set forth in this
Section 6(a), no adjustment shall be made to the Exercise Price upon (A)
the issuance of shares of Common Stock pursuant to any compensation or
incentive plan for officers, directors, employees or consultants of the
Company which plan has been approved by the Compensation Committee of the
Board of Directors (or if there is no such committee then serving, by the
majority vote of the Directors then serving who are not employees or
officers of the Company, a 5% or greater stockholder of the Company or an
officer, employee, affiliate or associate of any such 5% or greater
stockholder) (unless the exercise price thereof is changed after the date
hereof other than solely by operation of the anti-dilution provisions
thereof or by the Compensation Committee of the Board of Directors or, if
applicable, the Board of Directors and, if required by law, the
stockholders of the Company as provided in this clause (A)), or (B) the
issuance of Common Stock upon the conversion or exercise of the options,
warrants or rights of the Company outstanding on March 27, 2003, unless the
conversion or exercise price thereof is changed after March 27, 2003 (other
than solely by operation of the anti-dilution provisions thereof).
(v) In the event that, at any time as a result of an adjustment made
pursuant to Sections 6(a)(i) through 6(a)(iii) above, the Holder of any
Warrant thereafter surrendered for exercise shall become entitled to
receive any shares of the Company other than shares of the Common Stock,
thereafter the number of such other shares so receivable upon exercise of
any such Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained in Sections 6(a)(i) through
6(a)(iv) above, and the other provisions of this Section 6(a) with respect
to the Common Stock shall apply on like terms to any such other shares.
(b) In case of any reclassification of the Common Stock (other than in a
transaction to which Section 6(a)(i) applies), any consolidation of the Company
with, or merger of the Company into, any other entity, any merger of another
entity into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), any sale or transfer of all or substantially all
of the assets of the Company or any compulsory share exchange, pursuant to which
share exchange the Common Stock is converted into other securities, cash or
other property, then lawful provision shall be made as part of the terms of such
transaction whereby the Holder of a Warrant then outstanding shall have the
right thereafter, during the period such Warrant shall be exercisable, to
exercise such Warrant only for the kind and amount of securities, cash and other
property receivable upon the reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
of the Company into which a Warrant might have been able to exercise for
immediately prior to the reclassification, consolidation, merger, sale, transfer
or share exchange assuming that such holder of Common Stock failed to exercise
rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon consummation of such transaction subject to
adjustment as provided in Section 6(a) above following the date of consummation
of such transaction. The provisions of this Section 6(b) shall similarly apply
to successive reclassifications, consolidations, mergers, sales, transfers or
share exchanges.
6
(c) If:
(i) the Company shall take any action which would require an
adjustment in the Exercise Price pursuant to Section 6(a); or
(ii) the Company shall authorize the granting to the holders of its
Common Stock generally of rights, warrants or options to subscribe for or
purchase any shares of any class or any other rights, warrants or options;
or
(iii) there shall be any reclassification or change of the Common
Stock (other than a subdivision or combination of its outstanding Common
Stock or a change in par value) or any consolidation, merger or statutory
share exchange to which the Company is a party and for which approval of
any stockholders of the Company is required, or the sale or transfer of all
or substantially all of the assets of the Company; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, the Company shall cause to be filed with the transfer agent for the
Warrants and shall cause to be mailed to each Holder at such Holder's address as
shown on the books of the transfer agent for the Warrants, as promptly as
possible, but at least 30 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights, warrants or
options, or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution or rights,
warrants or options are to be determined, or (B) the date on which such
reclassification, change, consolidation, merger, statutory share exchange, sale,
transfer, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification, change,
consolidation, merger, statutory share exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give such notice or any defect therein
shall not affect the legality or validity of the proceedings described in this
Section 6(c).
(d) Whenever the Exercise Price is adjusted as herein provided, the Company
shall promptly file with the transfer agent for the Warrants a certificate of an
officer of the Company setting forth the Exercise Price after the adjustment and
setting forth a brief statement of the facts requiring such adjustment and a
computation thereof. The Company shall promptly cause a notice of the adjusted
Exercise Price to be mailed to each Holder.
7
(e) In any case in which Section 6(a) provides that an adjustment shall
become effective immediately after a record date for an event and the date fixed
for such adjustment pursuant to Section 6(a) occurs after such record date but
before the occurrence of such event, the Company may defer until the actual
occurrence of such event (i) issuing to the Holder of any Warrants exercised
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
exercise before giving effect to such adjustment, and (ii) paying to such holder
any amount in cash in lieu of any fraction pursuant to Section 6(h).
(f) For the purpose of any computation under this Section 6, the "Current
Market Price" per share of Common Stock on any date shall be deemed to be the
volume weighted average price of a single share of Common Stock for the ten (10)
consecutive trading days immediately preceding the date in question as reported
on the American Stock Exchange. If on any such dates the Common Stock is not
listed or admitted to trading on the American Stock Exchange or any other
national securities exchange and is not quoted by NASDAQ or any similar
organization, the fair value of a share of Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
(g) Upon each adjustment of the Exercise Price, this Warrant shall
thereafter evidence the right to purchase, at the adjusted Exercise Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (i)
the product obtained by multiplying the number of shares purchasable upon
exercise of this Warrant prior to adjustment of the number of shares by the
Exercise Price in effect prior to adjustment of the Exercise Price, by (ii) the
Exercise Price in effect after such adjustment of the Exercise Price.
(h) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share would be issuable on the exercise of this
Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Current Market
Price of such share of Common Stock on the date of exercise of this Warrant.
7. Transfer Taxes. The issuance of any shares or other securities upon the
exercise of this Warrant, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
the Holder for any tax or other charge in respect of such issuance. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
8
8. Loss or Mutilation of Warrant. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction, or mutilation of any Warrant (and
upon surrender of any Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor, and denomination.
9. No Rights as a Stockholder. The Holder of any Warrant shall not have,
solely on account of such status, any rights of a stockholder of the Company,
either at law or in equity, or to any notice of meetings of stockholders or of
any other proceedings of the Company, except as provided in this Warrant.
10. Governing Law. This Warrant shall be construed in accordance with the
laws of the State of Delaware applicable to contracts made and performed within
such State, without regard to principles of conflicts of law.
11. Notices. All notices and other communications under this Warrant
(except payment) shall be in writing and shall be sufficiently given if sent to
the Holder or the Company, as the case may be, by hand delivery, private
overnight courier, with acknowledgement of receipt, or by registered or
certified mail, return receipt requested, as follows:
If to Holder: Gryphon Master Fund, L.P.
500 Crescent Court
Suite 270
Dallas, Texas 75201
Attn: E.B. Lyon, IV
If to Company: Intelli-Check, Inc.
246 Crossways Park West
Woodbury, New York 11797
Attention: Frank Mandelbaum
Or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
date of delivery in person or by overnight courier or five (5) business days
after mailing.
Dated: March 27, 2003
Intelli-Check, Inc.
/s/ Frank Mandelbaum
By: Frank Mandelbaum
Chief Executive Officer
9
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto
__________________ a Warrant to purchase __________ shares of Common Stock, par
value $0.001 per share, of Intelli-Check, Inc. (the "Company"), together with
all right, title, and interest therein, and does hereby irrevocably constitute
and appoint attorney to transfer such Warrant on the books of the Company, with
full power of substitution.
Dated: _______________________________
By: __________________________________
Signature
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
To: Intelli-Check, Inc.
246 Crossways Park West
Woodbury, New York 11797
Attention: Chief Financial Officer
NOTICE OF EXERCISE
The undersigned hereby exercises his or its rights to purchase _______
Warrant Shares covered by the within Warrant and tenders payment herewith in the
amount of $_________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
---------------------------------------
---------------------------------------
---------------------------------------
(Print Name, Address and Social Security
or Tax Identification Number)
NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE WITHIN WARRANT IN EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated: _____________________________
By: _________________________________
Print Name
_____________________________________
Signature
Address:
____________________________
____________________________