Exhibit "1"
To
Innovative Card Technologies, Inc.
Subscription Application & Agreement
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
THIS WARRANT AND THE SHARES PURCHASABLE HEREUNDER ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AS SET FORTH HEREIN.
Issue Date: ______________ Warrant No.__
WARRANT TO PURCHASE
_______ SHARES
OF COMMON STOCK OF
INNOVATIVE CARD TECHNOLOGIES, INC.
This certifies that _______________________, or his/its assigns (the "Holder"),
for value received, is entitled to purchase from INNOVATIVE CARD TECHNOLOGIES,
INC., a Delaware corporation (the "Company"), subject to the terms set forth
below, ____________ (_________) fully paid and nonassessable shares (subject to
adjustment as provided herein) of the Common Stock of the Company (the "Warrant
Shares") at a per share price of $1.25 (the "Exercise Price") (subject to
adjustment as provided herein), subject to the provisions of Section 1.1 of this
Warrant, at any time or from time to time up to and including 5:00 p.m. (Pacific
Standard Time) on expiration date as set forth in Section 1.4 hereof (the
"Expiration Date") upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Form of Subscription attached hereto duly
filled in and signed and upon payment in cash or by check or otherwise
hereinafter provided of the aggregate Exercise Price for the number of shares
for which this Warrant is being exercised determined in accordance with the
provisions hereof. The Exercise Price is subject to adjustment as provided in
Section 3 of this Warrant.
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1. Exercise, Issuance of Certificates, Reduction in Number of Warrant
Shares.
1.1 General. This Warrant shall vest immediately. The vested shares
are exercisable at the option of the Holder of record at any time or from time
to time for all or any part of the vested Warrant Shares (but not for a fraction
of a share) which may be purchased hereunder, as that number may be adjusted
pursuant to Section 3 of this Warrant, on or prior to the Expiration Date. The
Company agrees that the Warrant Shares purchased under this Warrant shall be and
are deemed to be issued to the Holder as the record owner of such Warrant Shares
as of the close of business on the date on which this Warrant shall have been
surrendered, properly endorsed, the completed and executed Form of Subscription
delivered, and payment made for such Warrant Shares (i) in cash or by check,
(ii) cancellation of indebtedness or other obligations of the company to the
Holder, or (iii) by a combination of (i) and (ii). Certificates for the Warrant
Shares so purchased, together with any other securities or property to which the
Holder is entitled upon such exercise, shall be delivered to the Holder by the
Company at the Company's expense as soon as practicable after the rights
represented by this Warrant have been so exercised. In case of a purchase of
less than all the Warrant Shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver to the Holder within a
reasonable time a new Warrant or Warrants of like tenor for the balance of the
Warrant Shares purchasable under the Warrant surrendered upon such purchase.
Each stock certificate so delivered shall be registered in the name of the
Holder.
1.2 Limitation on Exercise. The Company shall not effect any
exercise of this Warrant, and the Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 1.1 or otherwise, to the extent
that after giving effect to such issuance after exercise, the Holder (together
with the Holder's Affiliates), as set forth on the applicable Form of
Subscription, would beneficially own in excess of 9.9% of the number of shares
of the Common Stock outstanding immediately after giving effect to such
issuance. For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this Warrant beneficially
owned by the Holder or any of its Affiliates and (B) = exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any convertible instrument or warrant) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its Affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 1.2, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act. For purposes of this Section 1.2, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (x) the Company's most recent Form 10-Q or Form
10-K, as the case may be, (y) a more recent public announcement by the Company
or (z) any other notice by the Company or the Company's Transfer Agent setting
forth the number of shares of Common Stock outstanding. Upon the written or oral
request of the Holder, the Company shall within two trading days confirm orally
and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Company Common
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Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder or its
Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The provisions of this Section 1.2 may be waived by
the Holder upon, at the election of the Holder, not less than 61 days' prior
notice to the Company, and the provisions of this Section 1.2 shall continue to
apply until such 61st day (or such later date, as determined by the Holder, as
may be specified in such notice of waiver).
1.3 Cashless Exercise. If after one year following the date this
Warrant is issued there is no effective registration statement registering the
Warrant Shares, this Warrant may also be exercised by means of a "cashless
exercise" in which the Holder shall be entitled to receive a certificate for the
number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)]
by (A), where:
(A) = the average of the high and low trading prices per share of
Common Stock on the Trading Day preceding the date of such
election, provided if the Company's Common Stock is not
trading, the fair market value of one share of Common Stock as
determined by the Board of Directors of the Company, in good
faith (at the date of such calculation);
(B) = the Exercise Price of the Warrants; and
(X) = the number of Warrant Shares issuable upon exercise of the
Warrants in accordance with the terms of this Warrant.
1.4 Expiration Date. Unless the Company, in its sole discretion,
extends any expiration date set forth herein (such extension referred to as an
"Expiration Date Extension"), this Warrant shall terminate at 5:00 p.m. (P.S.T.)
on [insert date 5 years from the Issue Date].
1.5 Record Ownership. To the extent permitted by applicable law, the
person in whose name any certificate for shares of Common Stock or other
evidence of ownership of any other security is issued upon exercise or exchange
of the Warrant shall for all purposes be deemed to have become the holder of
record of such shares or other security on the Delivery Date, irrespective of
the date of delivery of such certificate or other evidence of ownership
(subject, in the case of any exercise to which Section 1.7 of this Warrant
applies, to the consummation of a transaction upon which such exercise is
conditioned), notwithstanding that the transfer books of the Company shall then
be closed or that such certificates or other evidence of ownership shall not
then actually have been delivered to such person.
1.6 Approvals. If any securities constituting Warrant Shares or any
portion thereof to be issued upon exercise or exchange of the Warrant require
registration or approval under any applicable law, or require listing on any
national securities exchange or national market system before such securities
may be so issued, the Company will as expeditiously as possible cause such
securities to be registered, approved or listed, as applicable. The Company may
suspend the exercise of the Warrant for the period during which such
registration, approval or listing is required but not in effect.
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1.7 Conditional Exercise or Exchange. Any form of subscription or
exchange form delivered under Sections 1.1 or 8.2 may condition the exercise or
exchange of this Warrant on the consummation of a transaction being undertaken
by the Company or the Holder, and such exercise or exchange shall not be deemed
to have occurred except concurrently with the consummation of such transaction,
except that, for purposes of determining whether such exercise or exchange is
timely it shall be deemed to have occurred on the date of delivery (the
"Delivery Date") of the subscription or exchange form. If any exercise of the
Warrant is so conditioned, then, subject to delivery of the items required by
Sections 1.1 and 2 of this Warrant, the Company shall deliver the certificates
and other evidence of ownership of other securities or other property in such
manner as the Holder shall direct as required in connection with the
consummation of such transaction upon which the exercise is conditioned. At any
time that the Holder shall give notice to the Company that such transaction has
been abandoned or that the Holder has withdrawn from participation in such
transaction, the Company shall return the items delivered pursuant to Sections
1.1 and 2 of this Warrant, and the Holder's election to exercise the Warrant
shall be deemed rescinded.
1.8 Regulatory Problem. The Holder shall not exercise or exchange
the Warrant for shares of Common Stock if after giving effect to such exercise
or exchange the Holder reasonably determines that such exercise would violate
any law or regulation or any requirement of any governmental authority
applicable to Holder or his affiliates.
2. Shares to be Fully Paid. The Company covenants and agrees that all
Warrant Shares, will, upon issuance and, if applicable, payment of the
applicable Exercise Price, be duly authorized, validly issued, fully paid and
nonassessable, and free of all liens and encumbrances, except for restrictions
on transfer provided for herein or under applicable federal and state securities
laws.
3. Adjustment of Exercise Price and Number of Shares. The Exercise Price
and the number of Warrant Shares shall be proportionately adjusted from time to
time upon the occurrence of any capital reorganization or any reclassification
of Common Stock, or the consolidation, merger, combination or exchange of shares
with another entity, or the divisive reorganization of the Company. Upon each
adjustment of the Exercise Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Exercise Price resulting from such adjustment.
4. Voting Rights. Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent to or receive notice
as a shareholder of the Company on any other matters or any rights whatsoever as
a shareholder of the Company.
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5. Compliance with Securities Act: Transferability of Warrant, Disposition
of Shares of Common Stock.
5.1 Compliance with Securities Act. The Holder, by acceptance
hereof, agrees that this Warrant and the Warrant Shares to be issued upon
exercise hereof are being acquired for investment and that he will not offer,
sell, or otherwise dispose of this Warrant or any Warrant Shares except under
circumstances which will not result in a violation of the Securities Act of 1933
(the "Act") or any applicable state securities laws. This Warrant and all
Warrant Shares (unless registered under the Act) shall be stamped or imprinted
with a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED OR THE SECURITIES OR BLUE SKY LAWS OF
ANY STATE. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED, OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT.
5.2 Access to Information; Pre-Existing Relationship. Holder has had
the opportunity to ask questions of, and to receive answers from, appropriate
executive officers of the Company with respect to the terms and conditions of
the transactions contemplated hereby and with respect to the business, affairs,
financial condition and results of operations of the Company. Holder has had
access to such financial and other information as is necessary in order for
Holder to make a fully informed decision as to investment in the Company, and
has had the opportunity to obtain any additional information necessary to verify
any of such information to which Holder has had access. Holder further
represents and warrants that he has either (i) a pre-existing relationship with
the Company or one or more of its officers or directors consisting of personal
or business contacts of a nature and duration which enable him to be aware of
the character, business acumen and general business and financial circumstances
of the Company or the officer or director with whom such relationship exists or
(ii) such business or financial expertise as to be able to protect his own
interests in connection with the purchase of the Shares.
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5.3 Warrant Transferable. Subject to compliance with applicable
federal and state securities laws under which this Warrant was issued, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the Holder (except for transfer taxes), upon surrender of this Warrant
properly endorsed; provided, however, that the Holder shall notify the Company
in writing in advance of any proposed transfer and shall not transfer this
Warrant or any rights hereunder to any person or entity which is then engaged in
a business that in the reasonable judgment of the Company is in direct
competition with the Company. As promptly as practicable but in any event within
ten (10) Business Days of receipt of such properly endorsed Warrant, the Company
shall issue, register and deliver to the Holder thereof a new Warrant or
Warrants of like kind and tenor representing in the aggregate the right to
purchase the same number of Warrant Shares that could be purchased pursuant to
the Warrant being transferred. Holder shall pay Company's reasonable costs
incurred in effectuating such transfer.
5.4 Disposition of Warrant Shares. With respect to any offer, sale,
or other disposition of the Warrant or any Warrant Shares, the Holder hereof and
each subsequent Holder of this Warrant agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of such holder's counsel, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state law then in effect) of the Warrant or Warrant Shares, as
the case may be, and indicating whether or not under the Act certificates for
the Warrant or Warrant Shares to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Act. Promptly upon receiving such written notice and
opinion, the Company, as promptly as practicable, shall notify the Holder that
such Holder may sell or otherwise dispose of the Warrant or Warrant Shares, all
in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this subparagraph 5.4 that the opinion
of the counsel for the Holder is not reasonably satisfactory to the Company, the
Company shall so notify the Holder promptly after such determination has been
made. Notwithstanding the foregoing, the Warrant or Warrant Shares may be
offered, sold or otherwise disposed of in accordance with Rule 144 under the
Act, provided that the Company shall have been furnished with such information
as the Company may request to provide reasonable assurance that the provisions
of Rule 144 have been satisfied. Each certificate representing the Warrant or
Warrant Shares thus transferred (except a transfer pursuant to Rule 144) shall
bear a legend as to the applicable restrictions on transferability in order to
insure compliance with the Act, unless in the aforesaid opinion of counsel for
the Holder, such legend is not required in order to insure compliance with the
Act. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
5.5 Market Standoff. The Holder agrees that if so requested by the
Company or any representative of the underwriters in connection with
registration of the initial public offering of any securities of the Company
under the Act, the Holder shall not sell or otherwise transfer any Warrant
Shares or other securities of the Company during the 120 day period following
the effective date of such registration statement. The Company may impose stop
transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such 120 day period.
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5.6 Register. This Warrant is, and any Warrant issued, exchanged or
transferred hereunder shall be registered in a warrant register (the "Warrant
Register"). The Warrant Register shall set forth the number of the Warrant, the
name and address of the Holder hereof and the original number of Warrant Shares
purchasable upon the exercise hereof. The Warrant Register will be maintained by
the Company and will be available for inspection by the Holder at the principal
office of the Company or such other location as the Company may designate to the
Holder in the manner set forth in Section 7. The Company shall be entitled to
treat the Holder 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 the Warrant on
the part of any other person.
6. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
7. Governing Law; Waiver of Jury Trial.
7.1 Governing Law. All questions concerning the construction,
interpretation and validity of this Agreement shall be governed by and construed
and enforced in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether in the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. In furtherance of the foregoing, the internal law of the State of New York
will control the interpretation and construction of this Agreement, even if
under such jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily or necessarily
apply.
7.2 Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO
APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
8. Exchange of Warrant for Warrants.
8.1 Lost Warrant. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of the Warrant, the Company will, at the Company's
expense, make and deliver a new Warrant, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant.
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8.2 Exchange. The Holder may exchange this Warrant at his option,
upon presentation and surrender of this Warrant to Company, for other Warrants
of different denominations, entitling the Holder to purchase in the aggregate
the same number of Warrant Shares. A Warrant may be divided or combined with
other Warrants that carry the same rights, upon presentation thereof at the
principal office of the Company, together with written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
holder thereof. In order to effect an exchange permitted by this Section 8.2,
the Holder shall deliver to the Company this Warrant accompanied by a written
request signed by the Holder specifying the number and denominations of the
Warrant or the Warrants to be issued in such exchange and the names in which the
Warrant or Warrants are to be issued. As promptly as practicable but in any
event within ten (10) Business Days of receipt of such a request, the Company
shall, without charge, issue, register and deliver to the Holder each Warrant to
be issued in such exchange.
9. Fractional Shares. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the Holder entitled to such fraction a sum in cash equal to such fraction
(calculated to the nearest 1/100th of a share) multiplied by the then effective
Exercise Price on the date the Form of Subscription is received by the Company.
10. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company
and the Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
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NOTICE OF EXERCISE
(To be signed only upon exercise of Warrant)
To: Innovative Card Technologies, Inc.
The undersigned, the holder of the attached Common Stock Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, shares of Common Stock of Innovative Card
Technologies, Inc. (the "Company") and herewith makes payment (i) in cash or by
check, (ii) cancellation of indebtedness or other obligations of the company to
the Holder, or by a combination of (i) and (ii), of $_________ therefor. Please
issue the share certificate representing the warrant shares in the name of:
____________________.
The warrant shares shall be delivered to:
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The undersigned represents that he is acquiring such Common Stock for his own
account for investment and not with a view to or for sale in connection with any
distribution thereof.
DATED: ___________
-----------------------------------------
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant)
Name: ___________________________________
Title: __________________________________
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