THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER FROM
THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING
WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
IQ BIOMETRIX, INC.
WARRANT TO PURCHASE COMMON STOCK
THIS CERTIFIES THAT, for value received pursuant to that certain
Debenture of even date herewith (the "Debenture"), the undersigned and its
assigns (collectively, the "Holder") are entitled to subscribe for and purchase
up to that number of shares derived from the calculations set forth in Section
1.2 of the Debenture (as adjusted pursuant to Section 3 hereof, the "Shares") of
the fully paid and nonassessable Common Stock of IQ Biometrix, Inc. (the
"Company"), at the price of $0.20 per share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 3
hereof is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. The term "Warrant" as
used herein, shall include this Warrant and any warrants issued upon transfer or
partial exercise of this Warrant unless the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable, in whole
or in part, for five years from the date of the issuance of this Warrant (the
"Expiration Date"). 2. Method of Exercise; Payment; Issuance of New Warrant.
(a) Subject to Section 1 hereof, the purchase right represented by this Warrant
may be exercised by the Holder the surrender of this Warrant (with the notice of
exercise substantially in the form attached hereto as Exhibit A duly completed
and executed) at the principal office of the Company and by the payment to the
Company, either: (i) by certified or bank check, or by wire transfer to an
account designated by the Company in an amount equal to the then applicable
Warrant Price multiplied by the number of Shares then being purchased, (ii) by
the delivery of that number of shares of Common Stock having a value equal to
the Warrant Price, which shares may be the Shares underlying the Warrant, or
(iii) by the net exercise method set forth below in Section 2(b). If, in any
event, this Warrant has not been exercised on the Expiration Date, then the
Company shall, without further action by the Holder, exercise any unexercised
Shares by net exercise in accordance with Sections 2(b) throughand 2(d) below.
(b) Net Exercise; Procedure.
(i) In addition to and without limiting the rights of
the Holder under the terms of this
Warrant, but only to the extent this Warrant has not otherwise been exercised,
the Holder shall have the right to convert this Warrant or any portion thereof
(the "Conversion Right") into shares of Common Stock as provided in this Section
2(b) at any time or from time to time during the term of this Warrant. Upon
exercise of the Conversion Right with respect to a particular number of shares
subject to this Warrant (the "Converted Warrant Shares"), the Company shall
deliver to the Holder (without payment by the Holder of any exercise price or
any cash or other consideration) (X) that number of shares of fully paid and
nonassessable Common Stock equal to the quotient obtained by dividing the value
of this Warrant (or the specified portion hereof) on the Conversion Date (as
defined in subsection (d) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the value of
the Converted Warrant Shares issuable upon exercise of this Warrant (or the
specified portion hereof) on the Conversion Date (as herein defined) by (Y) the
Fair Market Value of one share of Common Stock as determined in accordance with
Section 2(c) below.
Expressed as a formula, such conversion shall be computed as
follows:
X = B - A
---------
Y
Where:
X = the number of shares of Common Stock that may be
issued to Holder
Y = the Fair Market Value of one share of Common
Stock as of the Conversion Date
A = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
B = the Fair Market Value of all Converted Warrant
Shares
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
Holder an amount in cash equal to the value of the resulting fractional share on
the Conversion Date (as hereinafter defined).
(c) Determination of Fair Market Value. For purposes
of this Section 2, the "Fair
Market Value" of a share of Common Stock as of the Conversion Date shall mean:
(i) If traded on a securities exchange, the fair
market value per share of the Common
Stock shall be deemed to be the average of the closing prices of the Common
Stock on such exchange over the five (5) day period ending one (1) business day
prior to the Conversion Date;
(ii) If traded over-the-counter, the fair market
value per share of the Common Stock
shall be deemed to be the average of the closing bid prices of the Common Stock
over the five (5) day period ending one (1) business day prior to the Conversion
Date; and
(iii) If there is no public market for the Common
Stock, then fair market value per
share shall be the value per share determined in good faith by the Company (by
action of its Board of Directors) for the issuance of Incentive Stock Options as
of the Conversion Date.
(d) Holder of Record; Certificates. The person or persons in
whose name(s) any certificate(s) representing the Shares shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of the Shares
represented thereby (and such Shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised (the "Conversion Date"). In the event of any exercise of
the rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the Holder hereof as soon as practicable and, if
requested by the Holder, the Company shall cause its transfer agent to deliver
the certificate representing Shares issued upon exercise of this Warrant to a
broker or other person (as directed by the Holder exercising this Warrant)
within the time period required to settle any trade made by the Holder after
exercise of this Warrant.
3. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) Reclassification or Merger. In case of any reclassification or change of
securities of the class issuable upon exercise of this Warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in case of any
merger of the Company with or into another corporation (other than a merger with
another corporation in which the Company is the acquiring and the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall duly
execute and deliver to the Holder a new Warrant (in form and substance
satisfactory to the Holder), or the Company shall make appropriate provision
without the issuance of a new Warrant, so that the Holder shall have the right
to receive upon exercise of this Warrant, at a total purchase price not to
exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of Common Stock then purchasable
under this Warrant. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 3. The provisions of this subparagraph (a) shall similarly apply to
successive reclassifications, changes, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the Company shall at any
time prior to the expiration of this Warrant subdivide its outstanding shares of
Common Stock, by split-up or otherwise, or combine its outstanding shares of
Common Stock, or issue additional shares of its Common Stock as a dividend on
its Common Stock, the number of Shares issuable on the exercise of this Warrant
shall forthwith be proportionately increased in the case of a subdivision or
stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the purchase price payable per
share, but the aggregate purchase price payable for the total number of Shares
purchasable under this Warrant (as adjusted) shall remain the same. 4. Notice of
Adjustments. Whenever the Warrant Price or the number of Shares purchasable
hereunder shall be adjusted pursuant to Section 3 hereof, the Company shall make
a certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Adjusted Warrant Price and the number of Shares
purchasable hereunder after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (without regard to Section 10 hereof, by
first class mail, postage prepaid) to the Holder at such Xxxxxx's last known
address.
5. Fractional Shares. No fractional shares of Common Stock will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value of
the Common Stock on the date of exercise.
6. Compliance with Securities Act; Disposition of Warrant or Shares of Common
Stock.
(a) Investment Only. The Holder understands that the Company is issuing this
Warrant to Holder in reliance upon Xxxxxx's representation to the Company, which
by Xxxxxx's acceptance of this Warrant Holder hereby confirms, that the Warrant
and the Common Stock issuable upon conversion thereof (collectively, the
"Securities") are being acquired for investment for Xxxxxx's own account, not as
a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same. By accepting this Warrant,
Holder further represents that Xxxxxx does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
(b) Disclosure of Information. Xxxxxx has received and reviewed information
about the Company and has had an opportunity to discuss the Company' business,
management and financial affairs with its management. Holder understands and
acknowledges that such discussions, as well as any written information issued by
the Company, (i) were intended to describe the aspects of the Company's business
and prospects which the Company believes to be material, but were not
necessarily an exhaustive description, and (ii) may have contained
forward-looking statements involving known and unknown risks and uncertainties
which may cause the Company's actual results in future periods or plans for
future periods to differ materially from what was anticipated and that no
representations or warranties were or are being made with respect to any such
forward-looking statements or the probability of achieving any of the results
projected in any of such forward-looking statements.
(c) Investment Experience. Holder acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Securities.
(d) Accredited Investor. Holder is an "accredited investor" within the meaning
of SEC Rule 501 of Regulation D, as now in effect and shall submit to the
Company such further assurances of such status as may be reasonably requested by
the Company.
(e) Restricted Securities.
(1) Current Limitation. Holder understands that the Securities it is receiving
are currently characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may be resold without registration under
the Securities Act of 1933 only in certain limited circumstances. In this
connection, the Holder represents that it is familiar with SEC Rule 144, as now
in effect, and understands the resale limitations imposed thereby and by the
Act.
(2) Registration of Warrant Shares. IQB is currently
preparing a form SB-2 for
filling with the Securities and Exchange Commission. The Shares of Common Stock
issuable upon the exercise of this Warrant shall be included for registration in
such filing. While acting in a commercially reasonable fashion, IQB shall
promptly after the Closing (as defined in the Debenture), file such form for
registration and use its commercially reasonable efforts to effect such
registration (including, without limitation, filing post-effective amendments,
appropriate qualifications under applicable blue sky or other state securities
laws, and appropriate compliance with the Securities Act), of the Shares. The
term "registration" shall refer to a registration effected by preparing and
filing a registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder with the Securities and Exchange
Commission, and the declaration or ordering of the effectiveness of such
registration statement.
(f) Legends. This Warrant and all Shares issued upon exercise of this Warrant
(unless registered under the Act and any applicable state securities laws) shall
be stamped or imprinted with a legend in substantially the form appearing at the
top of this Warrant. Said legend(s) shall be removed by the Company, upon the
written request of a Holder, at such time as the restrictions on the transfer of
the applicable security shall have terminated. (g) Disposition of Warrant or
Shares. With respect to any offer, sale or other disposition of this Warrant or
any Shares acquired pursuant to the exercise of this Warrant prior to
registration of such Warrant or Shares, the Holder agrees to give written notice
to the Company prior thereto, describing briefly the manner thereof, together
with a written opinion of such Xxxxxx's counsel, or other evidence satisfactory
to 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 securities law then in effect) of this Warrant or the
Shares and indicating whether or not under the Act certificates for this Warrant
or the Shares to be sold or otherwise disposed of require any restrictive legend
as to applicable restrictions on transferability in order to ensure compliance
with such law. Upon receiving such written notice and reasonably satisfactory
opinion or other evidence, the Company, as promptly as practicable but no later
than fifteen (15) days after receipt of the written notice, shall notify such
Holder that such Holder may sell or otherwise dispose of this Warrant or such
Shares, all in accordance with the terms of the notice delivered to the Company.
If a determination has been made pursuant to this Section 6(g) that the opinion
of counsel for the Holder or other evidence is not reasonably satisfactory to
the Company, the Company shall so notify the Holder promptly with details
thereof after such determination has been made. Notwithstanding the foregoing,
this Warrant or such Shares may, as to such federal laws, be offered, sold or
otherwise disposed of in accordance with Rule 144 or 144A under the Act,
provided that the Company shall have been furnished with such information as the
Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 or 144A have been satisfied. Each certificate
representing this Warrant or the Shares thus transferred (except a transfer
pursuant to Rule 144 or 144A) shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with such laws,
unless in the aforesaid opinion of counsel for the Holder, such legend is not
required in order to ensure compliance with such laws. The Company may issue
stop transfer instructions to its transfer agent in connection with such
restrictions.
(h) Applicability of Restrictions. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 6(g) above shall apply
to any transfer or grant of a security interest in this Warrant (or the Common
Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of
the Holder if the Holder is a partnership or to a member of the Holder if the
Holder is a limited liability company, (ii) to a partnership of which the Holder
is a partner or a limited liability company of which the Holder is a member, or
(iii) to any affiliate of the Holder if the Holder is a corporation; provided,
however, in any such transfer, if applicable, the transferee shall on the
Company's request agree in writing to be bound by the terms of this Warrant as
if an original Holder hereof.
(i) Registration of Shares. While acting in a commercially
reasonable fashion, IQB shall promptly after the Issue Date (as defined in the
Debenture), file for registration and use its commercially reasonable efforts to
effect such registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other state
securities laws, and appropriate compliance with the Securities Act) the Common
Stock issuable upon the exercise of this Warrant. The term "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder with the Securities and Exchange Commission, and the
declaration or ordering of the effectiveness of such registration statement.
7. Rights as Shareholders; Information. No Holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the Holder of Common
Stock or any other securities which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the Holder of this Warrant, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise
until this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
Notwithstanding the foregoing, the Company will transmit to the Holder of this
Warrant such information, documents and reports as are generally distributed to
the holders of any class or series of the securities of the Company concurrently
with the distribution thereof to the shareholders.
8. Notification of Merger. The Company shall provide the Holder with at least
twenty (20) days' written notice prior to the closing thereof of the terms and
conditions of any of the following transactions: (i) the sale, lease, exchange,
conveyance or other disposition of all or substantially all of the Company's
property or business, or (ii) its merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company), or (iii) any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is
disposed of.
9. 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. 10.
Notices. Any notice, request, communication or other document required or
permitted to be given or delivered to the Holder or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid, to
each such Holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor on the signature page of this Warrant.
11. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon the exercise or conversion of
this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof.
12. Lost Warrants or Stock Certificates. The Company covenants to the Holder
that, upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
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 such Warrant or stock certificate,
the Company will make and deliver a new Warrant or stock certificate, of like
tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
13. Descriptive Headings. The descriptive headings of the several paragraphs of
this Warrant are inserted for convenience only and do not constitute a part of
this Warrant. The language in this Warrant shall be construed as to its fair
meaning without regard to which party drafted this Warrant.
14. Governing Law. This Warrant shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of California, with reference to conflict of laws principles. 15. Survival of
Representations, Warranties and Agreements. All representations and warranties
of the Holder contained herein shall survive the date of issuance of this
Warrant, the exercise or conversion of this Warrant (or any part hereof) or the
termination or expiration of rights hereunder. All agreements of the Company and
the Holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative. 16. Remedies. In case any one or
more of the covenants and agreements contained in this Warrant shall have been
breached, the Holders hereof (in the case of a breach by the Company), or the
Company (in the case of a breach by a Holder), may proceed to protect and
enforce their or its rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific performance of any such covenant or
agreement contained in this Warrant.
17. No Impairment of Rights. The Company will not, by amendment of its
certificate of incorporation or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder of this Warrant against impairment. 18. Severability.
Whenever possible, each provision of this Warrant shall be interpreted in such a
manner as to be valid, legal and enforceable under all applicable laws and
regulations. If, however, any provision of this Warrant shall be invalid,
illegal or unenforceable under any such law or regulation in any jurisdiction,
it shall, as to such jurisdiction, be deemed modified to conform to the minimum
requirements of such law or regulation, or, if for any reason it is not deemed
to be so modified, it shall be invalid, illegal or unenforceable only to the
extent of such invalidity, illegality or limitation on enforceability without
affecting the remaining provisions of this Warrant or the validity, legality or
enforceability of such provision in any other jurisdiction. 19. Entire
Agreement. This Warrant and the Purchase Agreement constitute the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
[The Remainder of this Page is Intentionally Blank]
Date of issuance: __________________
IQ Biometrix, Inc.
By:
-------------------------------------------------
Title:
-------------------------------------------------
Address:
Holder
By:
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Title:
-------------------------------------------------
Address:
[Signature Page to Warrant to Purchase Common Stock]
EXHIBIT A
NOTICE OF EXERCISE
To: IQ Biometrix, Inc. (the "Company")
1. The undersigned hereby elects to purchase ___________ shares of
Common Stock of the Company pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
(Signature)
(Date)
