REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made and entered
into as of March 27, 2003, by and among Intelli-Check, Inc., a Delaware
corporation (the "Company"), and the persons and entities listed on Exhibit A
hereto (each, a "Purchaser" and, collectively, the "Purchasers").
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"), the
Company has agreed to issue and sell shares of its Preferred Stock and Warrants
to purchase shares of its Common Stock to the Purchasers; and
WHEREAS, to induce the Purchasers to execute and deliver the Purchase
Agreement and to purchase the Shares and the Warrants, the Company has agreed to
provide certain registration rights under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Shares, the Conversion Shares, the
Warrants and the Warrant Shares (each as respectively defined in the Purchase
Agreement).
NOW, THEREFORE, in consideration of the representations, warranties and
agreements contained herein and other good and valuable consideration, the
receipt and legal adequacy of which are hereby acknowledged by the parties, the
Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used but not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"AMEX" shall mean the American Stock Exchange.
"Blackout Period" shall have the meaning set forth in Section 3(m).
"Board" shall have the meaning set forth in Section 3(m).
"Business Day" means any day except Saturday, Sunday and any day which is a
legal holiday or a day on which banking institutions in the state of New York
generally are authorized or required by law or other government actions to
close.
"Commission" means the Securities and Exchange Commission.
"Common Shares" shall have the meaning set forth in the definition of
"Registrable Securities."
"Common Stock" means the Company's Common Stock, $.001 par value.
"Effectiveness Date" means with respect to the Registration Statement the
earlier of (i) the 90th day following the Closing Date, before which the Company
will use its commercially reasonable efforts to cause the Registration Statement
to become effective, and (ii) the date which is within five (5) Business Days of
the date on which the Commission informs the Company that the Commission (a)
will not review the Registration Statement or (b) that the Company may request
the acceleration of the effectiveness of the Registration Statement.
"Effectiveness Period" shall have the meaning set forth in Section 2.
"Event" shall have the meaning set forth in Section 8(d).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the date that the Registration Statement is required to
be filed which date shall be within thirty (30) days from the Closing Date.
"Holder" means, collectively, each holder from time to time of Registrable
Securities including, without limitation, each Purchaser and its assignees. To
the extent this Agreement refers to an election, consent, waiver, request or
approval of or by a Holder, such reference shall mean an election, consent,
waiver, request or approval by the holders of a majority in interest of the
then-outstanding Registrable Securities (on an as converted basis).
"Indemnified Party" shall have the meaning set forth in Section 6(c).
"Indemnifying Party" shall have the meaning set forth in Section 6(c).
"Liquidated Damages" shall have the meaning set forth in Section 8(d).
"Losses" shall have the meaning set forth in Section 6(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Shares" shall have the meaning set forth in the definition of
"Registrable Securities."
"Preferred Stock" means the Company's 8% Convertible Preferred Stock, $.01
par value.
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"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.
"Registrable Securities" means (i) the shares of Preferred Stock issued or
issuable pursuant to the Purchase Agreement, and upon any stock split, stock
dividend, recapitalization or similar event with respect to such shares of
Preferred Stock and any other securities issued in exchange of or replacement of
such shares of Preferred Stock (collectively, the "Preferred Shares"); until in
the case of any of the Preferred Shares (a) a Registration Statement covering
such Preferred Share has been declared effective by the Commission and continues
to be effective during the Effectiveness Period; or (b) such Preferred Share is
sold in compliance with Rule 144 or may be sold pursuant to Rule 144(k), after
which time such Preferred Share shall not be a Registrable Security; (ii) the
Warrants issued or issuable pursuant to the Purchase Agreement until in the case
of any of the Warrants (a) a Registration Statement covering such Warrant has
been declared effective by the Commission and continues to be effective during
the Effectiveness Period, (b) such Warrant is sold in compliance with Rule 144
or may be sold pursuant to Rule 144(k), or (c) such Warrant is fully exercised
for shares of Common Stock, after which time such Warrant shall not be a
Registrable Security; and (iii) the shares of Common Stock issued and issuable
pursuant to the conversion of the Preferred Stock and the exercise of the
Warrants, as the case may be, and upon any stock split, stock dividend,
recapitalization or similar event with respect to such shares of Common Stock
and any other securities issued in exchange of or replacement of such shares of
Common Stock (collectively, the "Common Shares"); until in the case of any of
the Common Shares (a) a Registration Statement covering such Common Share has
been declared effective by the Commission and continues to be effective during
the Effectiveness Period, or (b) such Common Share is sold in compliance with
Rule 144 or may be sold pursuant to Rule 144(k), after which time such Common
Share shall not be a Registrable Security.
"Registration Statement" means the registration statement, including the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference in such registration statement, for
the Shares, the Conversion Shares, the Warrants and the Warrant Shares required
to be filed by the Company with the Commission pursuant to this Agreement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
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"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to Holder, for which Holder
will be reimbursed by the Company pursuant to Section 5 of this Agreement and
Section 8.1 of the Purchase Agreement.
2. Registration. On or prior to the Filing Date, the Company shall prepare
and file with the Commission a Registration Statement covering the resale of the
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance with the Securities Act and the rules promulgated thereunder)
and shall contain (except if otherwise directed by the Purchasers) the "Plan of
Distribution" attached hereto as Exhibit B. The Company shall (i) not permit any
securities other than the Registrable Securities to be included in the
Registration Statement, (ii) use its commercially reasonable efforts to cause
the Registration Statement to be declared effective under the Securities Act
(including filing with the Commission a request for acceleration of
effectiveness in accordance with Rule 12dl-2 promulgated under the Exchange Act
within five (5) Business Days of the date that the Company is notified (orally
or in writing, whichever is earlier) by the Commission that a Registration
Statement will not be "reviewed," or not be subject to further review) as soon
as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and (iii) keep such Registration Statement continuously
effective under the Securities Act for a period of two years from the
Effectiveness Date or such earlier date as all the Registrable Securities have
been sold or are saleable under Rule 144(k) (the "Effectiveness Period").
3. Registration Procedures; Company's Obligations.
In connection with the registration of the Registrable Securities, the
Company shall:
(a) Prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form S-3 (or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3 such registration
shall be on another appropriate form in accordance with the Securities Act and
the Rules promulgated thereunder) in accordance with the method or methods of
distribution thereof as specified by the Holder (except if otherwise directed by
the Holder), and use its commercially reasonable efforts to cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than three (3) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holder
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and any Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will be subject to
the timely review of and comment by such Special Counsel, and (ii) at the
request of the Holder cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of such Special Counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holder or any Special Counsel shall reasonably
object in writing within three (3) Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond promptly to any comments received from the Commission with respect
to the Registration Statement or any amendment thereto and promptly provide the
Holder true and complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the Holder set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holder of Registrable Securities to be sold and any Special
Counsel promptly (and, in the case of (i)(A) below, not less than three (3)
Business Days prior to such filing and, in the case of (i)(B) or (i)(C) below,
no later than the first Business Day following the date on which the
Registration Statement becomes effective) and (if requested by any such Person)
confirm such notice in writing no later than three (3) Business Days following
the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed, (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement, and (C) with respect to the Registration Statement or
any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence of any
event that makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference
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untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The Company shall promptly furnish to the Special Counsel, without charge,
(i) any correspondence from the Commission or the Commission's staff to the
Company or its representatives relating to any Registration Statement, and (ii)
promptly after the same is prepared and filed with the Commission, a copy of any
written response to the correspondence received from the Commission.
(d) Use its commercially reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of, (i) any order suspending the effectiveness
of the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any U.S. jurisdiction, at the earliest practicable moment.
(e) If requested by the Holder, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as the Company reasonably agrees should be included therein, and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
(f) Furnish to the Holder and any Special Counsel, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to the Holder and any Special Counsel, without charge,
as many copies of the Registration Statement, Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by the selling
Holder in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
commercially reasonable efforts to register or qualify or cooperate with the
selling Holder and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as the Holder reasonably requests
in writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
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to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any tax
in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holder to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to a Registration Statement and to enable such Registrable Securities to be in
such denominations and registered in such names as the Holder may request at
least two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(v),
promptly prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(k) Use its commercially reasonable efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on the AMEX and
any other securities exchange, quotation system, market or over-the-counter
bulletin board, if any, on which the same securities issued by the Company are
then listed as and when required pursuant to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than forty- five (45) days after the end
of any twelve (12) month period (or ninety (90) days after the end of any twelve
(12) month period if such period is a fiscal year) commencing on the first day
of the first fiscal quarter of the Company after the effective date of the
Registration Statement, which statement shall conform to the requirements of
Rule 158.
(m) If (i) there is material non-public information regarding the Company
which the Company's Board of Directors (the "Board") reasonably determines not
to be in the Company's best interest to disclose and which the Company is not
otherwise required to disclose, or (ii) there is a significant business
opportunity (including, but not limited to, the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Board reasonably determines not to be in the Company's best
interest to disclose and which the Company would be required to disclose under
the Registration Statement, then the Company may suspend effectiveness of a
Registration Statement and suspend the sale of Registrable Securities under a
Registration Statement one (1) time every three (3) months or three (3) times in
any twelve month period, provided that the Company may not suspend its
obligation for more than thirty (30) days in the aggregate in any twelve month
period if suspension is for any of the reasons listed above or sixty (60) days
in the aggregate in any twelve month period for any other reason (each, a
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"Blackout Period"); provided, however, that no such suspension shall be
permitted for more than twenty (20) consecutive days, arising out of the same
set of facts, circumstances or transactions.
(n) Within two (2) Business Days after the Registration Statement which
includes the Registrable Securities is ordered effective by the Commission, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the Holder
whose Registrable Securities are included in such Registration Statement)
confirmation that the Registration Statement has been declared effective by the
Commission in the form attached hereto as Exhibit C.
4. Registration Procedures; Holder's Obligations
In connection with the registration of the Registrable Securities, the
Holder shall:
(a) If the Registration Statement refers to the Holder by name or otherwise
as the holder of any securities of the Company, have the right to require (if
such reference to the Holder by name or otherwise is not required by the
Securities Act or any similar federal statute then in force) the deletion of the
reference to the Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
(b) (i) not sell any Registrable Securities under the Registration
Statement until it has received copies of the Prospectus as then amended or
supplemented as contemplated in Section 3(g) and notice from the Company that
such Registration Statement and any post- effective amendments thereto have
become effective as contemplated by Section 3(c), (ii) comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement, and (iii) furnish to the Company information regarding such Holder
and the distribution of such Registrable Securities as is required by law to be
disclosed in the Registration Statement, and the Company may exclude from such
registration the Registrable Securities of the Holder if it fails to furnish
such information within a reasonable time prior to the filing of each
Registration Statement, supplemented Prospectus and/or amended Registration
Statement.
(c) upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(m), forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until the Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
5. Registration Expenses
All reasonable fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, the following: (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
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required to be made with the AMEX and each other securities exchange or market
on which Registrable Securities are required hereunder to be listed, (B) with
respect to filings required to be made with the Commission, and (C) in
compliance with state securities or Blue Sky laws); (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in the Registration Statement); (iii) messenger, telephone
and delivery expenses; (iv) fees and disbursements of counsel for the Company;
and (v) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, the Company's independent public
accountants (including the expenses of any comfort letters or costs associated
with the delivery by independent public accountants of a comfort letter or
comfort letters). In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
6. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless the Purchaser, its
permitted assignees, officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees, each Person who controls any such Purchaser or permitted assignee
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against any and all claims, losses, damages,
liabilities, penalties, judgments, costs (including, without limitation, costs
of investigation) and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "Losses"), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus, as supplemented or
amended, if applicable, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except (i) to the extent, but only to the extent, that
such untrue statements or omissions are based solely upon information regarding
the Holder furnished in writing to the Company by the Holder expressly for use
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therein, which information was reviewed and expressly approved by the Holder or
Special Counsel expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto, or (ii) as
a result of the failure of the Holder to deliver a Prospectus, as amended or
supplemented, to a purchaser in connection with an offer or sale. The Company
shall notify the Holder promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of an Indemnified
Party (as defined in Section 6(c) hereof) and shall survive the transfer of the
Registrable Securities by the Holder.
(b) Indemnification by Purchaser. Purchaser and its permitted assignees
shall, severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out of
or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus, as supplemented or
amended, if applicable, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that (i) such
untrue statement or omission is contained in or omitted from any information so
furnished in writing by the Holder or the Special Counsel to the Company
specifically for inclusion in the Registration Statement or such Prospectus, and
(ii) such information was reasonably relied upon by the Company for use in the
Registration Statement, such Prospectus or such form of prospectus or, to the
extent that such information relates to the Holder or the Holder's proposed
method of distribution of Registrable Securities, was reviewed and expressly
approved in writing by the Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus Supplement.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable under this Section 6(b) for only that amount as does not exceed the net
proceeds to the Holder as a result of the sale of Registrable Securities
pursuant to such Registration Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity pursuant to Section
6(a) or 6(b) hereunder (an "Indemnified Party"), such Indemnified Party promptly
shall notify the Person from whom indemnity is sought (the "Indemnifying Party)
in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that
such failure shall have materially and adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
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Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld, conditioned or delayed. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, which consent shall not unreasonably be withheld, conditioned or delayed,
effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
If the Indemnifying Party fails or refuses to promptly assume the defense
of any Proceeding, then all reasonable fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner
not inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder or pursuant to applicable law).
(d) Contribution. If a claim for indemnification under Section 6(a) or 6(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 6(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for under
Section 6(a) or 6(b) was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable or required to contribute under this Section 6(d) for only that amount as
does not exceed the net proceeds to the Holder as a result of the sale of
Registrable Securities pursuant to the Registration Statement.
11
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The indemnity and
contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.
7. Rule 144.
As long as the Holder owns Registrable Securities, the Company covenants to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act and to
promptly furnish the Holder with true and complete copies of all such filings.
As long as the Holder owns Registrable Securities, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Holder and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as the Holder may reasonably request, all to the extent required
from time to time to enable the Holder to sell Warrants, Preferred Shares and
Common Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including providing any legal opinions of counsel to the Company
referred to in the Purchase Agreement. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.
8. Miscellaneous.
(a) Remedies. Except as otherwise specifically set forth in this Agreement,
the remedies provided in this Agreement and the Purchase Agreement are
cumulative and not exclusive of any remedies provided by law. In the event of a
breach by the Company or by the Holder of any of their obligations under this
Agreement, the Holder or the Company, as the case may be, in addition to being
entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and the Holder agree that monetary
damages would not provide adequate compensation for any losses incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
12
(b) No Inconsistent Agreements. Neither the Company nor any of its
Affiliates has as of the date hereof entered into, nor shall the Company or any
of its Affiliates, on or after the date of this Agreement, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holder in this Agreement or otherwise conflicts with the
provisions hereof. Without limiting the generality of the foregoing, without the
written consent of the Holder, the Company shall not grant to any Person the
right to request the Company to register any securities of the Company under the
Securities Act if the rights so granted are inconsistent with the rights granted
to the Holder set forth herein, or otherwise prevent the Company with complying
with all of its obligations hereunder.
(c) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holder in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement.
(d) Failure to File Registration Statement and Other Events. The Company
and the Holder agree that the Holder will suffer damages if the Registration
Statement is not filed on or prior to the Filing Date or is not declared
effective by the Commission on or prior to the Effectiveness Date and maintained
in the manner contemplated herein during the Effectiveness Period or if certain
other events occur. The Company and the Holder further agree that it would not
be feasible to ascertain the extent of such damages with precision. Accordingly,
if (i) the Registration Statement is not filed on or prior to the Filing Date,
or is not declared effective by the Commission on or prior to the Effectiveness
Date, or (ii) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12dl-2 promulgated under the Exchange Act
within five (5) Business Days of the date that the Company is notified (orally
or in writing, whichever is earlier) by the Commission that a Registration
Statement will not be "reviewed," or not subject to further review, or (iii) the
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective or available as to all Registrable
Securities at any time during the Effectiveness Period, without being succeeded
within a reasonable period by a subsequent Registration Statement filed with and
declared effective by the Commission, or (iv) the Company suspends the use of
the Prospectus forming a part of such Registration Statement for more than
thirty (30) days in any period of 365 consecutive days if the Company suspends
in reliance on its ability to do so due to the existence of a development that,
in the good faith discretion of the Board, makes it appropriate to so suspend or
which renders the Company unable to comply with the Commission requirements, or
the Company suspends the use of the Prospectus forming a part of such
Registration Statement for more than sixty (60) days in any period of 365
consecutive days for any other reason, or (v) during the Effectiveness Period,
trading in the Warrants, Preferred Stock or Common Stock shall be suspended for
any reason for more than five (5) Business Days in the aggregate, or (vi) the
Company breaches in a material respect any covenant or other material term or
condition in the Transaction Documents (other than a representation or warranty
contained therein) or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated hereby and
thereby, and such breach continues for a period of thirty (30) days after
written notice thereof to the Company, or (vii) the Company has breached Section
3(n) of this Agreement (any such failure or breach being referred to as an
"Event"), the Company shall pay as liquidated damages for such failure or breach
and not as a penalty (the "Liquidated Damages") to the Holder an amount equal to
13
one percent (1%) of the purchase price of the Preferred Stock paid by the Holder
pursuant to the Purchase Agreement for the first thirty (30) day period, one and
one-half percent (1%) of such purchase price for the second thirty (30) day
period, and two percent (2%) of such purchase price for each subsequent thirty
(30) day period, pro rated for any period less than thirty (30) days, following
the Event until the applicable Event has been cured; provided, however, the
Purchaser will waive any Liquidated Damages if the Company cures such failure or
breach prior to the end of the first thirty (30) day period. Payments to be made
pursuant to this Section 8(d) shall be due and payable immediately upon demand
in cash. The parties agree that the Liquidated Damages represent a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Holder if the Registration
Statement is not filed on or prior to the Filing Date or has not been declared
effective by the Commission on or prior to the Effectiveness Date and maintained
in the manner contemplated herein during the Effectiveness Period or if any
other Event as described herein has occurred. Purchaser agrees that the receipt
of the Liquidated Damages shall be Purchaser's sole and exclusive remedy under
this Agreement or otherwise for a default under this subsection 8(d) (except for
specific performance) and in no event shall the Company be liable for any lost
profits, consequential, special, punitive or similar damages no matter how
identified, resulting from such default.
(e) Consent to Jurisdiction. Both the Company and the Purchaser (i) hereby
irrevocably submit to the non-exclusive jurisdiction of the United States
District Courts sitting in the Northern District of Texas and the Eastern or
Southern District of New York for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement or the Purchase Agreement, and (ii)
hereby waive, and agree not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Both the Company and
the Purchasers consent to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 8(e) shall affect or limit any right to serve process in any other
manner permitted by law.
(f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Purchaser.
(g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., Eastern Standard Time,
on a Business Day, (ii) the first Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice later than 5:00 p.m., Eastern Standard
Time, on any date and earlier than 11:59 p.m., Eastern Standard Time, on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) actual receipt by the
party to whom such notice is required to be given.
14
(x) if to the Company:
Intelli-Check, Inc.
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxxxx
with a copy to:
Xxxxxxx, Xxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxx Xxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxx, Esq.
(y) if to any Purchaser:
At the address of such Purchaser set forth on Exhibit A to this
Agreeement.
with a copy to:
Fish & Xxxxxxxxxx P.C.
5000 Bank One Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Xxxxxx X. Garden
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice.
(h) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns and
shall inure to the benefit of the Holder and its successors and assigns. The
Company may not assign this Agreement or any of its respective rights or
obligations hereunder without the prior written consent of the Purchasers. Each
Purchaser may assign its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
(i) Assignment of Registration Rights. The rights of the Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be assignable
by each Holder to any transferee of the Holder of all or a portion of the shares
of Registrable Securities if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (A) the name and address of such transferee or
15
assignee, and (B) the securities with respect to which such registration rights
are being transferred or assigned; (iii) following such transfer or assignment
the further disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state securities laws; (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this Agreement; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Purchase Agreement and shall be for no less than 50% of the Registrable
Securities. In addition, the Holder shall have the right to assign its rights
hereunder to any other Person with the prior written consent of the Company,
which consent shall not be unreasonably withheld, conditioned or delayed. The
rights to assignment shall apply to the Holder (and to subsequent) successors
and assigns. In the event of an assignment pursuant to this Section 8(i), the
Purchaser shall pay all incremental costs and expenses incurred by the Company
in connection with filing a Registration Statement (or an amendment to the
Registration Statement) to register the shares of Registrable Securities
assigned to any assignee or transferee of the Purchaser.
(j) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(k) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts of law thereof. This Agreement shall not be interpreted or
construed with any presumption against the party causing this Agreement to be
drafted.
(l) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(m) Termination. This Agreement shall terminate on the date on which all
remaining Registrable Securities may be sold without restriction pursuant to
Rule 144(k) of the Securities Act.
(n) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, illegal, void or unenforceable in any respect,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
16
(o) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
INTELLI-CHECK, INC.
By: /s/
-----------------------------------
Name:
Title:
GRYPHON MASTER FUND, L.P.
By: Gryphon Partners, L.P., its General Partner
By: Gryphon Management Partners, L.P.,
its General Partner
By: Gryphon Advisors, LLC,
its General Partner
By: /s/
-------------------------------
X.X. Xxxx, XX, Authorized Agent
EXHIBIT A
---------
PURCHASERS
Gryphon Master Fund, L.P.
000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn: X.X. Xxxx, XX
X-0
XXXXXXX X
---------
PLAN OF DISTRIBUTION
We are registering the warrants and the shares of preferred stock and
common stock on behalf of the selling stockholders. The warrants and the shares
of preferred stock and common stock may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at prices related
to the prevailing market prices, at varying prices determined at the time of
sale, or at negotiated prices. These sales may be effected at various times in
one or more of the following transactions, or in other kinds of transactions:
-- transactions on the American Stock Exchange or on any national
securities exchange or U.S. inter-dealer system of a registered
national securities association on which the warrants and our
preferred stock and common stock may be listed or quoted at the time
of sale;
-- in the over-the-counter market;
-- in private transactions and transactions otherwise than on these
exchanges or systems or in the over-the-counter market;
-- in connection with short sales of the shares;
-- by pledge to secure or in payment of debt and other obligations;
-- through the writing of options, whether the options are listed on an
options exchange or otherwise;
-- in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options; or
-- through a combination of any of the above transactions.
The selling stockholder and its successors, including its transferees,
pledgees or donees or their successors, may sell the warrants, preferred stock
and common stock directly to purchasers or through underwriters, broker-dealers
or agents, who may receive compensation in the form of discounts, concessions or
commissions from the selling stockholder or the purchasers. These discounts,
concessions or commissions as to any particular underwriter, broker-dealer or
agent may be in excess of those customary in the types of transactions involved.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus.
We entered into a registration rights agreement for the benefit of the
selling stockholders to register the warrants and our preferred stock and common
B-1
stock under applicable federal and state securities laws. The registration
rights agreement provides for cross-indemnification of the selling stockholders
and us and our respective directors, officers and controlling persons against
specific liabilities in connection with the offer and sale of the warrants,
preferred stock and common stock, including liabilities under the Securities
Act. We will pay substantially all of the expenses incurred by the selling
stockholders incident to the offering and sale of the warrants, preferred stock
and common stock.
B-2
EXHIBIT C
---------
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and address of Transfer Agent]
_________________
_________________
_________________
Attn: ____________
Re: Intelli-Check, Inc.
-------------------
Ladies and Gentlemen:
We are counsel to Intelli-Check, Inc., a Delaware corporation (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement"), dated as of March __,
2003, by and between the Company and the purchasers (the "Purchasers" and the
"Holders") named therein pursuant to which the Company issued to the Purchasers
shares (the "Preferred Shares") of its 8% Convertible Preferred Stock, $.01 par
value (the "Preferred Stock"). Pursuant to the Purchase Agreement, the Company
has also entered into a Registration Rights Agreement with the Purchasers (the
"Registration Rights Agreement"), dated as of March __, 2003, pursuant to which
the Company agreed, among other things, to register the Registrable Securities
(as defined in the Registration Rights Agreement), including the Preferred
Shares, under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with the Company's obligations under the Registration Rights
Agreement, on _________ __, 2003, the Company filed a Registration Statement on
Form S-3 (File No. 333-________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the resale of the
Registrable Securities which names the Holders as selling stockholders
thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and, accordingly, the
Registrable Securities are available for resale under the 1933 Act in the manner
specified in, and pursuant to the terms of, the Registration Statement.
Very truly yours,
By:
cc: [PURCHASERS]
C-1
