-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FnR0kGjvQY8GuUHpOPKBdhy5BKnIze6K5X1y5DkaUzKwCRknIhJyYLCQzZJIZK7p Bih1tdBSqj4Mn3GBS/avXA== 0000891092-01-500025.txt : 20010426 0000891092-01-500025.hdr.sgml : 20010426 ACCESSION NUMBER: 0000891092-01-500025 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20010425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTELLI CHECK INC CENTRAL INDEX KEY: 0001040896 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 113234779 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-59494 FILM NUMBER: 1610339 BUSINESS ADDRESS: STREET 1: 775 PARK AVE CITY: HUNTINGTON STATE: NY ZIP: 11743 BUSINESS PHONE: 5164212011 MAIL ADDRESS: STREET 1: 775 PARK AVENUE STREET 2: SUITE 340 CITY: HUNTINGTON STATE: NY ZIP: 11743 S-3 1 file001.txt FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2001. Registration No. 333-______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- Intelli-Check, Inc. (Exact name of registrant as specified in its charter) DELAWARE 113234779 (State or other jurisdiction of (I.R.S. Employee incorporation or organization Identification Number) 246 Crossways Park West Woodbury, New York 11797 (516) 992-1900 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Frank Mandelbaum Chairman and Chief Executive Officer Intelli-Check, Inc. 246 Crossways Park West Woodbury, New York 11797 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Arnold Bressler, Esq. Milberg Weiss Bershad Hynes & Lerach, LLP One Pennsylvania Plaza New York, New York 10119-0165 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (as defined below), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
======================= ================ ================= ======================== ===================== TITLE OF EACH CLASS PROPOSED OF SECURITIES TO BE AMOUNT TO MAXIMUM PROPOSED MAXIMUM REGISTERED BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF REGISTERED PER SHARE (1) PRICE (1) REGISTRATION FEE - ----------------------- ---------------- ----------------- ------------------------ --------------------- Common Stock $.001 par value per share 970,076(3) $8.5 (2)(4) $8,245,646(2)(4) $2,061.41(2) ======================= ================ ================= ======================== =====================
(1) Calculated pursuant to Rule 457 under the Securities Act of 1933. (2) Dividend distribution to holders of Common Stock. (3) Reflects up to 970,076 shares of Common Stock issuable upon exercise of Common Stock Purchase Rights (the "Rights") that will be issued by the Company as a dividend to its Common Stockholders of record on March 30, 2001. The Rights will be distributed as soon as practicable after the effective date of this Registration Statement. Rights will also attach to shares of Common Stock underlying vested stock options and warrants outstanding on March 30, 2001. These Rights will be issued upon exercise of such options and warrants. (4) Based upon the $8.50 per share exercise price of the Rights. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, Acting Pursuant to said Section 8(a), may determine. ================================================================================ SUBJECT TO COMPLETION - DATED APRIL 25, 2001 ================================================================================ PROSPECTUS ______________, 2001 Intelli-Check, Inc. 970,076 Shares of Common Stock ================================================================================ Our Board of Directors declared a dividend of rights to purchase our common stock to holders of record as of March 30, 2001. Through this prospectus, we are offering the shares of common stock that rightsholders may purchase upon exercising the rights. These rights cannot be transferred. - - You will receive one right for each ten shares of our common stock which you own on the record date of March 30, 2001. For each right which you exercise, you will be able to purchase one share of our common stock at a price of $8.50. - - We will not issue fractional rights or fractional shares, and we will not pay cash in place of rights or fractional shares. - - The rights are non-transferrable and holders who want to exercise must certify that they have held the common stock to which the rights attach continuously from March 30, 2001 through the exercise date. - - The rights are exercisable beginning on the date of this prospectus and continuing until 5:00 p.m. Eastern Standard Time on ___________, 2002, the expiration date. If you want to participate in this rights offering, you must submit your subscription documents to us before the expiration date, in the manner described in this prospectus. - - The rights are redeemable at our option, upon 30 days' notice at a redemption price of $0.01 per right, if the last sale price for our common stock exceeds $10.50 for 20 consecutive trading days or upon a change of control. Offering Price: $8.50 Our common stock is quoted on the American Stock Exchange under the symbol "IDN." Our principal executive offices are located at 246 Crossways Park West Woodbury, New York 11797, and our telephone number is (516) 992-1900. ---------- This investment involves risk. See "Risk Factors" beginning on page 5 for a discussion of certain material factors that you should consider in connection with an investment in our common stock. ---------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. No dealer, salesperson or other person has been authorized to give any information or to represent anything not contained in the prospectus. You may not rely on any unauthorized information or representations. We may not sell these securities until the date of this prospectus. The prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. ================================================================================ TABLE OF CONTENTS Page Risk Factors. ........................................... 5 Use of Proceeds ......................................... 8 Determination of Offering Price ......................... 8 Plan of Distribution .................................... 8 Description of Rights ................................... 8 Certain Federal Income Tax Considerations ............... 13 Legal Matters ........................................... 16 Experts ................................................. 16 Where You Can Find More Information ..................... 16 ================================================================================ This prospectus contains forward-looking statements based on our current expectations, assumptions, estimates and projections about our Company and our industry. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including all the risks discussed in "Risk Factors" and elsewhere in this prospectus. We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. RISK FACTORS You should carefully consider the following factors and other information. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties may also adversely impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially and adversely affected. Because we have experienced losses and expect our expenses to increase, we may not be able to achieve profitability. We have incurred operating losses since our inception. We had an accumulated deficit of $6,936,011 at December 31, 2000. We cannot assure you that our revenues will become significant or that we will ever achieve profitable operations. If we are unable to obtain additional financing when needed, we will be required to curtail our marketing and production plans and possibly cease operations. Our capital requirements have been and will continue to be significant. Not including the proceeds received by us from the sale of the shares in this offering, if any, we currently anticipate that our available cash resources and expected revenues combined with either the exercise of the expiring warrants by our warrantholders before expiration or the exercise of the warrants by our warrantholders should we be able to redeem them, will be sufficient to meet our anticipated working capital and capital expenditure requirements through December 31, 2001. If we fail to attain significant sales or a positive cash flow, we may be required to reduce certain costs or seek additional equity or debt financing to fund the costs of our operations. We cannot assure you that additional financing will be available to us when needed, on commercially reasonable terms, or at all. We depend on our intellectual property, which may not be fully protected. We depend upon technology and know-how to differentiate our products from those of our competitors. We rely on a combination of our patent and trademarks, trade secret laws and nondisclosure and confidentiality agreements with our employees and others with whom we do business, to protect our technology. There can be no assurance that these will provide meaningful protection for our trade secrets or proprietary know-how in the event of any unauthorized use or disclosure. In addition, others may obtain access to or independently develop technologies or know-how similar to ours. -5- A third party is seeking to invalidate our patent. The IdentiScan Company, LLC offers a product that electronically reads and calculates age from a driver license. In August 1999, IdentiScan filed a complaint against us in Connecticut which seeks to have the IdentiScan product declared non-infringing on our patent and seeks to have our patent declared invalid. The complaint does not seek monetary damages. We believe that our patent, to which we hold clear title, is valid and fully enforceable, and we are vigorously defending it. We also believe IdentiScan's claim of non-infringement is without merit. In October 1999, we made a motion to dismiss IdentiScan's claim for lack of jurisdiction. Subsequently, IdentiScan withdrew its suit against us and re-filed it in Delaware where it is in the preliminary stages. If our patent were to be declared invalid or if our patent were to be otherwise limited, we believe it would have an adverse effect on our business and future success because other companies, including IdentiScan, might be able to use some or all of the technology covered by our patent to develop and market products which will directly compete with our products. Furthermore, if we were required to devote a significant portion of our funds to defend our patent, we would have less money available for other purposes. We currently rely on one hardware supplier to provide us with the terminals we need to run our ID-Check software. Delays and inconsistencies in the quality of the terminals could result in lost sales. Welch Allyn, Inc. supplies us with our hardware terminals, which run our patented software. If Welch Allyn does not meet our delivery requirements, we may have to seek an alternate supplier. While we believe alternate suppliers would be available, any delay in securing a new source on satisfactory terms or within the time frame to meet our sales goals could have a material adverse effect on our marketing plans. Since we will not have direct control over the manufacturing process, the possibility of delays and inconsistencies in quality could result in the failure to fulfill sales orders and the cancellation of potential orders, which could damage our reputation. If governmental agencies were to stop sharing data with us, our business would be damaged. Currently, a number of states and Canadian provinces which conform to the guidelines established by standardization bodies cooperate with us by providing sample driver licenses and identification cards so that we may program the ID-Check terminal to read and analyze the encoded information found on the driver licences and identification cards. We cannot assure you that these jurisdictions will continue to cooperate with us. Future government regulation restricting access to information electronically stored on driver licenses could adversely affect our business. Our products can be used to capture information from driver licenses. Currently, our customers are not legally restricted from using this information for their own use. Because issues of personal privacy are currently a major topic of public policy debate, it is possible that in the future merchants may be restricted from capturing this information. In that event, we could anticipate an adverse effect on our business. -6- If we fail to conform to emerging technological standards, our products could become outdated and less attractive to potential customers. Our success depends upon our ability to maintain and develop competitive technologies to continue to enhance our products and to conform to emerging technological standards in a timely and cost-effective manner. Developing these products may require substantial time and expense. We cannot assure you that we will be able to respond quickly, cost-effectively or sufficiently to developments affecting our market. Our business, financial condition and operating results may be adversely affected if we are unable to anticipate or respond quickly to any developments. We may not be able to attract and retain the key personnel we need to succeed. In order to successfully implement our business plan, we need to attract and retain qualified and experienced managerial, technical and sales personnel. Competition for the type of qualified individuals that we seek is intense. We cannot assure you that we will be able to retain existing employees or that we will be able to attract and retain the qualified personnel we need. Our success depends on our senior officers. Our success depends on our senior officers, Frank Mandelbaum, our Chairman of the Board and Chief Executive Officer, and Kevin Messina, our Senior Executive Vice President-Technology and Chief Technical Officer, Bob Holloway, our Senior Executive Vice President-Sales and Edwin Winiarz, our Senior Executive Vice President-Finance and Treasurer and Chief Accounting Officer. The loss of the services of any of them could materially and adversely affect us. We do not intend to obtain "key man" life insurance on the lives of these individuals. Our stock price could be extremely volatile. The trading price of our common stock may be highly volatile as a result of factors specific to us or applicable to our market and industry in general. These factors, include: o variations in our annual or quarterly financial results or those of our competitors; o changes by financial research analysts in their recommendations or estimates of our earnings; o conditions in the economy in general or in the information technology service sector in particular; o announcements of technological innovations or new products or services by us or our competitors; and o unfavorable publicity or changes in applicable laws and regulations, or their judicial or administrative interpretations, affecting us or the information technology service sectors. -7- USE OF PROCEEDS We will use the net proceeds, if any, realized from the exercise of the rights for working capital and for general corporate purposes, at the discretion of our management. DETERMINATION OF OFFERING PRICE The offering price of the shares offered upon exercise of the rights is $8.50 per share. We determined the exercise price per right and it bears no relationship to the market price of our common stock, the prevailing market conditions, our operating results in recent periods, our book value or other recognized criteria of value. PLAN OF DISTRIBUTION The rights entitle the holders to acquire up to approximately 970,076 shares of common stock on a fully diluted basis and assuming all rights are exercised upon payment of the applicable exercise price. We issued the rights as a dividend to all of our stockholders of record on March 30, 2001. Rights also attached to shares of common stock underlying all vested stock options and warrants outstanding on March 30, 2001. We are offering the shares of common stock underlying the rights. No underwriter or placement agent has been engaged to assist us in this regard and no commissions or similar compensation will be paid to any person. The shares of common stock to be issued upon exercise of the rights are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act. DESCRIPTION OF RIGHTS GENERAL The shares of common stock being offered are issuable to you upon the exercise of the rights. Stockholders of record on March 30, 2001 will receive a dividend of one right for every ten (10) shares of common stock that they hold. The rights will be distributed as soon as practicable after the date of this prospectus. Each Right will entitle the holder to purchase one share of common stock at an exercise price of $8.50. The rights are exercisable for a one-year period beginning on the date of this prospectus. Holders who wish to exercise their rights must certify that they have held the common stock to which the rights attach continuously from March 30, 2001 through the exercise date. Holders of vested stock options and holders of outstanding warrants to purchase common stock as of March 30, 2001 also will be entitled to receive rights based on the number of shares of common stock underlying the vested stock options or warrants held on the respective record dates. One right will attach to every ten (10) shares of common stock underlying vested stock options and warrants held of record on March 30, 2001. The number of rights relating to the amount of common stock purchased upon exercise of vested stock options or warrants will be issued to the vested stock option holders or warrant holders upon exercise of the vested stock options or warrants. -8- Beneficial owners of common stock who are not record holders should contact the nominee rightsholder to obtain a separate rights certificate. See " - -- Exercise of Rights." NON-TRANSFERABLE The rights are not transferable and bear a legend to that effect. EXPIRATION In the event the rights are not exercised within the applicable one-year period, all unexercised rights will expire and will no longer be exercisable. We may extend the rights exercise period if authorized by our Board of Directors and will give thirty (30) days' notice to the rightsholders. The rights will expire and become unexerciseable upon conclusion of the applicable exercise period, or any extension. REDEMPTION The rights are redeemable at our option, upon 30 days' notice at a redemption price of $0.01 per right, if the last sale price for our common stock exceeds $10.50 for 20 consecutive trading days or upon a change of control. The exercise price, number and kind of shares to be received upon exercise of the rights are subject to adjustment, in the discretion of our Board of Directors, on the occurrence of certain events, such as stock splits, stock dividends or a recapitalization. If there is a liquidation, dissolution or winding up of our company, the rightsholders will not be entitled to participate in the distribution of our assets. Additionally, rightsholders have no voting, pre-emptive, liquidation or other rights of stockholders, and no dividends will be declared on the rights or the shares underlying the rights. A change of control means any event where: o any person or group is or becomes the beneficial owner of shares representing more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in elections of directors. o we consolidate with or merge into any other corporation, or any other corporation merges into us, and, our outstanding common stock is reclassified into or exchanged for any other property or security, unless our stockholders immediately before such transaction own, directly or indirectly immediately following such transaction, at least a majority of the combined voting power of the outstanding voting securities of the corporation resulting from such transaction in substantially the same proportion as their ownership immediately before such transaction. o we convey, transfer or lease all or substantially all of our assets to any corporation (or other entity) or any time the continuing directors do not constitute a majority of our Board of Directors (or, if applicable, a successor corporation to us). "Continuing directors" means as of any date of determination, any member of our Board of Directors who: -9- o was a member of our Board of Directors on the date of this prospectus; or o was nominated for election or elected to our Board of Directors with the approval of a majority of the continuing directors who were members of the board at the time of the nomination or election. EXERCISE OF RIGHTS The rights may be exercised only to the extent that beneficial ownership of some or all of the shares to which the rights relate have been continuously held from March 30, 2001 or the date on which a holder of a vested option or warrant exercises through the date of exercise of the rights. Any transfers of beneficial ownership of shares between March 30, 2001 or the vested option/warrant exercise date, will correspondingly reduce the number of rights, that may be exercised. To illustrate: o A rightsholder who beneficially owns 100 shares on March 30, 2001 will receive ten (10) rights (based on the 1:10 ratio of rights to shares held). o If, between March 30, 2001 and the date of exercise of the rights, the rightsholder transfers beneficial ownership of 20 out of the 100 shares, then the rightsholder may only exercise eight of the rights. o If, between March 30, 2001 and the date of exercise of the rights, the rightsholder instead transfers beneficial ownership of 11 out of the 100 shares, then the rightsholder still may only exercise eight of the rights because fractional rights are rounded down to the nearest whole right. A rightsholder who is both the record holder and beneficial owner of the shares of common stock to which the rights relate must certify as to the number of shares beneficially owned on March 30, 2001 or the vested option/warrant exercise date, as applicable. The rightsholder must also certify as to the number of shares that, as of the date of exercise, continue to be beneficially owned, having not been transferred since March 30, 2001 or the vested option/warrant exercise date, as applicable. A rightsholder who holds shares of common stock for the account of others, such as a broker, a trustee or a depository for securities must certify as to the number of shares beneficially owned on March 30, 2001 or the vested option/warrant exercise date, as applicable, by each beneficial owner for which the rightsholder holds shares. Rightsholders must also certify as to the corresponding number of shares that, as of the date of exercise, continue to be beneficially owned, having not been transferred since March 30, 2001 or the vested option/warrant exercise date, as applicable. We intend to monitor beneficial ownership by rightholders who elect to exercise all or a portion of their rights. Rights may be exercised by delivering to Continental Stock Transfer & Trust Company, the rights agent, on or prior to 5:00 p.m., New York time, on the expiration date, the properly completed and executed rights certificate evidencing the rights with any required signature guarantees, together with payment in full of the exercise price for each right exercised. The payment in full must be by: -10- o check drawn upon a U.S. bank or postal, telegraphic or express money order payable to Continental Stock Transfer & Trust Company as agent for Intelli-Check, Inc.; or o wire transfer of funds to the account maintained by the rights agent for this purpose. For the rights agent's wire transfer information, please call (212) 509-4000 extension 535. Payment of the exercise price will be deemed to have been received by the rights agent only upon o clearance of any uncertified check, o receipt by the rights agent of any certified check drawn upon a United States bank or of any postal, telegraphic or express money order, or o receipt of good funds in the rights agent's account designated above. If paying by uncertified personal check, please note that it may take at least five business days to clear. Accordingly, holders who wish to pay the exercise price by means of an uncertified personal check are urged to make payment sufficiently in advance of the expiration date to ensure that their payment is received and clears by the expiration date and are urged to consider payment by means of certified or cashier's check, money order or wire transfer of funds. If a rightsholder wishes to exercise rights, but time will not permit the rightsholder to cause the rights certificate or rights certificates evidencing the rights to reach the rights agent on or prior to the expiration date, the rights may still be exercised if all of the following conditions are met: o the rightsholder has made payment of the exercise price for each share of common stock being subscribed for and the rights agent receives this payment on or prior to the expiration date; o the rights agent receives, on or prior to the expiration date, a guaranteed notice in the form distributed with the rights certificates, from a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or from a commercial bank or trust company having an office or correspondent in the United States, stating: o the name of the exercising rightsholder, o the number of rights represented by the rights certificate(s) held by the exercising rightsholder, o the number of shares of common stock being purchased and guaranteeing the delivery to the rights agent of any rights certificate(s) evidencing the rights within three American Stock Exchange trading days following the date of the guaranteed notice; and -11- o the properly completed rights certificate(s), with any required signatures guaranteed, is received by the rights agent within three American Stock Exchange trading days following the date of the guaranteed notice. The guaranteed notice may be delivered to the rights agent in the same manner as rights certificates at the addresses set forth above, or may be transmitted to the rights agent by facsimile transmission (telecopy no. (212) 616-7610. Additional copies of the form of guaranteed notice are available upon request from the rights agent, whose address and telephone numbers are set forth below. A rightsholder who holds shares of common stock for the account of others, such as a broker, a trustee or a depository for securities, should notify the respective beneficial owners of such shares as soon as possible to ascertain such beneficial owner's intentions and to obtain instructions with respect to the rights. If the beneficial owner so instructs, the record holder of such rights should complete the rights certificate and submit it to the rights agent with the proper payment. In addition, the beneficial owner of common stock or rights held through such a holder of record should contact the rightsholder and request the rightsholder to effect transactions in accordance with the beneficial owner's instructions. Unless a rights certificate provides that the shares of common stock to be issued pursuant to the exercise of rights are to be delivered to the rightsholder or is submitted for the account of an institution, signatures on such rights certificate must be guaranteed by an eligible institution. If either the number of shares being subscribed for is not specified on the rights certificate, or the amount delivered is not enough to pay the exercise price for all shares stated to be purchased, the number of shares purchased will be assumed to be the maximum amount that could be purchased upon payment of such amount, after allowance for the exercise price of any specified shares. DO NOT SEND RIGHTS CERTIFICATES TO INTELLI-CHECK. The method of delivery of rights certificates and payment of the exercise price to the rights agent will be at the election and risk of the rightsholder, but if sent by mail it is recommended that such certificates and payments be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the rights agent and clearance of payment prior to 5:00 p.m., New York time, on the expiration date. Because uncertified personal checks may take at least five business days to clear, rightsholders are strongly urged to pay, or arrange for payment, by means of certified or cashier's check, money order or wire transfer of funds. All questions concerning the timeliness, validity, form and eligibility of any exercise of rights will be determined by us, and our determinations will be final and binding. We may waive any defect or irregularity, permit a defect or irregularity to be corrected or reject the exercise of any right. Rights will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as we determine. Neither Intelli-Check nor the rights agent will be under any duty to give notification of any defect or irregularity in connection with the submission of rights certificates or incur any liability for failure to give such notification. -12- Any questions or requests for assistance concerning the method of exercising rights or requests for additional copies of this prospectus or the guaranteed notice should be directed to the rights agent whose address and telephone numbers are set forth on the rights certificate. NO REVOCATION Once a rightsholder has exercised rights, such exercise may not be revoked. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS GENERAL The following is a general discussion of certain U.S. federal income tax considerations applicable upon the issuance, exercise, redemption and lapse of rights issued to the stock rightsholders, option rightsholders, and warrant rightsholders. This summary is based on provisions of the Internal Revenue Code of 1986, as amended (the "Code"), regulations of the Treasury Department, administrative rulings and pronouncements of the Internal Revenue Service and judicial decisions currently in effect, all of which are subject to change, possibly with retroactive effect. This discussion does not deal with all aspects of federal income taxation that may be relevant to particular stock rightsholders, option rightsholders, and warrant rightsholders in light of their personal investment circumstances (for example, to persons holding common stock as part of a conversion transaction or as part of a hedge or hedging transaction, or as a position in a straddle for tax purposes), nor does it discuss federal income tax considerations applicable to certain stock rightsholders, option rightsholders and warrant rightsholders subject to special treatment under the federal income tax laws (for example, insurance companies, tax-exempt organizations, financial institutions or broker-dealers, taxpayers subject to the alternative minimum tax, or non-United States persons). This discussion only addresses the stock rightsholders, option rightsholders, and warrant rightsholders who will both hold their respective interests in Intelli-Check as capital assets and will hold any common stock received upon exercise of the rights as capital assets (persons who may not be holding their interests in Intelli-Check as capital assets might include, for example, securities dealers or traders who do not hold their interests primarily for investment or who treat their interests as inventory for federal income tax purposes). In addition, this discussion does not consider the effect of any foreign, state, local, gift or estate or other tax laws which may apply to a particular investor. No ruling has been or will be sought from the IRS concerning the tax issues addressed in this prospectus, and such issues may be subject to substantial uncertainty resulting from the lack of definitive, judicial or administrative authority and interpretations. All stock rightsholders, option rightsholders, and warrant rightsholders are urged to consult with their own tax advisors regarding the specific tax consequences to them of the rights offering, including the effects of federal, state, local, foreign, and other tax laws. TAX CONSEQUENCES TO STOCK RIGHTSHOLDERS Distribution of Rights. Holders of our common stock will not recognize taxable income for federal income tax purposes upon distribution of the rights. -13- Basis And Holding Period. Except as provided in the following sentence, the basis of the rights received by a shareholder as distribution with respect to such shareholder's common stock will be zero. If, however, either (1) the fair market value of the rights on their date of issuance is 15% or more of the fair market value (on the date of issuance) of the common stock with respect to which they are received or (2) the shareholder properly elects, in his or her federal income tax return for the taxable year in which the rights are received, to allocate part of the basis of such common stock to the rights, then upon exercise or transfer of the rights, the shareholder's basis in such common stock will be allocated between the common stock and the rights in proportion to the fair market values of each on the date of issuance. The holding period of a shareholder with respect to the rights received as a distribution on such shareholder's common stock will include the shareholder's holding period for the common stock with respect to which the rights were distributed. Redemption of Rights. If we redeem rights held by a stock rightsholder, the stock rightsholder will recognize capital gain or loss equal to the difference between the redemption price and the stock rightsholder's basis, if any, in those rights. Lapse of Rights. Holders who allow the rights received by them in this offering to lapse will not recognize any gain or loss, and no adjustment will be made to the basis of the common stock, if any, they own. Purchasers of the rights will recognize a loss equal to the tax basis of their rights, if such rights expire unexercised. Any loss recognized on the expiration of the rights acquired by a purchaser will be a capital loss. Exercise of Rights. If a stock rightsholder exercises rights, the holder will recognize taxable income at the time the rights are exercised in an amount equal to the excess, if any, of the fair market value of the common stock at that time over the exercise price. That income would be taxed at ordinary income rates and any gain or loss recognized on the subsequent disposition of the common stock so acquired would be treated as a capital gain or loss. TAX CONSEQUENCES TO OPTION RIGHTSHOLDERS Issuance of Rights. No gain or loss should be recognized by such holders in connection with the issuance of the rights provided that when issued the rights do not have a readily ascertainable fair market value within the meaning of the Treasury Regulations. We believe that rights issued to option rightsholders should not be treated as having a readily ascertainable fair market value because the rights are non-transferable and, thus, will not be actively traded on an established market and the fair market value of the rights otherwise cannot be measured with reasonable accuracy. Redemption of Rights. If we redeem rights held by an option rightsholder, the option rightsholder should recognize ordinary income equal to the redemption price of those rights. Lapse of Rights. Option rightsholders who allow rights issued to them to lapse will not recognize any gain or loss, and no adjustment will be made to the basis, if any, of any other ownership interest in Intelli-Check owned by the option rightsholders. Exercise of Rights. If an option rightsholder exercises their option to purchase common stock, upon the exercise of the rights that attached to such common stock, the holder will recognize taxable income at the time the rights -14- are exercised in an amount equal to the excess, if any, of the fair market value of the common stock at that time over the exercise price. That income would be taxed at ordinary income rates and any gain or loss recognized on the subsequent disposition of the common stock so acquired would be treated as a capital gain or loss. The tax basis of the common stock acquired by an option rightsholder through the exercise of rights will be equal to the fair market value of the common stock on the date of exercise and the holding period for that common stock generally will begin on the day following exercise. TAX CONSEQUENCES TO WARRANT RIGHTSHOLDERS Warrants Issued for Services. In the case of warrants issued to warrant rightsholders in connection with the performance of services, the federal income tax consequences arising upon the issuance of rights to those warrant rightsholders and upon the redemption, lapse or exercise of those rights should be the same as for rights issued to option rightsholders. See " - Tax Consequences to option rightsholders" above. The following discussion of the federal income tax consequences arising upon the issuance of rights to warrant rightsholders and upon the redemption, lapse or exercise of those rights applies only to warrant rightsholders who did not receive their warrants in connection with the performance of services. Issuance of rights. No applicable authority addresses the federal income tax consequences arising upon the issuance of rights to warrant rightsholders. Because rights will not be exercisable by warrant rightsholders prior to exercise of their warrants, substantial uncertainty exists regarding when the rights will be treated as distributed to warrant rightsholders for federal income tax purposes. If the rights are treated as distributed upon exercise of a warrant, we believes the receipt of rights at that time likely will not constitute a taxable distribution. If, however, the rights are treated as distributed to a warrant rightsholder before exercise of the warrant, we believe the issuance of the rights to warrant rightsholders likely will constitute a taxable distribution. Given the lack of applicable authority regarding these consequences, warrant rightsholders should consult and rely upon their own tax advisors as to the specific tax consequences to them relating to the issuance of rights. Basis and Holding Period. If the rights offering is characterized as a nontaxable distribution made upon exercise of a warrant and either (i) the fair market value of the rights on the date of distribution is equal to 15% or more of the fair market value on the date of issuance of the common stock with respect to which they are received or (ii) the warrant rightsholder elects, in his or her federal income tax return of the taxable year in which the rights are received, to allocate part of the tax basis of the common stock to the rights, then upon exercise or redemption of the rights, the warrant rightsholder's tax basis in the common stock will be allocated between the common stock and the rights in proportion to the fair market values of each on the date of the issuance of the rights. Otherwise, the tax basis of rights received by a warrant rightsholder as a nontaxable distribution will be zero. If, however, the distribution of rights to the warrant rightsholders were treated as a taxable distribution, a warrant rightsholder would have a tax basis in the rights that such warrant rightsholder received equal to the fair market value of the rights on the date of distribution of the rights. -15- If the rights offering to the warrant rightsholders is treated as a nontaxable distribution, the holding period of a holder with respect to rights received as a distribution on the holder's common stock will include the holder's holding period for the common stock with respect to which the rights were issued. If, however, the rights offering to the warrant rightsholders were treated as a taxable distribution, the warrant rightsholders would have a holding period that begins on the day following the date of distribution of the rights. Redemption of Rights. If we redeem rights held by a warrant rightsholder, the warrant rightsholder will recognize capital gain or loss equal to the difference between the redemption price and the warrant rightsholder's basis, if any, in those rights. Lapse of Rights. If the rights offering to the warrant rightsholders is treated as a nontaxable distribution, a warrant rightsholder who allows rights received by him or her to lapse without exercising them will not recognize any gain or loss and, as the rights were neither exercised nor redeemed, no adjustment will be made to the tax basis of any interest in the company owned by the warrant rightsholder. If, however, the rights offering to the warrant rightsholders were treated as a taxable distribution, a warrant rightsholder who allowed the rights to lapse would have a capital loss in an amount equal to his or her tax basis in the rights (as discussed above), and no adjustment would be made to the tax basis of any interest in the company owned by the warrant rightsholder. Exercise of Rights. If a warrant rightsholder exercises their warrant to purchase common stock, upon the exercise of the rights that attached to such common stock, the holder will recognize taxable income at the time the rights are exercised in an amount equal to the excess, if any, of the fair market value of the common stock at that time over the exercise price. That income would be taxed at ordinary income rates and any gain or loss recognized on the subsequent disposition of the common stock so acquired would be treated as a capital gain or loss. LEGAL MATTERS The validity of the issuance of the common stock offered by this prospectus has been passed upon for us by Milberg Weiss Bershad Hynes & Lerach LLP, One Pennsylvania Plaza, New York, New York 10119-1065. EXPERTS The financial statements incorporated by reference in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document we file with the SEC at the SEC's Public Reference Rooms at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The SEC maintains an Internet site -16- that contains reports, proxy and information statements, and other information regarding issuers, such as Intelli-Check, Inc., that file electronically with the SEC. The address of the site is http://www.sec.gov. We have filed with the SEC a registration statement on Form S-3 under the Securities Act of 1933, as amended. This prospectus does not contain all of the information, exhibits and undertakings set forth in the registration statement, certain portions of which are omitted as permitted by the rules and regulations of the SEC. Copies of the registration statement and the exhibits are on file with the SEC and may be obtained, upon payment of the fee prescribed by the SEC, or may be examined, without charge, at the offices of the SEC set forth above. For further information, reference is made to the registration statement and its exhibits. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by us with the SEC File No. 001-15465 are incorporated by reference in this prospectus: o Annual Report on Form 10-KSB for the year ended December 31, 2000. o The description of our common stock contained in our registration statement on Form SB-2 (No.333-87797), including any amendments or reports filed for the purpose of updating such description. We incorporate by reference additional documents that we may file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, between the date of this prospectus and the termination of the offering of securities under this prospectus. These documents include our periodic reports, such as Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB and Current Reports on Form 8-K, as well as our proxy statements. You may obtain any of these incorporated documents from us without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference in such document by requesting them from us in writing or by telephone at the following address and telephone number: Intelli-Check, Inc., 246 Crossways Park West, Woodbury, New York 11797 (516) 992-1900 -17- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. SEC registration fee............................ $ 2,061.41 American Stock Exchange Filing Fee ............. $17,500 Legal fees and expenses*........................ $30,000 Accounting fees and expenses*................... $ 4,000 Transfer agent fees*............................ $ 5,000 Printing Fees*.................................. $11,000 Miscellaneous*.................................. $18,000 ---------- Total $87,561.41 - ---------- *This expense has been estimated for the purpose of filing. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Intelli-Check's Certificate of Incorporation limits the liability of directors to the maximum extent permitted by Delaware General Corporation Law. Delaware law provides that the directors of a corporation will not be personally liable to such corporation or its stockholders for monetary damages for breach of their fiduciary duties as directors, except for liability (i) for any breach of their duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derives an improper personal benefit. Intelli-Check's By-laws provide that the Company shall indemnify its directors and officers under certain circumstances, including those circumstances in which indemnification would otherwise be discretionary, and the Company is required to advance expenses to its officers and directors as incurred in connection with proceedings against them for which they may be indemnified. ITEM 16. EXHIBITS. EXHIBIT NO. DESCRIPTION - ----------- ------------- 5.1 Opinion of Milberg Weiss Bershad Hynes & Lerach, LLP 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Milberg Weiss Bershad Hynes & Lerach LLP. Included in Exhibit 5.1 hereto. 24.1 Power of Attorney (included as part of the signature page). -18- 99.1 Form of Rights Certificate 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Rights Agent Agreement - ---------- ITEM 17. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represents a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrar pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered -19- therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from the registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, as amended, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue. -20- SIGNATURES In accordance with the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S-3 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on April 24, 2001. INTELLI-CHECK, INC. By: /s/ Frank Mandelbaum --------------------------------------- Frank Mandelbaum Chairman and Chief Executive Officer We, the undersigned directors and/or officers of Intelli-Check, Inc. (the Company), hereby severally constitute and appoint Frank Mandelbaum, Chairman and Chief Executive Officer, with full powers of substitution and resubstitution, our true and lawful attorney, with full power to sign for us, in our names and in the capacities indicated below, the registration statement on Form S-3 filed with the Securities and Exchange Commission, and any and all amendments to said registration statement (including post-effective amendments), and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, in connection with the registration under the Securities Action of 1933, as amended, of equity securities of the Company, and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of them might or could do in person, and hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes, shall do or cause to be done by virtue of this Power of Attorney. -21- Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated below: Date: April 24, 2001 /s/ Frank Mandelbaum ---------------------------------------------- Frank Mandelbaum Chairman, Chief Executive Officer and Director Date: April 24, 2001 /s/ Kevin Messina ---------------------------------------------- Kevin Messina Senior Executive Vice President, Chief Technology Officer and Director Date: April 24, 2001 /s/ Edwin Winiarz ---------------------------------------------- Edwin Winiarz Senior Executive Vice President, Treasurer and Chief Financial Officer and Director Date: April __, 2001 ---------------------------------------------- Evelyn Berezin, Director Date: April 24, 2001 /s/ Paul Cohen ---------------------------------------------- Paul Cohen, Director Date: April 24, 2001 /s/ Howard Davis ---------------------------------------------- Howard Davis, Director Date: April 24, 2001 /s/ Jeffrey Levy ---------------------------------------------- Jeffrey Levy, Director Date: April 24, 2001 /s/ Charles McQuinn ---------------------------------------------- Charles McQuinn, Director -22- Exhibit Index EXHIBIT NO. DESCRIPTION ----------- ----------- 5.1 Opinion of Milberg Weiss Bershad Hynes & Lerach, LLP 23.1 Consent of Arthur Anderson 23.2 Consent of Milberg Weiss Bershad Hynes & Lerach, LLP. Included in Exhibit 5.1 hereto. 24.1 Power of Attorney (included as part of the signature page). 99.1 Form of Rights Certificate 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Rights Agent Agreement EX-5.1 2 file002.txt OPINION OF COUNSEL April 24, 2001 Intelli-Check, Inc. 246 Crossways Park West Woodbury, New York 11797 Re: Intelli-Check, Inc. - Dividend Distribution of Rights to Purchase Intelli-Check, Inc. Common Stock and Issuance of Shares Upon Exercise of the Rights Ladies and Gentlemen: We have acted as counsel for Intelli-Check, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing by the Company of a registration statement (the "Registration Statement") on Form S-3, under the Securities Act of 1933, as amended relating to the distribution by dividend of non-transferable rights (the "Rights") to purchase shares of the Company's common stock, par value $.001 per share (the "Shares") and the issuance of the Shares upon exercise of the Rights. As counsel to the Company we have examined and relied upon, as to factual matters, originals or photostatic and certified copies of such corporate records, including, but not limited to minutes of the Board of Directors and Stockholders of the Company and other instruments, certificates of corporate officers and such other documents as we have deemed necessary or appropriate as a basis for the opinions hereafter expressed. We have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to the originals of all documents submitted to us as conformed or photostatic copies. Intelli-Check, Inc. Page 2 Based upon, and subject to the foregoing, we are of the opinion that the Rights have been duly authorized by the Board of Directors and are legally issued, fully paid and nonassessable, and the Shares have been duly authorized by the Board of Directors and, upon exercise of the Rights in accordance with their terms, will be legally issued, fully paid and nonassessable. We hereby consent to be named in the Registration Statement and the prospectus as attorneys who have passed upon legal matters in connection with the offering of the securities offered thereby under the caption "Legal Matters." We further consent to your filing a copy of this opinion as an Exhibit to the Registration Statement. Very truly yours, MILBERG WEISS BERSHAD HYNES & LERACH LLP By: /s/ Arnold N. Bressler ----------------------------- Arnold N. Bressler A Member of the Firm EX-23.1 3 file003.txt CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated March 19, 2001, included in Intelli-Check, Inc.'s Annual Report on Form 10-KSB (File No. 001-15465) previously filed with the Securities and Exchange Commission and to all references to our Firm included in this Registration Statement. ARTHUR ANDERSEN LLP New York, New York April 24, 2001 EX-99.1 4 file004.txt FORM OF RIGHTS CERTIFICATE FORM OF RIGHTS CERTIFICATE: COMMON STOCKHOLDER - ------------- --------------- ------------- --------------------------- SEQUENCE ACCOUNT KEY RIGHT # RIGHT TO PURCHASE RIGHTS INTELLI-CHECK, INC. RIGHTS CERTIFICATE FOR INFORMATION AND ASSISTANCE PLEASE CALL: CONTINENTAL STOCK TRANSFER & TRUST COMPANY (212) 509-4000 Ext. 535 The undersigned has Rights of Intelli-Check, Inc. (the "Company"), entitling the undersigned to purchase the Company's common stock, par value $0.001 per share (the "Common Stock"), offered by the Company by its prospectus dated __________ (the "Prospectus"), subject to the terms described in the Prospectus. By executing this Rights Certificate, the undersigned acknowledges having received and read the Prospectus, and understands that as a Rightsholder (as defined in the Prospectus), subject to certain limitations stated in the Prospectus, the undersigned is entitled to purchase the number of shares of Common Stock, as is shown above based on a purchase price of $8.50 per share of Common Stock. By: ---------------------------- as Rights Agent IMPORTANT: PAYMENT FOR SHARES OF COMMON STOCK MUST BE MADE BY WIRE TRANSFER, CHECK OR MONEY ORDER PAYABLE TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY AS AGENT FOR INTELLI-CHECK, INC. IN U.S. DOLLARS BEFORE THE APPLICABLE EXPIRATION DATE. IF FULL PAYMENT IS NOT RECEIVED BY CONTINENTAL STOCK TRANSFER & TRUST COMPANY BEFORE THE APPLICABLE EXPIRATION DATE YOUR PURCHASE WILL BE REJECTED. AN EXERCISE FOR SHARES OF COMMON STOCK IS IRREVOCABLE. THESE SECURITIES MAY BE REDEEMED BY THE COMPANY UPON THE TERMS DESCRIBED IN THE PROSPECTUS. THE SECURITIES REPRESENTED BY THIS RIGHTS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR ENCUMBERED OR IN ANY OTHER WAY ALIENATED. ANY PURPORTED SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OR OTHER ALIENATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE NULL AND VOID. RIGHTS TO PURCHASE SHARES OF COMMON STOCK OFFERED BY INTELLI-CHECK, INC. Exercise of Rights may have significant tax consequences. See "Certain Federal Income Tax Consequences" in the accompanying Prospectus. Upon the terms and subject to the conditions specified in the Prospectus, the undersigned hereby: A. Purchases shares of Common Stock as follows: 1. NUMBER OF SHARES OF COMMON STOCK SUBSCRIBED FOR PURSUANT TO RIGHTS: ______________ (May not exceed the number of Rights on the face of this certificate) 2. EXERCISE PRICE PER SHARE: $8.50 3. TOTAL AMOUNT OF PAYMENT FOR SHARES OF COMMON STOCK TO BE PURCHASED: $_______________ (Line 1 multiplied by line 2) Check one box: |_| Enclosed is my check or money order payable to Continental Stock Transfer & Trust Company as Agent for Intelli-Check, Inc. -2- |_| Payment has been made by wire transfer to Continental Stock Transfer & Trust Company's account (wire instructions are in the Prospectus). B. Certifies as follows (check one and complete blanks): |_| As of March 30, 2001, I was the record holder AND beneficial owner of the shares of Common Stock to which the Rights exercised hereunder relate, and, (i) as of March 30, 2001, I beneficially owned _______________ shares of Common Stock; and (ii) as of the date hereof, I continue to be the record holder and beneficial owner of _________________ shares of Common Stock listed in (i), having not transferred, assigned, pledged or otherwise encumbered beneficial ownership of such shares since the Record Date. |_| As of the Record Date of the Rights exercised hereunder: (i) shares of Common Stock to which the Rights exercised hereunder relate were held by the undersigned record holder on behalf of the beneficial owner of such shares; and (ii) as of the date hereof, such beneficial owner continues to be the beneficial owner of ___________________ shares of Common Stock listed in (i), having not transferred, assigned, pledged or otherwise encumbered beneficial ownership of such shares since the Record Date. RETURN THIS FORM IN THE PRE-ADDRESSED STAMPED ENVELOPE ALONG WITH A PAYMENT IN U.S. DOLLARS BY CHECK, DRAFT OR MONEY ORDER PAYABLE TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY AS AGENT FOR INTELLI-CHECK, INC. (OR PAYMENT MAY BE MADE BY WIRE TRANSFER) TO: BY MAIL/HAND/OVERNIGHT DELIVERY: Continental Stock Transfer & Trust Company 2 Broadway New York, New York 10004 -3- Acceptance or rejection by the Company of this executed Rights Certificate shall be effective in accordance with the terms set forth in the Prospectus. All questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Company, whose determinations shall be final and binding. Shares of Common Stock will be registered in the same manner as set forth on the face of this Rights Certificate. Stock certificates evidencing such shares of Common Stock will be sent to you as soon as practicable after receipt of valid payment therefor. Date:____________________________ Name:________________________________ Title:___________________________ Signature:_________________________ Day Phone: ( ) _____________________________ Evening Phone: ( ) _____________________________ -4- FORM OF RIGHTS CERTIFICATE: OPTION OR WARRANT HOLDER - ------------- --------------- ------------- --------------------------- SEQUENCE ACCOUNT KEY RIGHT # RIGHT TO PURCHASE RIGHTS INTELLI-CHECK, INC. RIGHTS CERTIFICATE FOR INFORMATION AND ASSISTANCE PLEASE CALL: CONTINENTAL STOCK TRANSFER & TRUST COMPANY (212) _________________ The undersigned has Rights of Intelli-check, Inc. (the "Company"), entitling the undersigned to purchase the Company's common stock, par value $0.001 per share (the "Common Stock"), offered by the Company by its prospectus dated _____________, (the "Prospectus"), subject to the terms described in the Prospectus. By executing this Rights Certificate, the undersigned acknowledges having received and read the Prospectus, and understands that as a Holder of Rights (as defined in the Prospectus), subject to certain limitations stated in the Prospectus, the undersigned is entitled to purchase the number of shares of Common Stock, as is shown above based on a purchase price of $ 8.50 per share of Common Stock. By: --------------------------------- as Rights Agent IMPORTANT: PAYMENT FOR SHARES OF COMMON STOCK MUST BE MADE BY WIRE TRANSFER, CHECK OR MONEY ORDER PAYABLE TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY AS AGENT FOR INTELLI-CHECK, INC., IN U.S. DOLLARS BEFORE THE APPLICABLE EXPIRATION DATE. IF FULL PAYMENT IS NOT RECEIVED BY CONTINENTAL STOCK TRANSFER & TRUST COMPANY BEFORE THE APPLICABLE EXPIRATION DATE YOUR PURCHASE WILL BE REJECTED. AN EXERCISE FOR SHARES OF COMMON STOCK IS IRREVOCABLE. THESE SECURITIES MAY BE REDEEMED BY THE COMPANY UPON THE TERMS DESCRIBED IN THE PROSPECTUS. THE SECURITIES REPRESENTED BY THIS RIGHTS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR ENCUMBERED OR IN ANY OTHER WAY ALIENATED. ANY PURPORTED SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OR OTHER ALIENATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE NULL AND VOID. RIGHTS TO PURCHASE SHARES OF COMMON STOCK OFFERED BY INTELLI-CHECK, INC. Upon the terms and subject to the conditions specified in the Prospectus, the undersigned hereby: A. Purchases shares of Common Stock as follows: 1. NUMBER OF SHARES OF COMMON STOCK SUBSCRIBED FOR PURSUANT TO RIGHTS: __________ (May not exceed the number of Rights on the face of this certificate) 2. EXERCISE PRICE PER SHARE: $8.50 3. TOTAL AMOUNT OF PAYMENT FOR SHARES OF COMMON STOCK TO BE PURCHASED: $_________ (Line 1 multiplied by line 2) -2- Check one box: |_| Enclosed is my check or money order payable to Continental Stock Transfer and Trust Company as Agent for Intelli-Check, Inc. |_| Payment has been made by wire transfer to Continental Stock Transfer & Trust Company's account (wire instructions are in the Prospectus). B. Certifies as follows (check one): |_| As of the date on which I exercised stock options or warrants for the Common Stock to which the Rights exercised hereunder relate, I was the record holder and beneficial owner of the shares of such Common Stock; and (i) Upon the exercise of my options or warrants, I became the beneficial owner of __________________ shares of Common Stock; and (ii) as of the date hereof, I continue to be the record holder and beneficial owner of_________________ shares of Common Stock listed in (i), having not transferred, assigned, pledged or otherwise encumbered beneficial ownership of such shares since I exercised my stock options or warrants. |_| As of the date on which the stock options or warrants were exercised to purchase the Common Stock to which the Rights exercised hereunder relate, shares of such Common Stock where held by the undersigned record holder on behalf of the beneficial owner of such shares; and (i) Upon the exercise of options or warrants, such beneficial owner became the beneficial owner of __________________ shares of Common Stock; and (ii) as of the date hereof, such beneficial owner continues to be the beneficial owner of _________________ the shares of Common Stock listed in (i), having not transferred, assigned, pledged or otherwise encumbered beneficial ownership of such shares since exercising the stock options or warrants. RETURN THIS FORM IN THE PRE-ADDRESSED STAMPED ENVELOPE ALONG WITH A PAYMENT IN U.S. DOLLARS BY CHECK, DRAFT OR MONEY ORDER PAYABLE TO -3- CONTINENTAL STOCK TRANSFER & TRUST COMPANY AS AGENT FOR INTELLI-CHECK, INC. (OR PAYMENT MAY BE MADE BY WIRE TRANSFER) TO: BY MAIL/HAND/OVERNIGHT DELIVERY: Continental Stock Transfer & Trust Company 2 Broadway New York, New York 10011 Acceptance or rejection by the Company of this executed Rights Certificate shall be effective in accordance with the terms set forth in the Prospectus. All questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Company, whose determinations shall be final and binding. Shares of Common Stock will be registered in the same manner as set forth on the face of this Rights Certificate. Stock certificates evidencing such shares of Common Stock will be sent to you as soon as practicable after receipt of valid payment therefor. Date:__________________________ Name:__________________________ Title:_________________________ Signature:__________________________ Day Phone: ( )_____________________ Evening Phone: ( )_________________ -4- FORM OF RIGHTS CERTIFICATE PART 2 SPECIAL DELIVERY INSTRUCTIONS FOR RIGHTSHOLDERS: UNLESS OTHERWISE INDICATED BELOW. THE RIGHTS AGENT IS HEREBY AUTHORIZED TO DELIVER CERTIFICATES FOR COMMON STOCK TO RIGHTSHOLDERS AT THE ADDRESS SET FORTH ABOVE. To be completed ONLY if the certificate representing the Common Stock is to be sent to an address other than that shown above. Mail and deliver to: Name: ----------------------------- ---------------------------- (Please Print) Street Address ----------------------------- ---------------------------- City State Zip Code Social Security or Tax ID# ACKNOWLEDGMENT THE RIGHTS CERTIFICATE IS NOT VALID UNLESS YOU SIGN BELOW I/We acknowledge receipt of the Prospectus and understand that after delivery to the Company, I/We may not modify or revoke this exercise. Under penalties of perjury, I/We certify that the information contained herein, including the social security number or taxpayer identification number given above, is correct. The signature below must correspond with the name of the registered holder exactly as it appears on the books of the Company's transfer agent without any alteration or change whatsoever. -5- Signature(s) of registered holder Dated: If signature is by trustee(s), executor(s), administrator(s), guardian(s), attorney(s)-in-fact, agent(s), officers(s) of a corporation or another acting in a fiduciary or representative capacity, please provide the following information. Name: Daytime Phone ( ) -------------------------- ------------------------------ (Please Print) Evening Phone ( ) ------------------------------ Capacity: -------------------------------- (Full Title) Address: ------------------------------- Social Security or Taxpayer ID# (Including Zip Code) ------------------------------- -6- GUARANTEE OF SIGNATURE(S) All Rightsholders who specify special delivery instructions must have their signatures guaranteed by an Eligible Institution. An "Eligible Institution" for this purpose is a bank, stockbroker, savings and loan association and credit union with membership in an approved signature guaranteed medallion program, pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934. Authorized signature Name of Firm - ------------------------------ ----------------------------- Name Address - ------------------------------ ----------------------------- Title Area Code and - ------------------------------ Telephone Number ----------------------------- Dated - ------------------------------ NAME - ------------------------------ ADDRESS - ------------------------------ (CITY, STATE AND ZIP CODE) -7- PAYER'S NAME: ______________________
- ----------------------------- --------------------------------------------- ---------------------------------- SUBSTITUTE FORM W-9 PART 1: PROVIDE YOUR TIN IN THE BOX TO THE RIGHT AND CERTIFY BY SIGNING AND DATING BELOW ---------------------------------- Social Security Number OR ---------------------------------- Employer Identification No. - ----------------------------- --------------------------------------------- ---------------------------------- DEPARTMENT OF THE TREASURY PART 2: CERTIFICATION. Under penalties of INTERNAL REVENUE SERVICE perjury, I certify that (1) the number above on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because I am exempt from backup withholding, I have not been notified by the IRS that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. - ----------------------------- --------------------------------------------- ---------------------------------- PAYER'S REQUEST FOR PART 3: TAXPAYER IDENTIFICATION NUMBER (TIN) Awaiting TIN - ----------------------------- --------------------------------------------- ---------------------------------- FOR PAYEE EXEMPT FROM PART 4: BACKUP WITHHOLDING Exempt: Certificate Instructions. You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding, you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). - ----------------------------- --------------------------------------------- ---------------------------------- Signature:________________________________ Date:________________ Name (Please Print):____________________________________________ - --------------------------------------------------------------------------------------------------------------------
-8- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY DIVIDEND PAYMENTS MADE TO YOU ON SHARES OF COMMON STOCK ISSUED UPON EXERCISE OF THE RIGHTS. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM 2-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate IRS Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable dividend payments made to me thereafter on shares of Common Stock issued upon exercise of the Rights will be withheld until I provide a taxpayer identification number. ------------------------------- ---------------------------- Signature Date Name (Please Print) -9- EX-99.2 5 file005.txt FORM OF NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY FOR RIGHTS CERTIFICATES This form, or one substantially equivalent hereto, must be used to exercise Rights described in the Prospectus dated ______________ (the "Prospectus") of Intelli-Check, Inc., (the "Company"), if a Rightsholder cannot deliver the Right Certificate(s) evidencing the Rights, to the Rights Agent listed below at or prior to 5:00 p.m. New York City time on the Expiration Date. Such form must be delivered by hand or sent by facsimile transmission or mail to the Rights Agent, and must be received by the Rights Agent on or prior to the Expiration Date. See "Description of Rights -- Exercise of Rights" in the Prospectus. Payment of the applicable Exercise Price for each share of the Company's Common Stock purchased upon exercise of such Rights must be received by the Rights Agent in the manner specified in the Prospectus at or prior to the Expiration Date even if the Rights Certificate evidencing such Rights is being delivered pursuant to the procedure for guaranteed delivery thereof. The Rights Agent is: Continental Stock Transfer & Trust Company - -------------------------------------------- --------------------------- By Mail/Hand/Overnight Courier: Facsimile Transmission (212) 616-7610 Continental Stock Transfer & Trust Company 2 Broadway New York, New York 10004 - -------------------------------------------- --------------------------- DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. Gentlemen: The undersigned hereby represents that he or she is the holder of a Rights Certificate(s) representing ______ Rights and that such Right Certificate(s) cannot be delivered to the Rights Agent at or before the Expiration Date. Upon the terms and subject to the conditions set forth in the Prospectus, receipt of which is hereby acknowledged, the undersigned hereby elects to purchase one share of Common Stock per Right with respect to each of ______ Rights represented by such Right Certificate. The undersigned understands that payment of the Exercise Price for each share of Common Stock purchased must be received by the Rights Agent at or before the Expiration Date and represents that such payment, in the aggregate amount of $_________, either (check appropriate box): |_| is delivered herewith; or |_| was delivered separately; in the manner set forth below (check appropriate box and complete information relating thereto): |_| wire transfer of funds:___________________________________________ name of transferor institution:___________________________________ date of transfer:_________________________________________________ confirmation number (if available):_______________________________ |_| uncertified check (payment by uncertified check will not be deemed to have been received by the Rights Agent until such check has cleared. Holders paying by such means are urged to make payment sufficiently in advance of the applicable Expiration Date to ensure that such payment clears by such time.) |_| certified check; |_| bank draft (cashier's check); |_| money order; name of maker:_________________________________________________________ date and number of check, draft or money order number: _______________________________________________________________________ bank on which check is drawn or issuer of money order: _______________________________________________________________________ Signature(s):________________________________________________________________ Address:_____________________________________________________________________ Name(s):_____________________________________________________________________ Please Type or Print Area Code and Tel. No(s).:______________________________ Right Certificate No(s). (if available):_____________________________________ -2- GUARANTEE OF DELIVERY (NOT TO BE USED FOR RIGHTS CERTIFICATE SIGNATURE GUARANTEE.) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, guarantees that the undersigned will deliver to the Rights Agent the certificates representing the Rights being exercised hereby, with any required signature guarantees and any other required documents, all within five business days after the date hereof. Dated: ________________________________________________________________________ Name of Firm: _________________________________________________________________ Address: ______________________________________________________________________ Telephone: ( )_____________________________________________________________ Authorized Signature:__________________________________________________________ The institution which completes this form must communicate the guarantee to the Rights Agent and must deliver the Right Certificate(s) to the Rights Agent within the time period shown herein. Failure to do so could result in a financial loss to such institution. -3- EX-99.3 6 file006.txt FORM OF RIGHTS AGENT AGREEMENT RIGHTS AGENT AGREEMENT This RIGHTS AGREEMENT ("Agreement") is made and entered into as of April ___, 2001, by and between Intelli-Check, Inc., a Delaware corporation (the "Company") and Continental Stock Transfer & Trust Company (the "Rights Agent"). RECITALS A. The Company has (i) declared a dividend of rights (each a "Right") to purchase shares of common stock, $.001 par value per share ("Common Stock") payable to stockholders of record on the close of business on March 30, 2001 (the "Record Date") and (ii) attached Rights to the shares of Common Stock underlying any options and warrants outstanding as of the Record Date. B. The Company will file with the Securities and Exchange Commission (the "SEC"), under the Securities Act of 1933, as amended (the "Act"), a Registration Statement on Form S-3 relating to the Common Stock to be issued on the exercise of the Rights. C. Each Right distributed to holders of record on the Record Date will entitle the holder thereof to purchase, subject to section 4.2 hereof, one share of Common Stock for $8.50 per share (the "Exercise Price"). D. The Company wishes the Rights Agent to act on its behalf in connection with the rights offering (the "Rights Offering") as set forth herein, and the Rights Agent is willing so to act. AGREEMENT NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent in accordance with the instructions set forth in this Agreement, and the Rights Agent hereby accepts such appointment and agrees to take such actions as may be necessary to effectuate the terms of this Agreement. The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable. 2. DISTRIBUTION OF RIGHTS CERTIFICATES. 2.1. Each Right Certificate, in substantially the form attached as Exhibit A hereto, subject to such changes as the parties deem necessary ("Rights Certificates"), shall evidence the holder of Rights (each a "Rightsholder") therein named to purchase shares of Common Stock upon the terms and conditions therein and herein set forth. 2.2. Upon the written authorization of the Company, signed by any of its duly authorized officers, as to the Record Date, the Rights Agent shall, from a list of the Rightsholders of Common Stock to be prepared by the Rights Agent in its capacity as Transfer Agent of the Company, prepare and record Right Certificates in the names of the Rightsholders, setting forth the number of Rights to purchase shares of Common Stock calculated on the basis of 0.1 Rights for each share of Common Stock recorded on the books in the name of each such Rightsholder. The number of Rights distributed to each Rightsholder shall be rounded down to the nearest whole number. No fractional Rights will be issued upon exchange of a Rights Certificate, and any requests to exchange a Rights Certificate that would result in the issuance of fractional Rights will be rejected. -2- 2.3. Upon the written authorization of the Company, signed by any of its duly authorized officers, as to the exercise of outstanding warrants or options, the Rights Agent shall issue Rights Certificates to the holders of such options and warrants as the Company may direct. 2.4. Upon the written advice from counsel to the Company as to the effective date of the Registration Statement, the Rights Agent shall promptly deliver the Rights Certificates, together with a copy of the Prospectus, and any other document as the Company deems necessary or appropriate, to all stockholders with record addresses in the United States (including its territories and possessions and the District of Columbia). 3. RIGHTSHOLDERS. 3.1. The Rights Certificate will be prepared by the Rights Agent, and the Rights Agent shall affix such identifying information as it deems necessary to identify each Rightsholder. No Rights Certificate shall be valid for any purpose unless so executed. 3.2. The Rights Agent will keep or cause to be kept, at its principal offices, books for registration of Rights. Such books will show the names and addresses of the respective Rightsholders and the number of Rights that have been granted or are held. 3.3. Rights may not be transferred, assigned, pledged or encumbered by the Rightsholder or a beneficial owner of such Rightsholder. 3.4. Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity and/or security satisfactory to them, in their sole discretion, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Rights Certificate, if mutilated, the Rights Agent will make and deliver a new Rights Certificate of like tenor to the registered -3- Rightsholder, in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. If required by the Company or the Rights Agent, an indemnity bond must be sufficient in the judgment of each party to protect the Company, the Rights Agent or any agent thereof from any loss that any of them may suffer if a lost, stolen, destroyed or mutilated Rights Certificate is replaced. 3.5. The Rights will expire one (1) year after the effective date of the Registration Statement (the "Expiration Date"). 4. EXERCISE OF RIGHTS. 4.1. Subject to Section 4.2, a Rightsholder may exercise his or her Right(s) by completing, signing and delivering or mailing the Rights Certificate (with any required signature guarantee(s) as required by the form of Rights Certificate), together with payment in full of the Exercise Price for each Right for which he or she is exercising as follows: by mail, hand or overnight delivery to Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York 10004. In order for a Rightsholder to exercise his or her Right(s), the completed Rights Certificate and payment must be received by the Rights Agent by 5:00 p.m. New York Time on or before the Expiration Date. Checks or money orders should be made payable to "Continental Stock Transfer & Trust Company as Agent for Intelli-Check, Inc." in United States Dollars. 4.2. A Rightsholder may exercise his or her Rights only to the extent such Rightsholder maintains continuous ownership (of record or beneficially) of the shares of Common Stock to which the Rights relate from the Record Date through the date on which the Rights are exercised. If the Rightsholder is both the record and beneficial owner of the shares, then the Rightsholder shall certify continued ownership as part of the executed Rights Certificate. If the Rightsholder is exercising Rights on behalf of a beneficial owner of the shares of Common Stock -4- to which the Rights relate, then the Rightsholder shall certify as to such beneficial owner's continued ownership of shares of Common Stock at and through the applicable dates. Rights will become unexercisable to the extent that beneficial ownership of the shares to which they relate are transferred between the Record Date and the date of exercise. 4.3. The Exercise Price will be payable in United States dollars by check drawn upon a U.S. bank or postal, telegraphic or express money order or wire transfer of funds to the account maintained by the Rights Agent for such purpose payable to the order of Continental Stock Transfer & Trust Company as Agent for Intelli-Check, Inc. The Exercise Price will be deemed to have been received by the Rights Agent only upon (i) clearance of any uncertified check, (ii) receipt by the Rights Agent of any certified check drawn upon a United States bank or of any postal, telegraphic or express money order or (iii) receipt of good funds in the Rights Agent's account. 5. REDEMPTION OF RIGHTS. 5.1. The Company may, at its option, redeem all but not less than all of the then outstanding Rights, at a redemption price of $.01 per Right (the "Redemption Price"), appropriately adjusted to reflect any stock split, stock dividend or recapitalization, if (i) the last sale price of the Company's Common Stock as reported on the American Stock Exchange (or the principal exchange on which the Common Stock is then listed) exceeds $10.50 per share for 20 consecutive trading days or (ii) upon a "Change is Control." A "Change in Control" means any event where: (i) any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of shares representing more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in elections of directors of the Company -5- ("Voting Stock"), (ii) the Company consolidates with or merges into any other corporation, or any other person merges into the Company, and, in the case of any such transaction, the outstanding Common Stock of the Company is reclassified into or exchanged for any other property or security, unless the stockholders of the Company immediately before such transaction own, directly or indirectly immediately following such transaction, at least a majority of the combined voting power of the outstanding voting securities of the corporation resulting from such transaction in substantially the same proportion as their ownership of the Voting Stock immediately before such transaction, (iii) the Company conveys, transfers or leases all or substantially all of its assets to any person (other than to one or more wholly-owned subsidiaries of the Company) or (iv) any time the Continuing Directors do not constitute a majority of the Board of Directors of the Company (or, if applicable, a successor corporation to the Company). "Continuing Directors" means as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of this Agreement or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such board at the time of such nomination or election. 5.2. Promptly upon action by the Board of Directors of the Company ordering the redemption of the Rights, the Company and Rights Agent shall give 30 days written notice ("Notice Period") of the redemption of the Rights. The Rights Agent shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last address appearing upon the registry books of the Rights Agent. Any notice that is mailed in the manner provided herein shall be deemed given, whether or not the holder receives the notice. Upon expiration of the Notice Period, the right to exercise the Rights will -6- terminate and the only right thereafter of the Rightsholders shall be to receive the Redemption Price. 6. DELIVERY OF SECURITIES. The Rights Agent, in its capacity as the Transfer Agent, shall issue certificates for Common Stock upon the instructions of the Company, according to the executed Rights Certificates that have been accepted by the Company. The Company shall inform the Rights Agent in writing as to the acceptance of payment and the date for actual issuance of Common Stock to each Rightsholder. Shares of Common Stock to be issued pursuant to the exercise of Rights are to be registered in the name of the registered holder of the Rights Certificate. Delivery of the stock certificates are to be to the registered holder of the Rights Certificate. 7. FRACTIONAL RIGHTS AND SHARES. No fractional Rights or cash in lieu thereof will be issued or paid. The number of Rights distributed to each Rightsholder or beneficial owner holding through a Qualified Financial Institution that complies with the procedures set forth in Section 2.2 above will be rounded down to the next whole number. All questions as to the validity and eligibility of any rounding of fractional Rights will be determined by the Company in its sole discretion, and its determination will be final and binding. 8. REPORTS. The Rights Agent will notify the Company and its designated representatives by telephone each commencing on the distribution date and ending at the Expiration Date, which notice will thereafter be confirmed in writing, of (i) the number of Rights exercised each week and (ii) the number of Rights for which a defective Rights Certificate has been received and (iii) cumulative totals with respect to the information set forth in each of the clauses (i) and (ii) above. The Rights Agent will also maintain and update a listing of Rightsholders who have fully or partially exercised their Rights and Rightsholders who have not -7- exercised their Rights. The Rights Agent will provide the Company and its respective designated representatives with the information compiled pursuant to this Section 8 and any Rights Certificates or other documents or date from which such information is derived, as any of them may request. The Rights Agent hereby represents and warrants that the information contained in each notification referred to in this Section 8 will be accurate in all material respects. 9. AMENDMENTS AND WAIVERS; TERMINATION. The Company reserves the right to alter the Expiration Date upon 30 days notice to Rightsholders, and to amend the terms and conditions of the Rights, whether the amended terms are more or less favorable to Rightsholders. All questions as to the timeliness, validity, form and eligibility (including time of receipt and record ownership) of any exercise of Rights will be determined by the Company, whose determinations will be final and binding, and the Company reserves the right to reject any exercise of a Right if such exercise is not in proper form, or if the acceptance thereof or the issuance of Common Stock thereto could be deemed unlawful. The Company also reserves the right to waive any defect or irregularity or permit a defect or irregularity to be corrected within such time as it may determine. An exercise of Rights will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Company determines in its sole discretion. Neither the Company nor the Rights Agent will be under any duty to give notification of any defect or irregularity in connection with the submission of Rights Certificates or incur any liability for failure to give such notification. Any exercise as to which no notice of any defect or irregularity has been given by the Company or the Rights Agent and no notice of rejection has been given prior to the Expiration Date, shall be deemed accepted by the Company. -8- 10. INSTRUCTIONS. The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chief Executive Officer or the Chief Financial Officer of the Company, or any other person designated by any of them, and to apply to such officers for advice or instructions in connection with its duties, and the Rights Agent will not be liable for any action taken by it in good faith in accordance with the instructions of any such officer. 11. FEES OF THE RIGHTS AGENT; INDEMNIFICATION. 11.1. The Company agrees to pay the Rights Agent compensation in accordance with the fee schedule attached hereto as Exhibit B for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and other disbursements incurred in the administration and execution of this Agreement. 11.2. The Company hereby covenants and agrees to indemnify and to hold the Rights Agent (the "Indemnified Party") harmless against any losses, claims, damages, liabilities, costs and expenses (including reasonable fees and disbursements of legal counsel) that the Indemnified Party may incur or become subject to arising from or out of any claim or liability resulting from actions taken as Rights Agent pursuant to this Agreement; PROVIDED, HOWEVER, that such covenant and agreement does not extend to, and the Indemnified Party will not be indemnified or held harmless with respect to, such losses, claims, damages, liabilities, costs and expenses incurred or suffered by the Indemnified Party as a result, or arising out of, the breach of this Agreement. In connection therewith, (i) in no case will the Company be liable with respect to any claim against the Indemnified Party unless the Indemnified Party notifies the Company in writing of the assertion of a claim against it or of any action commenced against it, as soon as practicable after it has notice of any such assertion of a claim or has been served with the -9- summons or other first legal process giving information as to the nature and basis of the claim (but in any event at least ten days prior to the date on which an answer or other pleading must be served in order to prevent a judgment by default in favor of the person asserting such claim), (ii) the Company will be entitled to participate at its own expense in the defense of any suit brought to enforce any such claim, and if the Company so elects, it may assume the defense of any such suit, in which event the Company will not thereafter be liable for the fees and expenses of any additional counsel that the Indemnified Party may retain, so long as the Company retains counsel satisfactory to the party to be indemnified, in the exercise of the party's reasonable judgment, to defend such suit, and (iii) the Indemnified Party agrees not to settle any litigation in connection with any claim or liability with respect to which either or both of them may seek indemnification from the Company without the prior written consent of the Company. 11.3. The Indemnified Party will be protected and will incur no liability for or with respect to any action taken, suffered or omitted by it without negligence and in good faith in connection with its administration of this Agreement in reliance upon any Rights Certificate, power of attorney, endorsement, affidavit letter, notice, direction, consent, certificate, statement or other paper or document reasonably believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged by the proper person or persons. 11.4. Anything in this Agreement to the contrary notwithstanding, in no event will the Indemnified Party be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Indemnified Party has been advised of the likelihood of such loss or damage and regardless of the form of action. 12. MERGER OR CONSOLIDATION. Any corporation into which the Rights Agent or Company or any successor Rights Agent or Company may be merged or with which it may be -10- consolidated, or any corporation resulting from any merger or consolidation to which any of them may be a party, or any corporation succeeding to their respective businesses, or any successor, will be the successors to the Rights Agent, or Company, respectively, under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto. 13. CONCERNING THE RIGHTS AGENT. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions: 13.1. The Rights Agent may consult with legal counsel acceptable to the Company (who may be, but is not required to be, legal counsel for the Company), and the opinion of such counsel will be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. 13.2. Whenever in the performance of its duties under this Agreement the Rights Agent may deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chief Executive Officer or the Chief Financial Officer of the Company and delivered to the Rights Agent, and such certificate will be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. 13.3. Nothing herein precludes the Rights Agent from acting in any other capacity for the Company. -11- 14. GENERAL PROVISIONS. 14.1. NOTICES. Unless otherwise specifically permitted by this Agreement, all notices or other communications required or permitted under this Agreement shall be in writing, and shall be personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, or sent by telecopy, provided that the telecopy cover sheet contains a notation of the date and time of transmission, and shall be deemed received: (i) if personally delivered, upon the date of delivery to the address of the person to receive such notice, (ii) if mailed in accordance with the provisions of this paragraph, two (2) business days after the date placed in the United States mail, (iii) if mailed other than in accordance with the provisions of this paragraph or mailed from outside the United States, upon the date of delivery to the address of the person to receive such notice, or (iv) if given by telecopy, when sent. Notices shall be given at the following address: If to the Company: Intelli-Check, Inc. 246 Crossways Park West Woodbury, NY 11797 If to the Rights Agent: Continental Stock Transfer Trust Company 2 Broadway New York, New York 10004 Attention: Compliance Department 14.2. COMPLETE AGREEMENT; MODIFICATION. This Agreement and written agreements, if any, entered into concurrently herewith (i) constitute the parties' entire agreement, including all terms, conditions, definitions, warranties, representations, and covenants, with respect to the subject -12- matter hereof, (ii) merge all prior discussions and negotiations between or among any or all of them as to the subject matter hereof, and (iii) supersede and replace all terms, conditions, definitions, warranties, representations, covenants, agreements, promises and understandings, whether oral or written, with respect to the subject matter hereof. This Agreement may not be amended, altered or modified except by a writing signed by the party to be bound. With regard to such amendments, alterations, or modifications, telecopied signatures shall be effective as original signatures. Any amendment, alteration, or modification requiring the signature of more than one party may be signed in counterparts. 14.3. FURTHER ACTION. Each party agrees to perform any further acts and execute and deliver any further documents reasonably necessary to carry out the provisions of this Agreement. 14.4. ASSIGNMENT. No party may assign its rights under this Agreement without the prior written consent of the other parties hereto. 14.5. SUCCESSORS AND ASSIGNS. Except as explicitly provided herein to the contrary, this Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and permitted assigns. 14.6. SEVERABILITY. If any portion of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by law if enforcement would not frustrate the overall intent of the parties (as such intent is manifested by all provisions of this Agreement, including such invalid, void, or otherwise unenforceable portion). 14.7. EXTENSION NOT A WAIVER. No delay or omission in the exercise of any power, remedy, or right herein provided or otherwise available to any party shall impair or affect the right of such party thereafter to exercise the same. Any extension of time or other indulgence granted to a party hereunder shall not otherwise alter or affect any power, remedy or right of any other party, or the obligations of the party to whom such extension or indulgence is granted except as specifically waived. -13- 14.8. TIME OF ESSENCE. Time is of the essence of each and every term, condition, obligation and provision hereof. 14.9. NO THIRD PARTY BENEFICIARIES. This Agreement and each and every provision hereof is for the exclusive benefit of the parties hereto and not for the benefit of any other party. 14.10. HEADINGS. The headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, or extend or interpret the scope of this Agreement or of any particular provision hereof. 14.11. REFERENCES. A reference to a particular paragraph of this Agreement shall be deemed to include references to all subordinate paragraphs, if any. 14.12. GENDER, NUMBER, AND TENSE. Throughout this Agreement, unless the context otherwise requires: (i) the masculine, feminine, and neuter genders each includes the other; (ii) the singular includes the plural, and the plural includes the singular; and (iii) the past tense includes the present, and the present tense includes the past. 14.13. COUNTERPARTS. This Agreement may be signed in multiple counterparts with the same force and effect as if all original signatures appeared on one copy; and in the event this Agreement is signed in counterparts, each counterpart shall be deemed an original and all of the counterparts shall be deemed to be one agreement. 14.14. DRAFTER. The parties acknowledge that each party has received and approved this Agreement and the normal rules of construction to the effect that any ambiguities -14- are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 14.15. APPLICABLE LAW. This Agreement shall be construed in accordance with, and governed by, the laws of the State of New York. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the date first above written. INTELLI-CHECK, INC. a Delaware Corporation By:____________________________________ Frank Mandelbaum Chairman and Chief Executive Officer CONTINENTAL STOCK TRANSFER & TRUST COMPANY By:____________________________________ -15- -----END PRIVACY-ENHANCED MESSAGE-----