WAIVER, AMENDMENT AND EXCHANGE AGREEMENT
 
THIS WAIVER, AMENDMENT AND EXCHANGE AGREEMENT (the “Agreement”), dated as of
September __, 2009, is entered into by and among Innovative Card Technologies,
Inc., a Delaware corporation (the “Company”), and the persons identified as
“Holders” on the signature pages hereto (the “Holders”).  Defined terms not
otherwise defined herein shall have the meanings set forth in the Purchase
Agreements (as defined below).
 
WHEREAS, pursuant to those certain Securities Purchase Agreements, dated January
8, 2008 and April 15, 2008 (the “Purchase Agreements”), among the Company and
the applicable Holders, the Holders purchased from the Company an aggregate of
$8,500,000 in principal amount of 8% Senior Secured Convertible Debentures of
the Company (the “Debentures”) and were issued warrants exercisable for shares
of Common Stock (the “Warrants”); and
 
WHEREAS, certain Events of Defaults (as defined under the Debentures) as set
forth on Annex A attached hereto have occurred and continue to occur  on and
prior to the date hereof (“Existing Defaults”); and
 
WHEREAS, the Company and the Holders have agreed to waive the Existing Defaults
for the consideration granted by the Company to the Holders as set forth
hereunder.
 
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, each Holder hereby agrees as follows:
 
1.           Waiver.  Subject to the terms and conditions hereunder, each Holder
hereby waives its right to exercise or enforce its rights under the Transaction
Documents, including the Debentures, solely on account of the Existing Defaults
as they exist on the date hereof provided that this waiver shall not apply to
any future Events of Default that may occur after the date hereof or prior
existing Events of Default that are not included as Existing Defaults, whether
known or unknown to the Company as of the date hereof.  Additionally, each
Holder hereby agrees to waive any late fees, increased interest or liquidated
damages that have accrued prior to the date hereof provided that this waiver
shall not apply to any future late fees, increased interest or liquidated
damages that may occur after the date hereof.   For purposes of clarity, the
parties hereto agree that no interest currently due and payable or payable in
the future under the Debentures shall be waived.
 

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2.           Amendments and other Agreements.
 
(a)           Amended and Exchanged Debentures and Warrants.  The Company hereby
agrees to issue each Holder an amended and restated Debenture, in the form of
Exhibit A attached hereto (the “Amended and Exchanged Debenture(s)”) with a
principal amount equal to the principal amount of such Holder’s current
Debenture plus any accrued but unpaid interest as of the date hereof and any
future interest to be accrued on and before April 1, 2010 and accrued but unpaid
liquidated damages, if any, as set forth on Annex B and an amended and restated
warrant, in the form of Exhibit B attached hereto (“Amended and Exchanged
Warrant(s)”).  Other than as amended thereunder, the rights and obligations of
the Holders and of the Company with respect to the Amended and Exchanged
Debentures, the Amended and Exchanged Warrants and any securities underlying
such securities (including the replacement common stock purchase warrants
issuable pursuant to the Amended and Exchange Warrants) shall be identical in
all respects to the rights and obligations of the Holders and of the Company
with respect to the Debentures, the Warrants and the Underlying Shares issued
and issuable pursuant to the Purchase Agreements.  For clarity, the Purchase
Agreements and all Transaction Documents thereunder are hereby amended so that
the term “Debentures” includes the Amended and Exchanged Debentures, the term
“Warrants” includes the Amended and Exchanged Warrants (and common stock
purchase warrants issued thereunder) and the term “Underlying Shares” includes
the shares of Common Stock issuable upon conversion and issuance thereof, and
the term “Transaction Documents” shall be amended to include this
Agreement.  The Amended and Exchanged Debentures and Amended and Exchanged
Warrants are being issued in substitution for and not in satisfaction of the
Debentures and Warrants, as applicable; provided, however, the Holder
acknowledges and agrees that upon the issuance and acceptance of the certificate
evidencing its Amended and Exchanged Debenture and Amended and Exchanged
Warrants issued pursuant to this Section, the original certificate evidencing
its Debenture and Warrants will be deemed cancelled.
 
(b)           Amendments to the Purchase Agreements.
 
(i)           clause (a) of the term “Exempt Issuance” in the Purchase
Agreements is hereby amended to increase the number of shares issuable
thereunder from 100,000 to 500,000, in the aggregate, during any 12 month period
for issuances with a bona-fide effective price per share of Common Stock of at
least $0.25 and an additional 500,000, in the aggregate, during any 12 months
period for issuances with a bona-fide effective price per share of Common stock
of at least $0.50, all prices and share numbers reference above subject to
adjustment for reverse and forward stock splits and the like.
 
(ii)          As to any Holder that does not participate ratably in that certain
Debenture and Warrant Purchase Agreement, dated as of September __, 2009 by and
among the Company and certain Holders, the Holders hereby amend the Purchase
Agreement such that, as to such Holders only, the issuance of the Amended and
Exchanged Debentures, Amended and Exchanged Warrants, shares of Common Stock
issued and issuable thereto, including the issuance and exercise of an
replacement common stock purchase warrants issuable thereunder, are here deemed
to be an “Exempt Issuance” under the Purchase Agreement and accordingly no
adjustments shall be made to the Debentures, Warrants, Amended and Exchanged
Debentures or the Amended and Exchanged Warrants pursuant to the anti-dilution
provisions thereunder solely as a result of such issuances.  For those Holders
that do participate ratably in such transaction, the conversion and exercise
price of their respective Amended and Exchanged Debentures and Amended and
Exchanged Warrants shall be adjusted pursuant to the anti-dilution provisions
set forth therein.

 
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(iii)         The obligation of the Company to obtain Shareholder Approval (as
defined in the Purchase Agreements) as set forth in the second, third and fourth
sentences of Section 4.11(c) of the Purchase Agreements and the restrictions on
obtaining financing prior to obtaining Shareholder Approval set forth in Section
4.13(c) of the Purchase Agreements are no longer of any force or effect and
shall be deleted in their entirety.  Additionally, the Amended and Exchanged
Debentures do not include any restriction on issuances based on Shareholder
Approval.
 
(iv)         The definition of “Trading Market” as defined and used in the
Transaction Documents shall hereafter be deemed to include the OTC Bulletin
Board.
 
(c)           Amendment to the Security Agreements, Guarantee and Intercreditor
Agreement.  Section 20(c) of the Security Agreements (as defined in the
respective Purchase Agreements) and Section 5(a) of the Guarantees (as defined
in the applicable Security Agreements) and Section 4.5 of that certain
Inter-Creditor Agreement by and among the Holder regarding the Debentures (the
“Inter-Creditor Agreement”) shall be amended such that Holders holding 70% of
the principal amount of Amended and Restated Debentures may amend, modify,
supplement or amend the terms of such agreements if in writing and further, that
upon a request in writing by the Company of any such amendment, modification,
supplement or amendment to any such agreements (or any Transaction Documents),
the failure of a Holder to respond in writing within 5 Trading Days shall be
deemed for such purposes an irrevocable affirmative election by such
Holder.  Notwithstanding anything herein to the contrary, each Holder shall be
provided with equal opportunity to participate in any such amendment, waiver,
modification or supplement on the same terms and conditions as every other
Holder.  The parties hereby agree to remove Paul T. Dacier as Agent under the
Security Agreements and appoint in his place John W. Galuchie, Jr.
 
(d)           Consent to Debt Exchange.  The Holders hereby consent to the
exchange of no more than $1,000,000 of unsecured debt into an equal principal
amount of Amended and Exchanged Debenture with a conversion price of $1.00,
subject to adjustment thereunder otherwise,  and no more than 200,000 common
stock purchase warrants and agree that such new holder of the Amended and
Exchanged Debenture shall be added as a party to the Security Agreement and the
Inter-Creditor Agreement and shall otherwise have all rights of a Holder under
the Transaction Documents.
 
(e)           Prohibition on Stock Splits.  The Company shall not undertake a
reverse or forward stock split or reclassification of the Common Stock without
the prior written consent of Holders holding at least 75% of the Amended and
Exchanged Debentures.

 
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(f)            Replacement Warrants.  Upon each cash exercise of an Amended and
Exchanged Warrant and in the time periods set forth for the delivery of the
Warrant Shares pursuant to Section 2(e)(i) of the Amended and Exchanged Warrant,
the Company shall issue to the holder thereof a new common stock purchase
warrant (“Replacement Warrant”) for the same number of Warrant Shares subject to
such exercise and in the form of the Amended and Exchanged Warrant provided that
(i) such Replacement Warrant shall (i) have an Initial Issuance Date of the date
such Replacement Warrant is issued and Termination Date which is 5 years from
such Initial Issuance Date, (ii) have an exercise price equal to the greater of
(A) $0.25, subject to adjustment for reverse and forward stock splits,
recapitalizations, stock dividends and the like and (B) the VWAP on the day of
exercise of such Amended and Exchanged Warrant which gives rise to the issuance
of such Replacement Warrant (“Replacement Market Price”), (iii) have a price at
which such Replacement Warrant may be called pursuant to Section 2(f) of the
Amended and Exchanged Warrant shall be the Replacement Market Price plus $0.10,
subject to adjustment for reverse and forward stock splits, recapitalizations,
stock dividends and the like and (iv) no Replacement Warrant shall be issued
upon exercise of the Replacement Warrants.
 
3.           Representations and Warranties. The Company hereby makes to the
Holders the following representations and warranties:
 
(a)           Authorization; Enforcement.  The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, its board of directors or its
stockholders in connection therewith.  This Agreement has been duly executed by
the Company and, when delivered in accordance with the terms hereof will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
 
(b)           No Conflicts.  The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not: (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any material agreement,
credit facility, debt or other material instrument (evidencing a Company or
Subsidiary debt or otherwise) or other material understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) conflict with or result
in a violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the Company
or a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.

 
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(d)           Equal Consideration.  Except as otherwise set forth herein, no
consideration has been offered or paid to any person to amend or consent to a
waiver, modification, forbearance or otherwise of any provision of any of the
Transaction Documents.
 
(e)           Survival and Bring Down.  All of the Company’s warranties and
representations contained in this Agreement shall survive the execution,
delivery and acceptance of this Agreement by the parties hereto.  Except as set
forth on Annex C attached hereto and the SEC Reports as of the date hereof,
the  Company expressly reaffirms that each of the representations and warranties
set forth in the Purchase Agreements, continues to be true, accurate and
complete, and the Company hereby remakes and incorporates herein by reference
each such representation and warranty as though made on the date of this
Agreement.
 
(f)           Holding Period for Amended and Restated Debentures and Amended and
Restated Warrants. Pursuant to Rule 144, the holding period of the Amended and
Exchanged Debentures and the Amended and Restated Warrants (and Underlying
Shares issuable upon conversion or cashless exercise thereof) shall tack back to
the original issue date of the Debentures and Warrants.  The Company agrees not
to take a position contrary to this Section 3(f).  The Company agrees to take
all actions, including, without limitation, the issuance by its legal counsel of
any necessary legal opinions (which may be satisfied pursuant to Section 5),
necessary to issue to the Amended and Exchanged Debentures and the Amended and
Exchanged Warrants (and Underlying Shares issuable upon conversion and cashless
exercise thereof) without restriction and not containing any restrictive legend
without the need for any action by the Holder.  The Company is not subject to
Rule 144(i).
 
(g)           No Novation.  The Amended and Exchanged Debentures and the Amended
and Exchanged Warrants are being issued in substitution for and not in
satisfaction of the Debentures and Warrants, respectively.  The Amended and
Exchanged Debentures and the Amended and Exchange Warrants shall not constitute
a novation or satisfaction and accord of any of the Debentures and Warrants, as
the case may be.  The Company hereby acknowledges and agrees that the Amended
and Exchanged Debentures and the Amended and Exchanged Warrants shall amend,
restate, modify, extend, renew and continue the terms and provisions contained
in the Debentures and Warrants, as the case may be, and shall not extinguish or
release the Company or any of its Subsidiaries under any Transaction Document
(as defined in the Purchase Agreements) or otherwise constitute a novation of
its obligations thereunder.
 
(h)           No Event of Default.  The Company represents and warrants to each
Holder that after giving effect to the terms of the waivers contemplated in this
Agreement, no Event of Default (as defined in the Amended and Exchanged
Debentures) shall have occurred and be continuing as of the date hereof.

 
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4.           Registration Rights.  As a result of the changes made to Rule 144
promulgated under the Securities Act of 1933, as amended (the “Securities Act”)
which are effective February 15, 2008 and based on the Company’s representation
that it is not subject to Rule 144(i), the Company's obligations, pursuant to
the Registration Rights Agreements (as defined in the applicable Purchase
Agreements), by and among the Company and each of the undersigned (the
“Registration Rights Agreements”), to register the shares of Common Stock
issuable upon conversion and/or cashless exercise of the Amended and Exchanged
Debentures and the Amended and Exchanged Warrants, are hereby
suspended.  Additionally, subject to the terms, conditions and representations
set forth herein, the Holders hereby agree that the Company can withdraw the
registration statement(s) filed pursuant to the Registration Rights Agreements,
and agree that the Company shall not be required to maintain the effectiveness
of such registration statement with respect to any Underlying Shares.

5.           Legal Opinion.  The Company hereby agrees to cause its legal
counsel to issue a legal opinion to the undersigned Holders and the Company’s
Transfer Agent regarding this Agreement and the transactions contemplated
hereby, in form and substance reasonably acceptable to the Purchasers, including
an opinion that the 144 Eligible Securities may be sold pursuant to Rule 144
without volume restrictions or manner of sale limitations as of the date hereof
and that certificates representing the 144 Eligible Securities issuable upon
conversion of the Amended and Exchanged Debentures or a “cashless exercise” of
the Amended and Exchanged Warrants may be issued without a restrictive legend as
required pursuant to Section 4.1 of the Purchase Agreements.

6.           Miscellaneous.

(a)           The foregoing waivers shall not be effective unless and until all
Holders shall have agreed to the terms and conditions hereunder.  The waivers,
agreements and obligations of the Holders set forth herein shall be null and
void in the event this Agreement is not executed by all Holders on or before
September 15, 2009.  In addition, the respective obligations, amendments,
agreements and waivers of the Holders hereunder are subject to the following
conditions being met: (a) the accuracy in all material respects of the
representations and warranties of the Company contained herein (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) and (b) the
performance by the Company of all if its obligations, covenants and agreements
required to be performed hereunder.  Except as expressly set forth above, all of
the terms and conditions of the Transaction Documents shall continue in full
force and effect after the execution of this Agreement and shall not be in any
way changed, modified or superseded by the terms set forth herein.  The Company
shall, within 2 Trading Days of the date hereof, issue a Current Report on Form
8-K disclosing the material terms of the transactions contemplated hereby, and
shall attach this Agreement and all other related agreements thereto, including,
without limitation, the Amended and Exchanged Debentures and Amended and
Exchanged Warrants (the “8-K Filing”).  From and after the filing of the 8-K
Filing with the Commission, the Holder shall not be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of their respective officers, directors, employees or
agents, that is not disclosed in the 8-K Filing.  The Company shall consult with
the Holders in issuing any other press releases with respect to the transactions
contemplated hereby.

 
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 (b)          This Agreement may be executed in two or more counterparts and by
facsimile signature or otherwise, and each of such counterparts shall be deemed
an original and all of such counterparts together shall constitute one and the
same agreement.

(c)           The Company has elected to provide all Holders with the same terms
and form of agreement for the convenience of the Company and not because it was
required or requested to do so by the Holders.  The obligations of each Holder
under this Agreement, and any Transaction Document are several and not joint
with the obligations of any other Holder, and no Holder shall be responsible in
any way for the performance or non-performance of the obligations of any other
Holder under this Agreement or any Transaction Document.  Nothing contained
herein or in any Transaction Document, and no action taken by any Holder
pursuant thereto, shall be deemed to constitute the Holders as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Holders are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by this Agreement
or the Transaction Documents.  Each Holder shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.  Each Holder has been represented by its own
separate legal counsel in their review and negotiation of this Agreement and the
Transaction Documents.
 
(d)           Except for the legal fees and expenses of counsel to T.R. Winston,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement.  The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of the Amended and Exchanged Debentures
and the Amended and Exchanged Warrants.
 
(e)           If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the
parties.  The parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 
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(f)           This Agreement shall be governed by and interpreted in accordance
with laws of the State of New York, excluding its choice of law rules.  The
parties hereto hereby waive the right to a jury trial in any litigation
resulting from or related to this Agreement.  The parties hereto consent to
exclusive jurisdiction and venue in the federal courts sitting in the southern
district of New York, unless no federal subject matter jurisdiction exists, in
which case the parties hereto consent to exclusive jurisdiction and venue in the
New York state courts in the borough of Manhattan, New York.  Each party waives
all defenses of lack of personal jurisdiction and forum non conveniens.  Process
may be served on any party hereto in the manner authorized by applicable law or
court rule.
 
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IN WITNESS WHEREOF, this Agreement is executed as of the date first set forth
above.

INNOVATIVE CARD TECHNOLOGIES, INC.

By:
   
Name:
 
Title:

[signature page(s) of Holders to follow]

 
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COUNTERPART SIGNATURE PAGE OF HOLDER TO
WAIVER, AMENDMENT AND EXCHANGE AGREEMENT
AMONG INNOVATIVE CARD TECHNOLOGIES, INC.. AND
THE HOLDERS THEREUNDER

Name of Holder:____________________________________

By: _______________________________________________

Name:_____________________________________________

Title:______________________________________________

Principal Amount of Debentures: _______________________

Warrants: __________________________________________
 
 

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